The Bitcoin block space wars are real, and if you run mining hardware, they affect your bottom line directly. When Ordinals exploded onto the scene in early 2023, they did something nobody expected: they turned Bitcoin’s scarce block space into a battleground between financial transactions and on-chain data inscriptions. Transaction fees spiked. Mempools bloated. And miners — ourselves included — watched fee revenue surge while everyday users scrambled to get confirmations.
The question that emerged from the chaos: can the Liquid Network, Blockstream’s federated sidechain, absorb the data-heavy Ordinal traffic and free up mainchain block space for the financial transactions Bitcoin was built to carry?
At D-Central Technologies, we have been deep in the trenches of Bitcoin mining since 2016. We have watched every protocol debate, fee market shift, and scaling proposal play out in real time — and we have a perspective that most commentators lack: we see block space economics from the miner’s side of the hashrate.
Let us break this down.
What Are Bitcoin Ordinals and Why Do They Matter to Miners?
Bitcoin Ordinals, introduced by Casey Rodarmor in January 2023, use the Ordinal Theory to assign serial numbers to individual satoshis and then inscribe arbitrary data — images, text, audio, even applications — directly onto the Bitcoin blockchain via the witness data section of transactions.
Here is what matters from a mining perspective:
| Metric | Standard BTC Transaction | Ordinal Inscription |
|---|---|---|
| Typical Size | 250-500 vBytes | Up to ~400,000 vBytes (4 MB witness) |
| Block Space Impact | Minimal per tx | Can fill entire block with single inscription |
| Fee Market Effect | Normal fee competition | Drives fees up across all transactions |
| Miner Revenue Impact | Base fee revenue | Significantly increases fee revenue per block |
| Data Stored | Transaction data only | Images, text, audio, arbitrary data |
Ordinals exploit the SegWit witness discount — data stored in the witness section gets a 75% discount on weight units, meaning a 400 KB image costs the same in fees as roughly 100 KB of regular transaction data. This is not a bug; it is how SegWit was designed. But it created an incentive structure that nobody fully anticipated.
For miners, this has a dual effect. Short-term, Ordinal inscriptions drive up fee revenue — during peak Ordinals activity in 2023 and into 2024, fees periodically exceeded block subsidy as a percentage of block reward. Long-term, the question is whether filling blocks with JPEG inscriptions is sustainable or healthy for the network that 800+ EH/s of hashrate is securing.
The Block Space Crunch: A Miner’s Perspective
Bitcoin blocks have a weight limit of 4 million weight units (approximately 1 MB for legacy transactions, up to ~4 MB with SegWit witness data). A new block is mined approximately every 10 minutes. That is it. That is all the throughput the base layer offers, and it is supposed to be scarce — this scarcity is what makes Bitcoin’s fee market work and what keeps running a full node accessible to regular people.
But scarcity cuts both ways. When Ordinals consume large chunks of block space, regular financial transactions get pushed to the back of the line unless users pay premium fees. During the BRC-20 token craze of mid-2023, average transaction fees exceeded $30, and the mempool held over 500,000 unconfirmed transactions.
This is not theoretical for anyone running mining hardware. If you are operating a Bitaxe solo mining at home, every block your machine finds is more valuable when fees are high. If you are running full-scale ASICs through our Quebec hosting facility, fee revenue directly impacts your ROI calculations.
The block space debate ultimately comes down to a philosophical question: should Bitcoin’s base layer accommodate all use cases, or should it remain optimized for financial settlement while other layers handle everything else?
Enter the Liquid Network: Blockstream’s Federated Sidechain
The Liquid Network is a Bitcoin sidechain launched by Blockstream in 2018. It operates as a separate blockchain pegged to Bitcoin through a two-way peg mechanism, where BTC is locked on the mainchain and an equivalent amount of L-BTC (Liquid Bitcoin) is released on the Liquid sidechain.
Here is how Liquid compares to the Bitcoin mainchain:
| Feature | Bitcoin Mainchain | Liquid Network |
|---|---|---|
| Block Time | ~10 minutes | ~1 minute |
| Consensus | Proof of Work (fully decentralized) | Federated (selected functionaries) |
| Transaction Privacy | Pseudonymous (amounts visible) | Confidential Transactions (amounts hidden) |
| Asset Issuance | BTC only (+ Ordinals/BRC-20) | Native token issuance (L-BTC, stablecoins, securities) |
| Block Space | ~4 MW (scarce, contested) | Larger, less contested |
| Settlement Finality | Probabilistic (6 confirmations ~1 hour) | 2 confirmations (~2 minutes) |
| Peg-in/Peg-out | N/A | 102 confirmations in (~17 hours), out varies |
| Trust Model | Trustless | Trust in federation (currently ~65 members) |
The pitch is straightforward: move data-heavy Ordinal inscriptions off the mainchain and onto Liquid, where block space is abundant and cheap. Mainchain blocks stay reserved for high-value financial settlements. Everyone wins.
