Bitcoin Ordinals are upending NFT trading amid surge in popularity

Quick Take

  • For more than three weeks, trading volumes for Bitcoin NFTs rank behind only Ethereum.
  • The move could reduce wash trading in the sector.

Bitcoin Ordinals, the non-fungible tokens minted on the world’s most valuable blockchain, have been the talk of the industry since they emerged virtually overnight earlier this year and quickly rose to prominence. Now they're providing serious competition to other networks, and changing trading behavior. 

While Ethereum, long the dominant blockchain for NFTs, still ranks number one in terms of trading volume and is unlikely to lose that lead any time soon, Bitcoin has been maintaining a firm grip on second place for more than three weeks.

Besides frustrating rival chains like Solana and Polygon that have been consistently ranking second and third for several months, Bitcoin’s ascendance in the NFT space could have the knock-on effect of spurring a decline in wash trading which can sometimes distort markets.

“Wash trading” generally refers to artificial trading that, rather than representing genuine supply and demand, inflates trading volumes as parties trade between their own wallets. It's harder to do on the Bitcoin network when it comes to NFT trading.

“You can’t really create tokens and advance smart contracts on Bitcoin, thus making token incentives for trading near impossible and wash trading less likely,” said The Block Director of Research Steven Zheng.

Before exchanges like LooksRare and Blur launched ambitious token-incentive programs designed to steal traders away from top NFT marketplace OpenSea, wash trading was minimal, according to Zheng. Most recently, Blur began awarding tokens to traders based on the total value of the trading they conducted on the marketplace.

Zheng illustrated the power of Blur’s incentives by providing the example of someone trading $1 million worth of NFTs on Blur in the hope of securing more than $1 million worth of BLUR tokens.

“This incentive mechanism doesn’t exist on Bitcoin," he said. "At least not yet.”


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Can Bitcoin Ordinals help restore legitimacy to NFT markets?

At the end of last year, an online sleuth known as @hildobby_ on Twitter posted a Dune analytics dashboard which posited that more than $30 billion of transaction volume, and roughly 44% of all NFT trading, was in fact nothing more than wash trading. At its peak, according to the same dashboard, wash trading accounted for about 80% of the total volume of NFT trades.