State of Bitcoin Q2 2023

Key Insights

• Q2’23 witnessed the meteoric rise of Ordinals and Inscriptions, fueling innovation, experimentation, and a surge in users and developers, resulting in a 44% increase in daily transactions and a 305% rise in daily transaction fees QoQ.
• The 2023 banking crisis reinforced Bitcoin's position as a refuge from the traditional financial system. Coupled with escalating SEC scrutiny towards crypto and BlackRock's pursuit of a spot-Bitcoin ETF, these external factors propelled Bitcoin's market cap dominance to 49%.
• Throughout the quarter, network congestion emerged as a recurring theme, driven by the swelling mempool due to Inscription-related transactions. The Bitcoin network witnessed a new all-time peak in transactions, with over 680,000 transactions occurring within a single day.
• Q2 witnessed miners generating $2.5 billion, marking a notable 26% QoQ increase. Inscriptions' heightened demand for blockspace drove transaction fees to account for 8% of this revenue, a significant shift from the 2% observed a year ago.

Primer on Bitcoin

Bitcoin is the first distributed consensus-based, peer-to-peer payment settlement network. Bitcoin (BTC), the native asset of the Bitcoin blockchain, is the world's first digital currency without a central bank or administrator. Often referred to as digital gold, bitcoin has a predictable, stable monetary policy that operates autonomously, giving it the ideal store-of-value properties. To secure its network, Bitcoin uses a consensus mechanism known as Proof-of-Work (PoW) to solve the “double-spend problem.” PoW requires participants (miners) to contribute computing power to solve arbitrary mathematical puzzles in order to add a new block to the blockchain. Bitcoin is awarded to the miner who solves the puzzle first, thus minting new bitcoins.