Inscription Tokens Drive Up Costs

In recent days, users of the Avalanche blockchain have incurred $13.8 million in transaction fees. This surge is attributed to the minting and movement of tokens and Non-Fungible Tokens (NFTs) using inscriptions.

Inscriptions are essentially text written within standard blockchain transactions, tracked through an off-chain numbering system. Originally developed on the Bitcoin network to bypass its limitations in supporting tokens, these inscriptions have now proliferated across various blockchains, including Avalanche.

The Allure of Lower Costs

A key reason for their popularity is the relatively lower cost of moving these inscription-based tokens compared to native tokens. On other blockchains like Polygon and BNB Chain, tens of millions of such tokens have been created. The fees paid on each of these chains amount to approximately one million dollars in total.

Avalanche's Fee Explosion

However, Avalanche's recent fee spike is notable. A Dune Analytics dashboard, created by Hildobby, a researcher at Dragonfly VC, reports daily fees reaching up to $5.6 million. These figures constitute about 70% of all inscription-related fees across various blockchains.

Historical Context of Fee Growth

Historically, Avalanche has seen two major spikes in interest regarding inscriptions. The first spike occurred in late November, with fees totaling around $1.5 million over five days. The recent spike, however, has been significantly higher.

This increase aligns with a surge in non-inscription transactions, driving up the overall demand for blockchain space. Consequently, transaction costs have escalated, with a notable peak in gas prices on December 18.

Ranking in Inscription Transactions

In terms of inscription-related transactions, Avalanche ranks third, processing 61 million transactions. This figure is behind BNB Chain's 77 million and Polygon PoS's 161 million transactions. Moreover, Avalanche is currently home to over 1,160 inscription collections.

Broader Blockchain Trends

Looking beyond Avalanche, other blockchains like Arbitrum are also experiencing a rise in transaction fees related to inscriptions. In the last three days alone, about $3 million has been spent on these transactions.

Additionally, there's been a significant increase in the number of addresses engaged in inscription-related transactions. For instance, a recent day saw 180,000 addresses involved, a sharp rise from the usual 50,000. This increase is primarily due to activities on blockchains like BNB, Avalanche, and zkSync Era.

Impact on Miners and Validators

Despite the varying reasons for the spread of inscriptions, one thing is certain: miners and validators benefit from the increased network activity through additional income. However, this excludes Avalanche validators, as they do not receive transaction fees, which are instead burned.

Update: It's important to note that Avalanche validators do not receive transaction fees.