On-Chain Commentary
- On-chain activity is on the rise thanks to use cases in emerging markets
- Bitcoin’s neutrality and decentralization allows for frictionless adoption
- NFTs are being minted on the Bitcoin chain using Ordinals
Bitcoin’s on-chain activity has picked up in recent weeks, thanks to growing utility in emerging markets and the rise of NFT novelty. Both transactions per day and average block sizes have risen substantially YTD.
In the Fall of 2021, Nigeria launched the eNaira, a Central Bank Digital Currency (CBDC) which saw no enthusiasm for use and poor adoption overall. CBDCs controlled by the government enable complete control over the citizenry, allowing issuance and redemption at any time, spending limitations, seizure and retention possibilities, and visibility over user spending behaviors. In an attempt to increase adoption and encourage a cashless society, the Nigerian government recently severely restricted cash withdrawals to $45 a day, while the country is also experiencing a 21% YoY inflation wave. Nigerians seeking alternatives to the eNaira over the past two years have increasingly sought out Bitcoin as an alternative payment and banking method.
Lebanon is another emerging market seeing increasing Bitcoin adoption after Lebanon’s Central Bank devalued the Lebanese Pound by 90% last week. In November, CNBC reported a rise in digital currency use as the country was dealing with severe hyperinflation. In both Lebanon and Nigeria, the need for a neutral, incorruptible, decentralized, trustless, peer to peer payment rail and money network acted as an escape hatch for those suffering under the misdeeds of their government.
Finally, Bitcoin chain use has also increased over the past week due to a controversial use case, non-fungible tokens (NFTs). The Ordinals protocol, which uses Taproot scripting technology implemented in November 2021, allows for the viewing, creating, and transferring inscriptions. These NFTs are fully on-chain and do not require a sidechain or separate token. Several prominent Bitcoin thought leaders have referred to the use of the chain in this way as spam or bloat, while others have welcomed the new use. Bitcoin’s average block size has increased from around 1.3 MB to around 2.2 MB, while average transaction fees have remained unchanged.
