As more and more crypto users are trying to make fast profits by issuing memecoins with the new BRC-20 standard for the Bitcoin blockchain with Ordinals protocol, it seems that the fears of Bitcoin purists are becoming a reality.
Read also: Ordinals inscriptions soared by 92% in just eight days
The recent increase in transactions on the Bitcoin network, originally caused by minting NFTs with Ordinals inscriptions and now related to issuing hundreds of memecoins, has made the cost of transactions skyrocket. This in turn affected residents of Salvador, the first country in the world to accept the oldest cryptocurrency as legal tender, who are now facing financial losses as they have to pay up to 20% fees to receive their salaries in Bitcoin.
When Ordinals, the protocol allowing users to inscribe data into satoshis, were introduced by Casey Rodarmor in January 2023, many conservative Bitcoin users and developers warned of the potential impact of this technology on crypto transaction costs. However, many supporters of Ordinals inscriptions viewed these predictions as an unwillingness to embrace innovation and celebrate the technology that has given Bitcoin massive traction.
Yet, it seems that one of the most common arguments made by the Ordinals opposition, who claims that the protocol is not in line with Bitcoin's primary role to bank the unbanked, may be true as the recent economic changes in El Salvador have shown.
On May 8, blogger Marce Romero tweeted about her experience of witnessing a cash withdrawal using Bitcoin.
"This individual now had to pay $20 in fees for getting $100 out in a country where the avg. salary is $300-350," Romero said, adding, "I want you to think about this when enabling gambling on fkn jpegs or meme coins. This is real."
The adoption of Bitcoin in El Salvador started on June 5, 2021, when the country's president Nayib Bukele announced a bill for a new legal tender. The government has taken significant steps to enforce the new currency in the country by launching Chivo, a special crypto wallet that supports dollars, installing crypto ATMs throughout the country, providing education about Bitcoin, and even airdropping free cryptocurrency.
Despite these efforts, less than a third of the country's population has become active Bitcoin users so far, while only 20% of the country's entrepreneurs have switched to Bitcoin. Still, many Salvadorans who have complied with the new financial policy are now being paid in cryptocurrency. For them, the increase in transaction fees is critical, as they have to pay up to 20% for withdrawing money.
Read also: Ordinals brings NFTs to Bitcoin, causing a stir in the crypto space
While Romero's concerns are understandable, many Twitter users suggested that El Salvador will not be able to survive with its new legal tender unless it switches to The Lightning Network Layer 2 payment protocol, which is specifically designed to improve Bitcoin's scalability and reduce transaction fees. Others criticized the blogger, telling her that "complaining about high fees because degen jpeg creators is so anti-free market," and this is exactly how "decentralization works."
Litecoin improves its position
In the meantime, some crypto users suggested switching to Litecoin, a Bitcoin fork featuring four times greater supply than Bitcoin, which equals 84 million coins, and a four times faster block time. It seems that many crypto users have indeed switched to the altcoin, which was worth $80 at press time and had the 13th largest market cap among other cryptocurrencies amounting to $5.83 billion.
According to BitInfoCharts data, Litecoin reached its all-time high of 576,000,000 transactions yesterday, which was very close to 598,105,000 Bitcoin transactions performed on the same day. Overall, Litecoin has experienced almost five-time growth in transactions since May.
Bitcoin responded to its increased appeal with a significant boost in transaction fees, surpassing the recent $ 18 fees on the Ethereum network, while some of its miners now earn more money for processing transactions than for mining itself. At the same time, a Litecoin transaction still cost just $0.003 yesterday. Now that it is obvious that the altcoin is indeed enjoying increased traction, the comments of some Twitter users claiming that the low fees are a signal of the network's unpopularity do not seem to be correct.
