According to a recent report by The Block, bitcoin network transaction activity has dropped to its lowest level in 18 months, with the 7-day moving average transaction volume reaching 316,000 last week, a decline of over 50% from the peak of 700,000 daily transactions in mid-2024.
Although transaction volume has recently slightly rebounded to about 350,000 transactions, this number is still far below market expectations, reflecting a significant cooling in the activity of the bitcoin on-chain ecosystem.
Runes and Ordinals: From Frenzy to Silence
The sharp decline in transaction volume is largely due to the waning craze of the bitcoin native protocols, Runes and Ordinals. In spring 2024, these two protocols ignited market enthusiasm, trying to inject decentralized application (DeFi) and non-fungible token (NFT) functionalities similar to Ethereum into the unique mechanism of the bitcoin blockchain.
The Ordinals protocol has sparked an NFT craze by assigning unique serial numbers to the smallest unit of bitcoin, 'Satoshi,' supporting data embedding in the form of inscriptions; while the Runes protocol, based on the UTXO model, aims to optimize homogeneous token issuance and seeks to replace the BRC-20 standard, becoming the 'new favorite' for issuing native bitcoin assets.
When the Runes protocol launched in April 2024, its transaction share once reached 68% of the bitcoin network, and on-chain transaction fees soared to thousands of sats/vB, dramatically increasing miner revenues. However, the good times were short-lived as Runes' complex distribution mechanism and inadequate user experience led to a rapid decline in its popularity, with current daily usage down to only 10,000 times, a nearly 99% drop from its peak.
The trading activity of Ordinals has also significantly shrunk. On-chain data shows that the trading volume of BRC-20 and Runes-related tokens has shown only weak stabilization after months of decline, far from restoring its former glory.
Why has the craze faded?
The silence of the bitcoin native protocol is both constrained by technical aspects and a shift in market sentiment.
The designs of Runes and Ordinals have not fundamentally resolved the efficiency issues of the bitcoin network. Although Runes optimized the UTXO expansion problem of BRC-20, its complex symbol distribution mechanism and lack of anti-sniping design have led to early high-quality symbols being quickly occupied, making it costly for retail investors to participate, draining market enthusiasm. Ordinals has caused network congestion due to inscription transactions, high gas fees, and poor user experience, limiting its large-scale adoption.
Secondly, the fragmentation of protocols in the bitcoin ecosystem further weakens its competitiveness. Runes, BRC-20, Ordinals, and even the emerging BRC-2.0 standards are battling independently, dividing liquidity and user attention, making it difficult to form a unified network effect.
In contrast, blockchain ecosystems like Ethereum and Solana offer more efficient DeFi and NFT solutions due to their mature smart contracts and developer communities, attracting a significant amount of speculative funds and user outflow.
Moreover, the low market sentiment has exacerbated the ecosystem's predicament. The inscription craze of spring 2024 once triggered the explosive growth of tokens like ORDI and SATS, but subsequently, over 90% of the valuation corrections turned investors from fervor to caution. Discussions about Runes and Ordinals on social media have shifted from bullish to indifferent, and community cohesion has significantly declined.
Structural Challenges of the Bitcoin Network
The sluggish transaction activity on the bitcoin network reflects the structural challenges it faces in expanding its ecosystem beyond being 'digital gold.' The decentralization and security design of bitcoin make it unmatched in value storage, but its block size limit and transaction throughput bottleneck make it difficult to support high-frequency DeFi or NFT activities.
Although the Ordinals craze in 2024 briefly pushed up transaction fees, accounting for over 20% of miner revenues, this was more a short-term phenomenon driven by speculation rather than sustainable ecosystem growth.
At the same time, internal disputes within the bitcoin community regarding the native protocols have not subsided. Some core developers believe the explosion of inscriptions and Runes-like protocols is akin to a 'spam' attack, occupying valuable block space and threatening network security.
At the end of 2023, Bitcoin Core developer Luke Dashjr submitted a vulnerability fix code in an attempt to limit inscription transactions, sparking intense debate within the community. Although strict restrictions were not subsequently implemented, this incident highlighted the dilemma of balancing innovation and security in bitcoin.
Future Outlook: Where is the Dawn?
Although on-chain activities in bitcoin are currently sluggish, the market is not entirely hopeless. CryptoQuant analysts point out that the significant increase in long-term accumulation addresses often signals a rise in bitcoin prices, reflecting investors' ongoing confidence in it as a store of value. Additionally, the upcoming BRC-2.0 protocol, promising to introduce smart contract functionality, may inject new vitality into the bitcoin ecosystem. However, its actual effects still require time to validate, and the past 'flash in the pan' of protocols has kept the market cautious.
For Runes and Ordinals, future recovery depends on the following conditions:
First, technological optimization to improve user experience and transaction efficiency;
Second, community integration to reduce protocol fragmentation and form stronger network effects;
Third, external catalysts, such as favorable policies or the return of market hotspots. Recently, U.S. President Trump signed a strategic bitcoin reserve executive order, and BlackRock suggested that investors allocate 2% of their assets to bitcoin, which boosted market sentiment. However, these positives are more effective at the price level, and it remains questionable whether they can directly stimulate the on-chain ecosystem.
In Conclusion
The bitcoin network's transaction volume has fallen to an 18-month low, and the craze for Runes and Ordinals has receded, revealing the difficult exploration of its ecosystem expansion. Bitcoin's status as 'digital gold' is unshakeable, but to share a piece of the pie in the DeFi and NFT fields, it still needs to overcome numerous technical and community barriers.
The current market trough may be a necessary path for the survival of the fittest in the ecosystem. Only with grounded technological breakthroughs and the reshaping of community consensus can the bitcoin on-chain ecosystem usher in a true revival. Investors and developers need to remain patient and wait for the next 'supernova' explosion.
