Three years ago, there was a lot of discussion about data embedded in bitcoin transactions as well as the block space taken by these OP_Return transaction. In recent years, however, the number of OP_Return transaction has decreased significantly and network fees have been lowered to some extent.

OP_Return Transaction Domination Slows Significantly to Reduce Bitcoin Network Fees

Bitcoin transfer fees have dropped quite a bit over the last nine months since July 1, 2021. At that time, the average transaction fee to send bitcoin (BTC) was above $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 published by the lead at Galaxy Digital Research, Alex Thorn, explains there are a number of reasons why onchain transactions have been cheaper.

Thorn’s research explains that fees are lower due to a variety of factors, including transaction batching, increased Segregated Witness adoption (Segwit), and Lightning Network usage. Thorn’s report also covers the fact that OP_Return transaction have decreased. The researcher notes how after 2018, following the launch of Veriblock, the use of storing arbitrary data on the Bitcoin blockchain spiked.

In recent years, however, OP_Return transaction stemming from Veriblock or Tether via Omni have been declining. Galaxy Digital Research’s study explains how most tethers moved away from the Omni Layer network, which uses OP_Return transaction to other chains. Thorn’s report mentions briefly the spike in OP_Returns following Veriblock, but it does not mention the controversy surrounding the storage of arbitrary data on Bitcoin blockchain at the time.

Essentially, an OP_Return is used to mark a transaction output and users can mark roughly 80 bytes of null_data to the Bitcoin blockchain in a given transaction. Many entities have used Bitcoin’s script to record important data and write messages on the Bitcoin blockchain. At the end of 2013 and into 2014, OP_Return use started to become more popular and controversial. Still, before 2017, research shows that OP_Return transactions only accounted for less than 2% of transactions.

Current daily data shows that OP_Returns have dropped in recent times and it is very different than when Veriblock captured 57% of Bitcoin’s OP_Return outputs in 2019. At the time, Bitcoin advocates were concerned about the possibility of people or organizations storing arbitrary information on the Bitcoin blockchain. One paper published on December 11, 2020, discusses “dominating” OP_Return outputs in a paper called “The Impact of Omni and Veriblock on Bitcoin.”

Besides Veriblock, between 2018 and December 2019, the top publishers of OP_Return transactions stemmed from Omni/Tether, Factom, Komodo, Blockstore, po.et, Chainx, and RSK. While many of these projects are still around, there aren’t as many OP_Return transactions today as in the past. Of course, there’s a chance the use of OP_Return outputs dominating BTC transactions could happen again. Thorn’s report and current data indicate that OP_Return transactions are declining, but there is no clear explanation.

What do you think about the decline in Bitcoin OP_Return transactions in recent times? Please comment below to let us know your thoughts on this topic.

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