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Inscriptions have been acting more as a "packing filler," stuffed into any remaining space once higher-value monetary transfers are packed into blocks, said the firm.

Despite concerns that Bitcoin Ordinals are clogging the network, there is little evidence to suggest inscriptions are taking blockspace away from higher-value Bitcoin (BTC) monetary transfers.

“There is minimal evidence that inscriptions are displacing monetary transfers,” on-chain analytics firm Glassnode explained in a Sept. 25 report.

The firm explained that this is likely because inscription users tend to set low fee rates, expressing willingness to wait longer periods of time for confirmation.

“Inscriptions appear to be buying and consuming the cheapest available blockspace, and are readily displaced by more urgent monetary transfers.”

Bitcoin Ordinals were introduced in Feburary 2023, and have since accounted for the lion’s share of network activity when it comes to daily transaction count.

However, this hasn’t necessarily been reflected in its share of mining fees, with inscriptions only attributing to about 20% of Bitcoin transaction fees, Glassnode noted.

More inscriptions means more revenue — but there’s a catch

While inscriptions have strengthened the base-load demand for blockspace and increased fees for miners, Glassnode says Bitcoin’s hashrate has also increased 50% since February.

This has resulted in tougher competition for miners looking to swoop in on revenue fees, says Glassnode:

“With extreme miner competition in play, and the halving event looming, it is likely that miners are on the edge of income stress, with their profitability to be tested unless BTC prices increase in the near term.”

Bitcoin is currently priced at $26,216 but many industry pundits expect some degree of price appreciation in the lead-up to Bitcoin’s halving event scheduled for April 2024.

Related: Bitcoin Ordinals creator Casey Rodarmor pitches BRC-20 alternative ‘Runes’

Currently, most inscriptions come as a result of BRC-20 tokens, which were introduced one month after Casey Rodamor launched the Ordinals protocol on Bitcoin in February.

On Sept. 25, Rodarmor pitched “Runes” as a potential alternative to BRC-20s, suggesting that a UTXO-based fungible token protocol wouldn’t leave as much “junk” unspent transaction outputs on the Bitcoin network.

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