Decoding the not-so-obvious reason behind Bitcoin [BTC] logs heavy network traffic

• On May 1, 60% of all transactions on Bitcoin used Taproot, reaching an all-time high.
• The Bitcoin network also recorded $3.5 million in transaction fees, hitting a 2-year high.

The 2o23 bull market has led to a sharp increase in Bitcoin network activity [BTC] chain. The number of daily transactions and unique active addresses has grown steadily over the past four months.

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Blockchain analytics firm CryptoQuant developed a Bitcoin Network Activity Index to capture the growing activity in the chain. The index takes into account key indicators such as transactions, addresses and demand for block space.

Interestingly, the main reason behind the increase in network traffic was transactions driven by Taproot addresses, as emphasized by CryptoQuant CEO Ki Young Ju.

Source: CryptoQuant

Bitcoin is reinventing itself

Until 2023, Bitcoin’s reputation was limited to being a peer-to-peer (P2P) payment network with little real-world utility aside from settling transactions on the chain.

However, with the Taproot upgrade, Bitcoin began to position itself as other conventional layer-1 blockchains, enabling the deployment of on-chain smart contracts and the minting of Ordinal NFTs.

According to a data scientist from the analysis company Glass node, Taproot transactions accounted for over 37% of used outputs on the Bitcoin network. The demand for Taproot was also reflected through the adoption and utilization targets.

The data showed that on May 1, 60% of all transactions used Bitcoin Taproot, reaching an all-time high.

Source: Glassnode

Another notable trend worthy of attention was the increasing dominance of textual inscriptions over pictorial inscriptions when it came to taproot transactions. In fact, text inscriptions powered more than 50% of all transactions on the Bitcoin network.

Taproot was an upgrade to improve the privacy, scalability and security of Bitcoin. It introduced new signature schemes and a flexible transaction structure, to make transactions more efficient and cheaper.

Miners rake in the moolah

Due to the increase in network traffic, miners were able to collect huge transaction fees. Users were willing to pay more to have their transactions validated quickly. On May 3, the Bitcoin network recorded $3.5 million in transaction fees, hitting a 2-year high.

Source: Glassnode

On expected lines, Ordinals made up a significant portion of the total fees paid to miners, averaging nearly 21% in the past week, data from a Dune dashboard showed.

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The crypto community has a divided attitude towards Ordinals, and in general the idea of ​​smart contracts on Bitcoin. The naysayers object to the non-financial use case which would overload the network and increase fees on the chain.

At the time of writing, BTC changed hands at $29,240, marking a marginal increase of 0.37% in the last 24 hours, according to CoinMarketCap.