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The number of daily Bitcoin (BTC) transactions on the blockchain rose, reaching an all-time high of 682,000 on May 1st. Rafael Schulze-Kraft, co-founder of Glassnode, suggested that this increase in transaction volume is likely due to a combination of factors.
Bitcoin transactions are skyrocketing
Rafael argues that one of the key factors is the growing adoption of Bitcoin by institutional investors and large corporations. As more companies begin to hold bitcoin on their balance sheets and offer it as a payment method, the demand for bitcoin transactions has more and more potential to increase.
Another factor driving the growth of bitcoin transactions is the growing popularity of decentralized finance (DeFi) applications. These blockchain-based applications such as Ethereum and Bitcoin allow users to borrow, lend, and trade cryptocurrencies in a decentralized manner.
In addition, Schulze-Kraft notes that the recent surge in bitcoin transactions may be a sign of increased interest and activity in the cryptocurrency space more broadly. As more people become aware of bitcoin and other cryptocurrencies.
Daily number of BTC transactions. Source: Raphael Schulze-Kraft on Twitter.
Also, according to Schulze-Kraft, the current surge in transactions is noteworthy as it is more than double the baseline set in 2022, which was relatively stable at around 250,000 transactions per day, as seen in the chart above.
The recent surge has been accompanied by a notable increase in the use of Taproot transactions. According to data from Glassnode, Taproot transactions accounted for 37.5% of spent outputs on April 30, and on May 1, a record 60% of all Bitcoin transactions using Taproot.
Acceptance of BTC Taproot. Source: Raphael Schulze-Kraft on Twitter.
So, what is Taproot and why is its adoption growing? Taproot is a proposed upgrade to the Bitcoin network designed to improve privacy and efficiency. This is achieved by combining multiple BTC script paths into a single output that can be spent using a single signature. This makes transactions smaller and cheaper, which can help reduce network congestion and lower fees.
Taproot was first proposed in 2018, but it took some time for the Bitcoin community to come to a consensus on its implementation. However, the recent activation of Taproot looks increasingly likely, with more users and companies starting to adopt the technology.
In addition, according to Rafael Schulze-Kraft, the recent spike in Taproot transactions on the Bitcoin network can be explained by a significant increase in text overlays. More than 50% of all transactions in the Bitcoin network are associated with text inscriptions.
When separating text-related transactions from all other bitcoin transactions, it becomes clear that they are the only driver of the recent increase in BTC activity, briefly surpassing the total number of all other transactions.
Type of inscriptions BTC. Source: Raphael Schulze-Kraft on Twitter.
Glassnode data shows that text labels are much more popular than others on the Bitcoin network, including images, video, and audio. While there are several uses for these other types of labels, such as embedding a digital signature or proof of ownership, text labels seem to be the most versatile and widely used.
As the Bitcoin network continues to evolve and adapt to changing user needs, there will likely be more innovations and updates that will further enhance its functionality and usability. Whether it’s text labels or other technologies, it’s clear that BTC is becoming not only a financial instrument, but also a powerful tool for communication and self-expression.
BTC is trading sideways on the daily chart. Source: BTCUSDT on TradingView.com.
Featured image from Unsplash, chart from TradingView.com