How Inscriptions Affect Bitcoin Blocksize

Bitcoin Inscriptions have increased the average size of the cryptocurrency’s blocks; here’s how this could affect the blockchain.

The Effect of Inscriptions on Bitcoin Blocksize

Very recently, “Inscriptions” have appeared on the Bitcoin network, basically an application of the BTC blockchain similar to non-fungible tokens (NFT), but not the same.

Unlike NFTs on other blockchains such as Ethereum, these inscriptions are directly inscribed on the Bitcoin blockchain (hence the name). Inscriptions can be data, images, audio, video or even software.

Since they are directly stored as a transaction on the blockchain, they have quickly inflated the size of the chain. This has made these assets a hotly debated topic around the community regarding their impact on the future of cryptocurrency.

In its new report, the chain analysis firm Glassnode has shown how this new BTC application has affected the network. An obvious implication has been on the block size, which has been pushed almost to the limit.

As for the impact on the overall size of the blockchain itself, Inscription transactions increased by 1.74 GB since December 15, 2022 (when they first appeared), as the chart below shows.

Looks like the size contributed by Inscriptions has been rapidly going up | Source: Glassnode

Compared to the total size of 444 GB of the Bitcoin blockchain, the inscriptions represent an increase of about 0.4%. Most of this increase has come from image Inscriptions, which is no surprise considering they are the most popular type out there.

In total, 93.3% of the data footprint has come from images, while text Inscriptions, the next best, has contributed around 4.59% to the increase. Audio, video and other inscriptions have had a small data footprint.

However, audio and video types have been the largest in terms of Bitcoin inscriptions’ average size. Their footprint remains the lowest because their frequency is significantly reduced compared to types such as images or text.

Inscriptions currently account for only 4.2% of all transactions on the network, but something interesting emerges when looking at the block size share they occupy.

The 24-hour MA blocksize share of Inscriptions in recent weeks | Source: Glassnode

Inscriptions occupy 47% of block space right now, despite only accounting for 4.2% of transactions, showing how much more data-rich this transaction type is. At its peak, Inscriptions took 60% of the block size.

Glassnode notes that blocks were usually mostly empty before the inscriptions appeared on the scene, with transactions taking up only 25-50% of the available block space.

“This changed dramatically since the rise of inscriptions, with blocks now typically reaching between 80-90% saturation (3.2-3.6 MB),” the report explains. “Since blockspace cannot be stored for future availability, one can consider Inscriptions a consumer of blockspace that would otherwise have run out.”

Since this is only the current effect of Inscriptions on the Bitcoin blockchain, a big question remains: what might be the long-term impact on chain size? To answer this question, Glassnode has modeled what the next 14 years could look like for BTC for three block size assumptions.

Evolution of the size of the blockchain | Source: Glassnode

The three block size assumptions (on which the simulations are based) are as follows: 1.35 MB (which is the maximum 30-day average block size of the days before inscription), 2.50 MB (highest average after inscription), and 4.00 MB (the theoretical upper limit).

Assuming the theoretical upper bound scenario follows, the Bitcoin blockchain size will have grown to 3.41TB by March 2037. At today’s hard drive prices, the hard drive needed to store a file of this size is only $120. This means that the future impact on on-chain data storage requirements is likely to be negligible.

BTC price

At the time of writing, Bitcoin is trading around $24,900, up 10% in the past week.

BTC has shot up today | Source: BTCUSD on TradingView

Featured image from Vasilis Chatzopoulos at Unsplash.com, Charts from TradingView.com, Glassnode.com