But does it actually work like that?
The Case For: Liquid as an Ordinals Pressure Valve
There are real technical arguments for why Liquid could absorb Ordinal traffic:
1. Abundant Block Space
Liquid blocks are not as contested as Bitcoin mainchain blocks. Moving large inscriptions to Liquid frees up mainchain capacity for financial transactions — the use case Bitcoin was designed for.
2. Faster Confirmations
One-minute block times mean Ordinal creators get faster confirmation of their inscriptions. For an artist minting a collection of hundreds of pieces, the time savings are significant.
3. Confidential Transactions
Liquid’s CT feature hides transaction amounts by default. While this is more relevant for financial use cases, it adds a privacy layer that some Ordinal traders may value for secondary market activity.
4. Reduced Fee Pressure on Mainchain
If even a fraction of Ordinal traffic migrates to Liquid, it reduces fee competition on the mainchain, making regular Bitcoin transactions cheaper for everyone — including miners consolidating UTXOs or exchanges batching withdrawals.
The Case Against: Why Liquid Is Not the Silver Bullet
Now here is where we put on our cypherpunk hat, because the trade-offs are serious:
1. Federation = Centralization
This is the big one. Liquid is a federated sidechain. Block validation is handled by a consortium of roughly 65 member organizations (exchanges, financial institutions, infrastructure companies). This is fundamentally different from Bitcoin’s trustless proof-of-work consensus, where any miner with a valid block can participate.
For a community that exists because of decentralization — and that is exactly why home mining matters — trusting a federation with your assets is a meaningful compromise. The federation controls the peg. If they collude or get compromised, your L-BTC is at risk.
2. Ordinal Culture is Mainchain Culture
A huge part of the Ordinals value proposition is that inscriptions live on the Bitcoin mainchain — the most secure, most decentralized blockchain in existence. Moving inscriptions to a sidechain removes that core value. An Ordinal on Liquid is not the same as an Ordinal on Bitcoin. The security guarantees are different. The permanence is different.
3. Two-Way Peg Friction
Pegging in to Liquid requires 102 Bitcoin mainchain confirmations (roughly 17 hours). Pegging out goes through the federation and can take even longer. This friction discourages casual users and makes Liquid less attractive for anyone who values quick access to their mainchain BTC.
4. Adoption Has Been Modest
Despite being live since 2018, Liquid’s adoption remains relatively niche. The total L-BTC in circulation has fluctuated but never achieved critical mass. Convincing the Ordinals community — which is passionate about mainchain inscription — to migrate to a federated sidechain is a hard sell.
5. Miners Lose Fee Revenue
Here is the mining angle nobody talks about enough: if Ordinals move off-chain, miners lose that fee revenue. For solo miners running a Bitaxe or home miners with Bitcoin space heaters, high-fee environments are actually beneficial. The block subsidy is currently 3.125 BTC post-halving — fees are becoming an increasingly important component of mining economics.
What This Actually Means for Home Miners
If you are mining at home — whether you are running a Bitaxe for the solo mining lottery, heating your space with an S19 space heater, or running full-scale ASICs — here is the practical reality:
High fees are good for miners. When Ordinals drive up fees, every block is worth more. For solo miners, this means a bigger prize when you hit a block. For pool miners, this means higher payouts.
Block space scarcity validates proof of work. The entire reason Bitcoin mining exists is to secure scarce block space. More demand for that space means more security budget for the network, which means mining remains economically viable longer into the future as block subsidies halve.
Layer 2 solutions matter, but trust assumptions matter more. Lightning Network, Liquid, and future layers all have roles to play. But as Bitcoin Mining Hackers, we evaluate every solution through the lens of decentralization and trust minimization. A solution that requires trusting a federation is not equivalent to one that runs on proof of work.
The real scaling solution for Bitcoin is a combination of approaches: Lightning for small payments, mainchain for high-value settlement, and — potentially — sidechains for specific use cases where the trust trade-offs are acceptable. Ordinals on mainchain? That is the free market deciding how to use scarce block space, and miners benefit from that demand.
