Bitcoin NFT Market Status Analysis: Total Exceeds 320,000, Trading Volume Close to 7 Million USD

Recently, the auction for the NFT series TwelveFold based on the Bitcoin Ordinals protocol has concluded, with a total transaction amount reaching 735.71 BTC. A total of 288 bidders won, with winning bids all above 2 BTC, and the highest bid being 7.1159 BTC.

Although Bitcoin on-chain NFTs have just emerged for more than a month, they are already seen as a market with great potential. Research institutions predict that the market size of Bitcoin NFTs will reach $4.5 billion within 2 years, with a transaction volume of $1.6 billion. In addition, the development of Bitcoin NFTs may also promote the overall development of the Bitcoin ecosystem, increase network utilization, and benefit miner earnings.

Starting from the release date of the Ordinals protocol version 0.4.0 on January 21, 2023, it has been about one and a half months. During this early development phase, what is the current status of Bitcoin Ordinals NFT? This article compiles on-chain data of Bitcoin (from January 21 to March 7) and the trading data of Ordinals NFT, analyzing the current types of NFTs, trading scale, user scale, changes in mining, and the network fundamentals, and reaches the following conclusions:

1. A total of 328,800 Ordinals NFTs have been generated on Bitcoin, with an average of 7,148 new ones added daily. Among them, there are 208,800 images and 117,400 texts. Recently, the growth of text NFTs has been the most significant.

2. The cumulative trading volume of the four major markets from February 15 to March 7 is approximately $6.99 million, and the current total number of unique addresses has surpassed 10,000.

3. OrdinalsNFT has become a major factor in increasing miners' fee income and may become a primary source of income in the future. The fees generated by NFTs grew from 0.00066 BTC in a single day to 0.28428 BTC, an increase of approximately 43257.73%, equivalent to a 433-fold increase. In mid-February, Bitcoin NFT fees once exceeded 21%, staying above 15% for several consecutive days.

4. During the statistical period, the average transaction fee for every 10,000 Bitcoin NFTs accounted for 12.47% of the total fee income of miners. The growth in the number of Bitcoin NFTs will noticeably impact miners' income.

5. During the statistical period, the average block weight of Bitcoin accounted for approximately 87.78% of the total capacity. The current Bitcoin Ordinals NFT activity has not squeezed out other transaction activities, but has only utilized the originally idle space. This is also the reason why the average transaction fee per byte has not increased.

The total number of NFTs has exceeded 320,000, with images and text being the two main types.

From January 21 to March 7, a total of 328,800 Ordinals NFTs have been generated on Bitcoin, with an average of 7,148 new ones added daily. Looking at the daily generation numbers, Bitcoin Ordinals NFTs have experienced two peaks. The first peak occurred in mid-February, during which the daily generation numbers on February 9, 14, and 15 all exceeded 15,000, likely influenced by the issuance of Bitcoin Punks. The second peak occurred in early March, with daily generation numbers from February 28 to March 5 all exceeding 15,000, peaking at 24,800 on March 1, likely influenced by news of a well-known NFT project issuing Bitcoin NFTs.

Overall, the development of Bitcoin Ordinals NFT is greatly influenced by the "migration" of well-known Ethereum NFT projects or project parties, with significant fluctuations in daily production volume, which aligns with the basic characteristics of the early market.

Currently, the types of Bitcoin Ordinals NFT mainly include four categories: images, text, video, and audio. In terms of total quantity, the type with the highest cumulative total is image NFT, with a total of 208,800, followed by text NFT, with a total of 117,400. Video and audio NFTs are less common, with each being less than 500. In terms of daily generation volume, the most produced image NFTs generated an average of 4,540 per day during the observation period, text NFTs generated an average of 2,551 per day, and video and audio NFTs generated less than 15 per day.

This type of distribution is related to the generation method of Bitcoin Ordinals NFTs. Bitcoin NFTs (i.e., inscription data) are fully on-chain, and they are part of the witness data, "bound" to a single satoshi. Therefore, the size of the NFT is constrained by the size of the Bitcoin block space, giving smaller image and text NFTs a certain advantage.

From the generation trends of various types of Bitcoin Ordinals NFTs, both image and text NFTs show a significant growth trend, especially text NFTs, whose growth trend line is more "steep", with the most noticeable increase recently. In contrast, video NFTs show a declining trend, while audio NFTs remain relatively stable.

Recently, the total trading volume exceeded 6.99 million USD, and the number of independent addresses participating in the trading has surpassed 10,000.

At this stage, the main value of NFTs is still reflected in the secondary market. Currently, there are 4 main trading markets for Bitcoin Ordinals NFTs. Between February 15 and March 7, the cumulative trading volume of the 4 major markets was approximately $6.99 million, with the highest trading platform reaching about $4.28 million, followed by about $1.66 million, and another platform also nearing $1 million. Overall, the total trading scale of these trading markets is still in the million-dollar range.

From the daily trading volume of the four major markets, the average daily total is about $333,000. The growth in trading volume began after February 28, when the trading volume on the 28th reached $1.74 million, and since then it has basically maintained around $500,000 daily, significantly higher than the previous daily level of around $100,000. The growth trend in daily trading volume is very evident.

