Three years ago there was much discussion about data embedded in Bitcoin transactions and the block size consumed by those OP_Return transactions. Recently, however, the use of OP_Return transactions has declined sharply, and the trend has reduced network fees to some extent.
OP_Return Transaction dominance significantly slows down bitcoin network fees
Bitcoin transfer fees have come down quite a bit in the last nine months since July 1, 2021. Back then, the average transaction fee for sending Bitcoin (BTC) was over $10 per transaction. Statistics show that at the end of April 2022, the average fee for sending BTC is 0.000042 BTC, or $1.62 per transfer. This month, a report released by Galaxy Digital Research head Alex Thorn explains that there are a number of reasons why onchain transactions were cheaper.
Thorn’s report explains that there are a number of reasons why the fees are lower, including the use of transaction batching, the increasing acceptance of Segregated Witness (Segwit), and the use of the Lightning Network. Another trend that Thorn’s report addresses is the fact that OP_Return transactions have been declining. The researcher notes how after 2018, after the launch of Veriblock, the use of storing arbitrary data on the Bitcoin blockchain skyrocketed.
Recently, however, OP_Return transactions originating from Veriblock and Tether via Omni have been declining. Galaxy Digital Research’s study explains how most tethers have moved out of the omni-layer network using OP_Return transactions to alternate chains. While Thorn’s report briefly mentioned the increase in OP_Returns after Veriblock, he fails to mention how controversial storing arbitrary data on the Bitcoin blockchain was at the time.
Essentially, an OP_Return is used to mark a transaction output, and users can mark approximately 80 bytes of null_data on the Bitcoin blockchain in a given transaction. Using Bitcoin’s script and null_data, a large number of companies have used it to write messages to the blockchain and record important data. In late 2013 and 2014 the use of OP_Return became more popular and controversial. However, research shows that prior to 2017, OP_Return transactions accounted for less than 2% of transactions.
Recent daily data shows that OP_Returns have been declining lately, and it’s very different from when Veriblock captured 57% of Bitcoin’s OP_Return spend in 2019. Bitcoin advocates at the time were very concerned about people and organizations storing arbitrary data on the Bitcoin blockchain. A paper published on December 11, 2020 discusses the “dominant” OP_Return issues in a paper titled “The Impact of Omni and Veriblock on Bitcoin”.
Besides Veriblock, the top publishers of OP_Return transactions between 2018 and December 2019 were Omni/Tether, Factom, Komodo, Blockstore, po.et, Chainx and RSK. Although many of these projects still exist today, they no longer produce as many OP_Return transactions as they did in the past. Of course, there is a possibility that using OP_Return outputs that dominate BTC transactions could happen again. While reports such as Thorn’s study and recent data show that OP_Return transactions have decreased, there is no clear explanation as to why this has happened.
What are your thoughts on the decline in Bitcoin OP_Return transactions lately? Let us know what you think about this topic in the comment section below.
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