Back in January, one of the hottest phenomena in the crypto world was the creation of a new face of Bitcoin known as Bitcoin Ordinals, which is a new form of NFT called “inscriptions“.
Innovators find clever ways to “log” text, images, and other content into blocks on the Bitcoin block chain.
Until the end of February, these Ordinals were so popular that Yuga Labs, the creators of the Bored Ape Yacht Club, even created a collection of NFTs for Bitcoin.
This excitement over the Bitcoin NFT has, in turn, led to the creation of a new type of token known as BRC-20, which can be traded on the Bitcoin block chain.
These tokens first appeared in early March, and if one may say so, have become even more sensational than the Bitcoin NFT.
In just two months time, the total market value of the token BRC-20 nearly US$1 billion. In early May, signs of a Bitcoin meme-token mania began to appear.
Real-world impact According to one block chain analytics service, 65 percent of all transactions on the Bitcoin face on May 7 were related to BRC-20 tokens.
In other words, 65 percent of the traffic on the Bitcoin block chain as of last Sunday involved people exchanging tokens memes.
Things got so messed up, that even Binance was the currency exchange crypto world’s largest has to temporarily halt Bitcoin withdrawals.
The important point here is that we are starting to see a breakdown in Bitcoin usage, and this is causing higher fees and network congestion.
In El Salvador, where Bitcoin is legal tender and is used for everyday purchases, the transaction fee for withdrawing US$100 in Bitcoin is reportedly now US$20.
Think about it: If your bank charges you $20 every time you take out $100 from an ATM, you might start looking at a different bank.
Of course, the innovators who brought us Ordinals and the new BRC-20 token would have explained how much functionality and usability they have brought to the face of Bitcoin.
Maybe they will tell you how they helped Bitcoin achieve adoption mainstream wider. And they claim they’ve helped create a multi-billion dollar market opportunity overnight, fair enough.
But I can’t help but think about the 65 percent figure. Are two-thirds of Bitcoin transactions now related only to speculation in the token memes? Please, don’t tell Gary Gensler this.
Once the Chairman of the US Securities and Exchange Commission found out that crypto enthusiasts had turned Bitcoin into a speculative playground with meme tokens, then all was said and done.
And that is my main concern. How can one reasonably explain Bitcoin as stable money when people are playing around with tokens memes behind it and taking down funny pictures in its blockchain?
The Face of Bitcoin, Should You Invest in This Asset?
At one time, a new NFT could be a good thing for future Bitcoin valuations. However, with the advent of the BRC-20 meme token, I started to change my opinion.
Many of Bitcoin’s most popular BRC-20 tokens are clearly designed as meme tokens.
The top tokens in this category by market cap now include a pizza-themed token, a frog-themed token, and a token that refers to itself as “memes“.
Now, when the cryptocurrency exchanges are bigger and more mainstream start listing these tokens for trading, this problem could grow bigger as more people join in on the mania memes token.
For now, I remain optimistic in the long term of Bitcoin. However, in the short term, I will be watching closely what is going on with NFTs and tokens memesquoted from Fool.
If Bitcoin’s main purpose is to act as a digital money system peer-to-peer hampered by high costs, congestion, and other forms of market friction, then it may be time to slow down.
If the face of Bitcoin is so trying to be Ethereum, why not just invest in Ethereum? [az]