In terms of user scale, the cumulative number of unique addresses in the four major markets during the same period was approximately 58,500, among which one platform had the highest cumulative number of unique addresses, reaching 30,800, followed by two platforms with approximately 15,600 and 12,000 respectively.

From the changes in the number of cumulative independent addresses in the four major markets, the total number of daily independent addresses has grown significantly, but the growth rate has slowed down recently. On March 7, the total number of independent addresses has exceeded 10,000, an increase of 211.75% compared to 3,209 at the beginning of this month, and a breakthrough from 0 to 1 compared to the 7 addresses on February 15.

The daily average contribution of NFT transaction fees exceeds 6%, and the transaction fee per byte is currently showing a downward trend.

The rapid development of Bitcoin Ordinals NFT has brought some noticeable changes to the underlying network. Firstly, the most intuitive change is the significant increase in the adoption rate of Taptoor.

According to the classification of a certain data platform, the type of balance used in Bitcoin, which can be understood as transaction types, can be divided into 8 categories: P2PK, P2PKH, Bare Multisig, P2SH, P2WPKH, P2WSH, P2TR, and Non-standard. Among them, P2TR refers to Pay to Taproot, which is a type of transaction using Taproot. The proportion of this transaction type has shown a significant upward trend since January 21, rising from 1.79% to 6.22%, and at one point it was close to 10%. Recently, it has basically remained above 5%.

In addition, the two intuitive changes in the chain are the increase in transaction volume and the rise in daily average computing power. The production and transfer of NFTs are both reflected as on-chain transactions, and the increase in transaction demand will naturally affect changes in computing power.

According to statistics, the growth in the number of transactions has been relatively moderate, increasing from 287,700 transactions per day to 315,900 transactions per day during the statistical period, with a growth rate of about 9.79%. The highest daily transaction count during this period was approximately 381,800 transactions, while the lowest was about 240,200 transactions, showing overall fluctuations that are not drastic. The increase in daily average computing power has also been quite moderate, rising from 259.0 EH/s to 279.3 EH/s in the statistical period, with a growth rate of about 7.81%, remaining at historically high levels. The highest daily average computing power during this period was approximately 361.6 EH/s, while the lowest was about 222.6 EH/s, with noticeable fluctuations recently.

The development of Bitcoin Ordinals NFT has opened up new space for the application of Bitcoin, and the increase in network usage has driven the growth of miner income. The total daily transaction fee income of miners increased from 16.33 BTC to 24.03 BTC during the statistical period, a significant increase of 47.15%. Among them, the transaction fees generated by NFTs rose from 0.00066 BTC per day to 0.28428 BTC, an increase of approximately 43257.73%, which is equivalent to a 433-fold increase.

Recently, the growth momentum of Bitcoin's daily total transaction fees mainly comes from Ordinals NFT. The correlation between the two is statistically significant, meaning that the more transaction fees generated by Ordinals NFT, the higher the total transaction fees for the day, benefiting miners from Ordinals NFT activities.

From the perspective of the proportion of Ordinals NFT transaction fees to the total transaction fees of the day, the average during the statistical period was about 6.61%, meaning nearly 7% of miners' income came from NFT activities. However, this is just the daily average, significantly affected by the relatively few early NFT activities. If we narrow the observation time frame to February, nearly 9% of miners' income came from NFT activities.

It is worth noting that in mid-February, the transaction fee proportion of Bitcoin NFTs once exceeded 21%, remaining above 15% for several consecutive days. NFTs may become an important source of income for miners in the future. Additionally, looking at the daily generation of Bitcoin NFTs, during the statistical period from January 21 to March 7, an average of 2.36 BTC in transaction fees was generated for every 10,000 NFTs, with the daily average total transaction fee during the same period being approximately 18.95 BTC, indicating that an average of 12.47% of miners' transaction fee income came from every 10,000 NFTs. This suggests that the growth in the number of Bitcoin NFTs will significantly impact miners' income.

However, as it stands, this impact has not yet been reflected. On the contrary, the average transaction fee per byte (the smallest unit of block space) on the Bitcoin network has been on a downward trend recently, decreasing from 0.0023 BTC on January 21 to 0.0013 BTC on March 5, a drop of approximately 41.52%. Additionally, the recent fluctuations in average transaction fees per byte have also been quite large, reaching a high of 0.0031 BTC and a low of only 0.00099 BTC.

This is related to the block space size used by Bitcoin Ordinals NFT. Although recently influenced by NFT activity, the average block capacity of Bitcoin has shown a significant upward trend, increasing from 2.94 MB on January 21 to 3.74 MB on March 5, an increase of approximately 26.94%. Since February, the average block weight has basically remained around 3.8 MB.

However, there is still some room compared to the maximum weight of 4 MB allowed by SegWit and Taroot. According to statistics, from January 21 to March 5, the average block weight of Bitcoin accounted for about 87.78% of the total capacity, which is less than 90%, with a maximum not exceeding 95.5%. This means that the current Bitcoin Ordinals NFT activities are still within the network's capacity and have not squeezed out other transaction activities; they have merely consumed the already available space.

But this is just the early stage of Bitcoin NFTs. With the prosperity and development of NFTs, there may be more complex effects on the fundamentals of the Bitcoin chain in the future, especially in terms of mining fundamentals.