New Era in Blockchain: The Rise and Dip of Inscriptions

Subtle Shifts in EVM Chains

A recent surge in Ethereum Virtual Machine (EVM) chain transactions has been observed. Notably, around 95% of these involve inscriptions, as reported by Etherscan, a blockchain analytics tool.

Ordinals inscriptions are emerging as a preferred method for creating non-fungible tokens (NFTs) on blockchains. These inscriptions are akin to tiny digital capsules within Bitcoin, containing unique data such as images, text, or videos. Each inscription is embedded in a single Satoshi, Bitcoin's smallest unit, crafting unique, indestructible digital assets reminiscent of NFTs but within the Bitcoin network.

The Art of Inscriptions

The durability and security of these inscriptions mirror that of Bitcoin. They open new avenues for artists to upload their work directly onto the blockchain, heralding a new era of verifiable digital art. This innovation also allows for the creation of limited-edition items and collectibles, redefining digital ownership.

However, this trend has recently seen a downturn. The flurry of activity in inscription protocols across EVM-compatible networks has lessened. Data from Dune Analytics shows that while Avalanche and Ethereum’s Goerli testnet continue to see high inscription activity, it has diminished on other Layer 2 networks like the Polygon PoS sidechain and BNB Chain.

Image Source: Dune

A deeper analysis reveals a significant decline in inscription-related transactions. For instance, the Avalanche network recorded a high of approximately 370,000 inscriptions.

Gas Fees: A Roller Coaster

In December, during the height of the inscription frenzy, networks like Avalanche and Arbitrum incurred gas fees exceeding $5 million and $2 million respectively. However, there was a sharp drop in gas prices post-December 21st, with the highest recorded gas price around $16,000.

Image Source: Dune

In the last week, inscriptions comprised 77% of Avalanche transactions, 67% of Goerli transactions, but less than 5% on the BNB Chain and OP Mainnet. This is a stark contrast to mid-December, where inscriptions accounted for over 40% of BNB Chain and Polygon PoS Chain transactions.

A Temporary Lull or a Declining Trend?

This decrease in activity follows a spike in recent weeks, spreading across EVM-compatible networks. The introduction of native inscription procedures in late November caused transaction fees on networks like Near, Polygon, and Fantom to skyrocket by thousands of percent.

This decline suggests a potential waning in the inscription-driven contribution to network fees. The future of inscriptions on EVMs, whether a temporary slowdown or a more permanent decline, remains uncertain.