NFTBITCOIN

The Bitcoin-based NFT protocol "Ordinals" remains active, with all Bitcoin Punks fully minted.

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The Bitcoin-based NFT protocol "Ordinals" remains active, with all Bitcoin Punks fully minted.

The emergence of Ordinals has brought a more active on-chain market for Bitcoin, but some conservative and Bitcoin purists believe that Bitcoin's sophistication should only be related to financial transactions, and writing NFT-related data into Bitcoin is undoubtedly a waste of block capacity.

Ordinals

Recently, thanks to the efforts of developers, an NFT based on Bitcoin has been successfully introduced. The Ordinals protocol writes images and related data into the smallest unit of Bitcoin, sats, through Taproot transactions.

According to an introduction by Casey Rodarmor, a developer of the Ordinals protocol, Ordinals assigns an identity to each sat, allowing for the writing of various content types such as images, text, SVG, HTML files, and more to sats. These can be viewed through the ordinals explorer in a browser, which he refers to as "Inscriptions."

Unlike NFT projects on blockchains like Ethereum, which often store image, description, and name metadata on centralized servers and require scrutiny of their smart contracts for potential backdoors and attributes, Inscriptions do not have these flaws, as all information is directly written into the immutable Bitcoin blockchain.

Although Ethereum NFTs can also achieve full data on-chain, Eric Wall, Chief Investment Officer at Arcane Research, pointed out a significant cost difference. Ethereum is much more expensive than Inscriptions, approximately seven times more costly.

Significant Increase in Transactions on the Bitcoin Chain

Data compiled by BitMEX Research further demonstrates the community's interest in Ordinals.

The first Ordinals transaction occurred on 12/14, and as of 2/7, the data is as follows:

  • 6.77 BTC spent in transactions

  • Over 13,000 transactions have taken place

  • 526MB of Bitcoin block capacity utilized

The emergence of Ordinals has drawn criticism from conservative Bitcoin advocates, with BitMEX Research noting that there are no consensus rules to limit the data size of Taproot transactions, with a maximum of 4MB, leading to a recent increase in the average Bitcoin block size.

NFT project "Taproot Wizards" even led to block 774628 setting a historical record for the largest Bitcoin block at 3.96MB, just slightly below the maximum limit.

Criticism from Bitcoin Conservatives

Blockstream CEO Adam Back has recently engaged in a significant amount of discussion regarding Ordinals, with many believing that Ordinals is merely wasting valuable block space.

For instance, EcologyHODL expressed deep frustration with the emergence of Ordinals, even leading to discussions of a fork; Adam Back himself openly supported miners reviewing related transactions, but later deleted the tweet.

In a softened tone, he stated that he realizes he cannot prevent the review of related transactions, as Bitcoin is a free world that accommodates anonymous miners. However, he suggested that perhaps encouraging and educating developers of Bitcoin-related applications to save block space might be a way forward.

Supporters of Ordinals

In addition to NFT enthusiasts, some argue that Ordinals could bring more active on-chain transactions to Bitcoin.

In reality, Bitcoin miners' income has significantly decreased and been surpassed by Ethereum, certain protocols, and projects.

As block rewards will eventually diminish to zero, the network's operation will rely entirely on on-chain transaction fees. The Bitcoin community and developers must find ways to help miners find solutions and increase revenue.

Last year, Monero and Zcash each introduced their own solutions, hoping to incentivize miners with rewards beyond transaction fees to further ensure network security.

For example, Dennis Porter, CEO of non-profit educational organization Satoshi Action, believes that this move could promote an increase in Bitcoin's on-chain transaction revenue.

Recreation of Ethereum NFT Projects

The renowned project CryptoPunks has been transplanted onto the Bitcoin chain, named Bitcoin Punks, and all have been minted by users.

The minting process is complex, requiring users to run a full node or rely on the OrdinalsBot robot for minting. For instructions, click here, but risks such as third-party robots ceasing operation and RugPulls exist.

Due to the high level of skill required and the lack of a trading market as widespread as OpenSea, the fervor for Ordinals may need to wait until retail investors enter the scene before its sustainability can be determined.