Bitcoin’s price may have stabilized below $30,000, but the Taproot upgrade has caused a significant increase in activity on the network.
It is important to note that the Taproot upgrade has enabled the creation of decentralized apps (dApps) on the Bitcoin blockchain, improving the network’s privacy, scalability, and security. The introduction of new signature schemes and a flexible transaction structure has improved the Bitcoin blockchain’s long-term viability for supporting the development of DeFi.
Taproot Behind Bitcoin’s Heavy Activity
Glassnode data suggests that more than 75% of Bitcoin’s on-chain transactions used Taproot on May 7th. This is a record high compared to only 1.536% at the beginning of the year.
The surge in Taproot’s adoption has led to an increase in network traffic, with transaction counts increasing more than 2x compared to the 2022 baseline, according to Glassnode co-founder Rafael Schultze.
The executive revealed that this figure had remained in a stable range of around 250k transactions per day throughout last year. The previous ATH of 490k daily transactions dates back to the 2017 bull market.
The network activity has pushed the average fee rate to the highest in nearly two years, which has resulted in extra revenue for Bitcoin miners. The average fee per Bitcoin transaction rose to $19.2 on May 7th, the highest since April 2021, according to BitInfoCharts’ data.
Bullish Despite Heightened Volatility
Meanwhile, there are currently over 455,000 transactions waiting to be confirmed in Bitcoin’s mempool. While the network congestion can be attributed to the rise in Ordinals inscriptions, this has nevertheless ignited concerns over a potential Denial of Service (DoS) attack on the network.
Binance, for one, was forced to halt BTC withdrawals citing “the large volume of pending transactions.” Despite the volatility and FUD, Bitcoin investors appear to be bullish.
The number of addresses sending BTC to exchanges hit a 2-year low of over 3,700, potentially indicating that investors are willing to hold the asset in anticipation of a new rally.
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— glassnode alerts (@glassnodealerts) May 7, 2023