TL; DR
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The more popular Ordinals become → the more are created → the more miners grease their palms → the higher the average Bitcoin transaction fees become.
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This is great for miners (who not only process transactions, but also keep the network safe)!
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…but not so great for anyone looking to send Bitcoin at a reasonable price.
Full story
Picture this:
It’s your friend’s birthday and you’re trying to get into their favorite bar with a giant cake, balloons, party favors, etc.
But the bouncer at the front has no intention of allowing that kind of stuff into the bar.
…unless you grease his palms – in which case he’ll show you to the service entrance around the corner and let you take your contraband inside.
That’s kind of how Bitcoin Ordinals (also known as Bitcoin NFTs) work.
If you tried to use Bitcoin’s ‘front door’, any transaction larger than 400kb would be rejected – which is fine, because you’ll never reach that limit when only Send Bitcoin.
…but if you want to send a Bitcoin Ordinal (which can be an image, video, small piece of software – basically anything code-based), you have to use the ‘side door’.
That means greasing a miner’s palm – enough to convince him that you can process up to 10x the usual transaction limit (4 MB, instead of 400 KB).
And all this feeds the ‘high-fee flywheel’:
The more popular Ordinals become → the more are created → the more miners grease their palms → the higher the average Bitcoin transaction fees become.
That’s great for miners (who not only process transactions, but also keep the network safe)!
…but not so great for anyone looking to send Bitcoin at a reasonable price.