Inscriptions Dominate Volume On EVM Chains

Inscriptions continue to spread across smart contract networks, representing the majority of transaction volume on many leading chains boasting Ethereum Virtual Machine (EVM)-compatibility.

In the past seven days, inscriptions accounted for more than 91% of transactions on Avalanche, 75% on Gnosis, 65% on Ethereum’s Goerli testnet, 62% on Arbitrum, 58% on ZkSync Era, and more than 40% on BNB Chain and Polygon PoS Chain, according to Dune Analytics.

The surging activity has driven outages on Arbitrum, Avalanche, ZkSync Era, Cronos, The Open Network, and most recently, Celestia.

More than 77% of transaction fees spent on Avalanche were associated with inscription in the past week, while 39% of transaction fees on ZkSync Era, 18% on Arbitrum, 16% on Gnosis, and 13% on BNB Chain funded inscription transactions.

Inscriptions are also disrupting the NFT sector. On Dec. 18, the OKX NFT Marketplace overtook Blur to rank as the leading NFT trading platform by trade volume for the first time after introducing support for Bitcoin Ordinals, according to DappRadar.

OKX NFT Marketplace drove $29.5M worth of transactions in the past 24 hours, beating out the second-ranked Blur’s $15.5 by nearly double.

The rise and controversy of inscriptions

Inscriptions emerged as a coding method for creating NFT-like assets on the Bitcoin blockchain despite the network’s lack of smart contract functionality in January. Fungible inscription tokens followed in March with the launch of the BRC-20 token standard.

Bitcoin-based inscription tokens enjoyed bullish momentum throughout the second quarter before taking a backseat in Q3. The sector enjoyed an impressive resurgence in recent months and began proliferating across EVM chains in November.

Ordinals have emerged as a divisive phenomenon for the web3 community. Proponents argue inscriptions offer an egalitarian issuance mechanism for new tokens and a theoretically cheaper way to create NFTs on EVM chains — with inscription tokens forgoing the need to interact with gas-intensive smart contracts, at the expense of requiring off-chain indexing to track ownership.

However, critics decry the sector’s lack of utility beyond speculation, characterizing inscription tokens as a waste of block space and a source of congestion.

While alternative Layer 1 networks Near, Fantom, and Polygon enjoyed a surge in activity amid the launch of native inscriptions, the uptick in adoption came alongside transaction fee hikes of between 4,500% and 9,000%.

The rise of inscriptions has also throttled congestion on Bitcoin, with more than 338,500 unconfirmed transactions sitting in Bitcoin’s mempool — up from 226,000 two weeks ago. According to Ordi.io, more than 49.6M inscriptions have been minted on the Bitcoin blockchain.

While select miners have moved to boycott inscriptions, research from Glassnode indicates that inscriptions accounted for up to 30% of miner revenue from transaction fees this year.

The lack of smart contract compatibility on EVM chains also means the tokens cannot interact with DeFi protocols.