The Bitcoin BTC network has once again found itself caught in a significant network of congestion. Recent data analysis highlights transactions awaiting confirmation on the network at the time of writing this report. This reveals a staggering backlog of more than 570,000 transactions.
BRC-20 tokens and Ordinals Protocol
This isn’t the first instance of congestion to plague the Bitcoin network. A similar situation arose in May 2023 due to the increasing popularity of BRC-20 tokens. This congestion became so severe that on May 8, Binance made a move. Accordingly, it had to stop Bitcoin withdrawals due to the network being overloaded. The ongoing blockage appears to share a common root cause with the previous incident.
At the heart of this congestion issue is the use of BRC-20 tokens, which use a protocol known as Ordinals. This protocol uses JSON, a data storage and exchange format for users. It also allows them to add data to the Bitcoin network. Essentially, BRC-20 tokens are similar to Satoshis, the smallest units of Bitcoin. However, it has the ability to add additional data via the Ordinals protocol. As demand for these BRC-20 tokens increases, Bitcoin miners are struggling to maintain their speed. On the other hand, they cause block times to increase to 12 minutes on average. At the same time, there is an increase in transaction fees.
Effects of Bitcoin network congestion
The consequences of this increasing congestion on the Bitcoin network are twofold. First, Bitcoin causes significant delays in BTC transactions. It also shakes trust in cryptocurrency. Second, this increase in unconfirmed transactions and blocked blocks raises the specter of exchanges suspending Bitcoin withdrawals once again. In such a case, it is expected that users will turn to alternative crypto money networks that offer more cost-effective transaction fees.
The recurring congestion of the Bitcoin BTC network underlines the urgent need for solutions that will increase scalability and alleviate network bottlenecks to provide a smoother and more efficient user experience in the future.
Capital can move away
As the Bitcoin network grapples with constant congestion and rising transaction fees, crypto experts predict a potential migration of users towards altcoins that promise faster and more cost-effective transactions. Additionally, this migration can temporarily divert capital away from Bitcoin by increasing interest in certain altcoins.
A notable example of this phenomenon occurred in June, when Bitcoin experienced network congestion. During this period, Stacks (STX) surprisingly witnessed a significant increase in its value. On the other hand, when we look at Kriptokoin.com, it differentiates it from the broader altcoin market.
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