The Number Of Entities Using Bitcoin To Store Arbitrary Data Has Decreased

Three years ago, there was a lot of talk about the data embedded in bitcoin transactions and the block size space consumed by those OP_Return transactions. However, lately, the usage of OP_Return transactions has decreased a lot, and the trend has reduced network fees to some extent.

Dominance of OP_Return Transactions Significantly Slows Bitcoin Network Fee Reduction

Bitcoin transfer fees have dropped significantly over the past nine months since July 1, 2021. At that time, the average transaction fee to send bitcoin (BTC) was over $10 per transaction. Statistics show that at the end of April 2022, the average fee to send BTC is 0.000042 BTC or $1.62 per transfer. This month, a report by Galaxy Digital Research head Alex Thorn explains that there are a number of reasons why on-chain transactions have been cheaper.

The number of entities using Bitcoin to store arbitrary data has decreased
The report from Alex Thorn and Galaxy Digital shows a drop in OP_Return transactions.

Thorn’s report explains that there are a number of reasons the fees are lower, including the use of transaction batching, increased adoption of Segregated Witness (Segwit), and use of the Lightning Network. Another trend covered by Thorn’s report is the fact that OP_Return transactions have declined. The researcher notes how after 2018, following the launch of Veriblock, the use of arbitrary data storage on the Bitcoin blockchain increased.

The number of entities using Bitcoin to store arbitrary data has decreased
Tether transactions through the Omni Layer chain which uses OP_Return transactions have declined significantly since USDT was added to a variety of different blockchains.

Lately, however, OP_Return transactions from Veriblock and Tether through Omni have been on the decline. The Galaxy Digital Research study explains how most tethers left the Omni Layer network that uses OP_Return transactions for alternate chains. Although Thorn’s report briefly mentions the spike in OP_Returns after Veriblock, it does not mention how controversial storing arbitrary data on the Bitcoin blockchain was at the time.

The number of entities using Bitcoin to store arbitrary data has decreased
Individuals and organizations have been storing data on the Bitcoin blockchain for years. The @OP_RETURN_Bot social media account posts specific OP_Return transactions with messages on Twitter.

Essentially, an OP_Return is used to mark a transaction exit and users can mark around 80 bytes of null_data in the Bitcoin blockchain in a given transaction. Using bitcoin’s script and null_data, a large number of entities have used it to write messages on the blockchain and record important data. In late 2013 and into 2014, the use of OP_Return started to become more popular and controversial. Yet, prior to 2017, research shows that OP_Return transactions accounted for less than 2% of transactions.

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Today’s daily data shows that OP_Returns have been dropping lately and that’s very different from when Veriblock captured 57% of Bitcoin’s OP_Return outflows in 2019. Bitcoin proponents were very concerned at the time about people and organizations storing arbitrary data on the Bitcoin blockchain. An article published on December 11, 2020 discusses “dominant” OP_Return outputs in an article titled “The Impact of Omni and Veriblock on Bitcoin.”

Besides Veriblock, between 2018 and December 2019, the top OP_Return transaction publishers were from Omni/Tether, Factom, Komodo, Blockstore, po.et, Chainx, and RSK. Today, while many of these projects still exist, they don’t produce as many OP_Return transactions as they did in the past. Of course, it is possible that the use of OP_Return outputs dominating BTC transactions will happen again. While reports like Thorn’s study and current data show that OP_Return transactions have decreased, there is no clear explanation as to why this has happened.

Keywords in this story

Alex Thorn, Bitcoin Blockchain, BTC, Galaxy Digital Research, Galaxy Digital Research study, Omni Layer Network, OP_Return data, OP_Return transactions, OP_Returns, arbitrary data storage, technology, transaction cost, transaction fees, transaction output, transactions, Veriblock

What do you think of the drop in Bitcoin OP_Return transactions lately? Let us know what you think about this topic in the comments section below.

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Jamie Redman

Jamie Redman is the news manager for Bitcoin.com News and a fintech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He is passionate about Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written over 5,000 articles for Bitcoin.com News about disruptive protocols emerging today.




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The Number Of Entities Using Bitcoin To Store Arbitrary Data Has Decreased


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