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Bitcoin Ordinals: Determinants and impact on total transaction fees

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  • Bertucci, Louis

Abstract

Bitcoin Ordinals are on-chain non-fungible assets native to the Bitcoin blockchain. As the data is stored on-chain, by opposition to Ethereum-like NFTs, creating an ordinal (i.e. “inscribing” it) can be expensive. We analyze the initial wave of Ordinals from December 14th 2022 until April 16th 2023. We show that ordinal inscriptions tend to have a lower fee rate than regular transactions. We also show that a high average block transaction fee rate is associated with lower ordinal inscriptions. These effects are larger for large inscriptions. This suggests that ordinal users are careful when setting the fee rate of their inscriptions. We also show that both the transaction fee rate for non-inscription transactions and total block fees have increased with the popularity of Bitcoin Ordinals, increasing miners’ revenue.

Suggested Citation

  • Bertucci, Louis, 2024. "Bitcoin Ordinals: Determinants and impact on total transaction fees," Research in International Business and Finance, Elsevier, vol. 70(PA).
    • Handle: RePEc:eee:riibaf:v:70:y:2024:i:pa:s0275531924001314
    DOI: 10.1016/j.ribaf.2024.102338
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    References listed on IDEAS

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    1. Tim Roughgarden, 2020. "Transaction Fee Mechanism Design for the Ethereum Blockchain: An Economic Analysis of EIP-1559," Papers 2012.00854, arXiv.org.
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    4. Chiu, Jonathan & Koeppl, Thorsten V, 2017. "The economics of cryptocurrencies – bitcoin and beyond," Working Paper Series 6688, Victoria University of Wellington, School of Economics and Finance.
    5. Easley, David & O'Hara, Maureen & Basu, Soumya, 2019. "From mining to markets: The evolution of bitcoin transaction fees," Journal of Financial Economics, Elsevier, vol. 134(1), pages 91-109.
    6. Jonathan Chiu & Thorsten V. Koeppl, 2017. "The Economics Of Cryptocurrencies - Bitcoin And Beyond," Working Paper 1389, Economics Department, Queen's University.
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    More about this item

    Keywords

    Bitcoin; Blockchain; Ordinal; Non fungible assets; Transaction fees;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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