The Bigger Picture: Block Space as Digital Real Estate
Think of Bitcoin block space as the most secure digital real estate on the planet. 800+ EH/s of hashrate protects it. Every 10 minutes, a new block of this real estate becomes available. There is no zoning board, no central authority deciding what goes in — just the fee market.
Ordinals treat this real estate like a canvas. Financial transactions treat it like a vault. Both are paying the same rent (fees) to the same landlords (miners). The market sorts itself out.
From D-Central’s perspective — as a company that has been repairing ASIC miners and supporting the home mining community since 2016 — we care about one thing above all else: that the hashrate stays decentralized. Whether block space is used for inscriptions, financial transactions, or something nobody has invented yet, the critical thing is that anyone can mine, anyone can run a node, and nobody can censor transactions.
That is why we build accessible mining hardware for home miners. That is why we support open-source mining with the Bitaxe ecosystem. And that is why we will always evaluate scaling proposals through the lens of decentralization first.
Our Take: Liquid Is a Tool, Not the Answer
The Liquid Network is a useful tool for specific use cases — fast inter-exchange transfers, confidential transactions, and token issuance. It may absorb some Ordinal traffic over time, particularly for commercial NFT projects that prioritize speed and cost over the security guarantees of the mainchain.
But Liquid is not “the answer” to Bitcoin’s block space constraints. Block space scarcity is a feature, not a bug. It is what makes Bitcoin’s security model work. It is what creates the fee market that will sustain mining after block subsidies trend toward zero. And it is what makes every hash from your mining hardware meaningful.
The real answer to block space constraints is the same answer Bitcoin has always provided: let the free market decide. Miners produce blocks, users bid for space, and the most valuable transactions get confirmed. Ordinals pay for their space just like everything else. And if fees get too high for certain use cases, those use cases naturally migrate to layers better suited for them — Lightning, Liquid, or whatever comes next.
Bitcoin does not need a central planner deciding what belongs in a block. It needs miners, nodes, and a free fee market. Everything else is optional infrastructure.
Frequently Asked Questions
What are Bitcoin Ordinals and how do they affect block space?
Bitcoin Ordinals use Ordinal Theory to assign serial numbers to individual satoshis and inscribe arbitrary data (images, text, audio) into the witness section of Bitcoin transactions. Because inscriptions can be up to ~400,000 vBytes, a single Ordinal can consume a large portion of a block’s 4 million weight unit capacity. This increases competition for block space, driving up transaction fees for all users.
What is the Liquid Network and how does it differ from Bitcoin’s mainchain?
The Liquid Network is a federated Bitcoin sidechain built by Blockstream. It uses a two-way peg to move BTC between the mainchain and Liquid (as L-BTC). Key differences include 1-minute block times (vs. 10 minutes), confidential transactions that hide amounts, native token issuance, and a federated consensus model run by ~65 member organizations instead of decentralized proof-of-work mining.
Can Liquid Network solve Bitcoin’s block space congestion from Ordinals?
Liquid can absorb some Ordinal traffic, particularly commercial NFT projects that prioritize speed and lower costs over mainchain security guarantees. However, it is not a complete solution because: (1) Ordinals derive much of their value from living on the Bitcoin mainchain, (2) Liquid uses a federated trust model rather than trustless proof of work, and (3) adoption of Liquid for Ordinals has been limited so far.
How do Ordinals affect Bitcoin mining profitability?
Ordinals increase mining profitability by driving up transaction fees. When block space demand is high, users pay more in fees to get their transactions confirmed. With the block subsidy at 3.125 BTC after the 2024 halving, fee revenue is becoming an increasingly important component of miner economics. For solo miners and home miners, high-fee periods mean every block found is worth significantly more.
Should home miners support or oppose Ordinals?
From a pure economics perspective, Ordinals benefit miners by increasing fee revenue. From a philosophical perspective, the free market should decide how block space is used — no central authority should determine which transactions are “valid” uses of Bitcoin. As Bitcoin Mining Hackers, we believe in permissionless block space: if someone pays the fee, their transaction deserves inclusion regardless of whether it contains a financial transfer or a JPEG.
What is the current Bitcoin block reward and how do fees factor in?
The current block reward is 3.125 BTC (after the April 2024 halving). On top of this subsidy, miners earn all transaction fees included in the block. During periods of high Ordinal activity, fees have sometimes exceeded 50% of total block revenue, demonstrating why block space demand — from any source — is economically significant for miners operating everything from Bitaxe solo miners to full-scale ASIC operations.
