Are Ordinals Good or Bad for Bitcoin? Supporters and opponents raise their voices

Bitcoin Ordinals, a technology that allows text, images and code to be added to a satoshi – the smallest unit of Bitcoin (BTC) – continues to inspire debate among the Bitcoin community.

Soon after the introduction of Bitcoin Ordinals in January 2023, the technology’s opponents began to raise concerns over its perceived flaws, citing problems such as rising transaction costs and slower speeds.

Conversely, Ordinals supporters said the technology provides more opportunities, improves decentralization and ensures freedom of expression.

As the number of Bitcoin Ordinals inscriptions doubled from 2.5 million to over 5 million in just eight days, Cointelegraph looks at the technology and the controversy surrounding it.

Weaknesses for cost, speed and security

The undeniable and unwanted impact of Ordinals on Bitcoin’s network capacity and scalability is one of the biggest arguments of Bitcoin purists, who believe that BTC should exclusively follow Satoshi Nakamoto’s prescribed peer-to-peer payment mission.

The ongoing increase in BRC-20 activity – which uses Ordinal Inscriptions – has triggered a sharp increase in BTC transaction fees. The trading frenzy of BRC-20 memecoins such as Pepe (PEPE) has driven Bitcoin transaction costs to the highest levels since 2021.

As users continue to pour BTC into minting new tokens settled via Ordinals inscriptions, the blockchain has also experienced massive congestion. On May 7, the Binance exchange temporarily closed BTC withdrawals due to 400,000 pending transactions clogging the mempool.

Enrico Rubboli, CEO of Bitcoin layer-2 sidechain Mintlayer, told Cointelegraph that the technology behind Ordinals is “severely flawed” and does not follow “the axioms of the core Bitcoin community.”

“The developers of the standard and tools are not affiliated with Bitcoin, they are anonymous, and their software has not been thoroughly tested in this application,” Rubboli said. Exec also believes that Ordinals could lead to further regulatory scrutiny for Bitcoin, as new BRC-20 tokens could be considered unregulated securities.

Rubboli further argued that with Ordinals, the protocol is vulnerable to fraud. “The whole ecosystem was set up to be confusing and misleading,” he said, claiming that BRC-20 was created to “obfuscate the popularity of Ethereum’s ERC-20 token.”

He further emphasized that the anonymous BRC-20 creator Domo initially warned users that the symbols were “worthless”. Before launching BRC-20, Domo took to Twitter to emphasize that the token is “just a fun experiment.”

“These will be worthless. Please don’t waste money on mass minting,” the BRC-20 creator wrote.

Arguments of Bitcoin Ordinals Proponents

Bitcoin Ordinals’ ability to unlock new value on the Bitcoin blockchain is a significant counter-argument from proponents of Ordinals. Some Ordinals defenders also believe that problems such as higher transaction costs will disappear over time.

“Ordinals is a beneficial exploration for Bitcoin applications and helps unlock greater value in the Bitcoin network,” F2Pool’s head of marketing Li Qingfei told Cointelegraph, adding:

“The network congestion it causes should be temporary, and there will be good solutions to solve the problem and reduce transaction costs and increase transaction speed, just like the Lightning Network.”

Li argued that the increase in transaction fees will encourage more miners to participate in the maintenance of the network after Bitcoin’s upcoming halving in 2024. As an active proponent of Ordinals, F2Pool launched a special non-fungible token series called “10² Islands” to celebrate its 10th anniversary.

Roundtable21 co-founder Brandon Dallmann echoed Li’s remarks, stating that BRC-20 is currently being stress tested against Ethereum’s ERC-20 protocol. “Since it is not complete yet, the Bitcoin network is unable to keep up with demand and is becoming overloaded,” he told Cointelegraph.

Dallmann also advised users to use multiple crypto platforms instead of keeping all their efforts on just one to prevent problems caused by congestion on the Bitcoin network.

Some community members asked why to prevent Bitcoin’s transformation from “magic internet money” to a more complex technology.

“I see the backlash from many BTC purists, but I don’t think anyone should use their platform to try to censor transactions and try to distinguish between what is a ‘valid’ and ‘invalid’ transaction on any network, AngelBlock founder Alex Strzesniewski told Cointelegraph.

Many Ordinals supporters have also noted the contribution of technology to freedom of expression. “I know everyone hates speech, but whether it’s text or images, the ability to publish uncensorable information on the Bitcoin timeline makes speech uncensored worldwide forever,” Bitcoin observer BitPaine wrote on Twitter.

Perspective matters most

Despite the conflicting perspectives between Ordinal’s proponents and critics, it is important to note that much of the reasoning for or against them largely depends on perspective.

For example, for layer-2 technology builders, it is only natural to oppose Bitcoin’s base-layer development such as Ordinals. In contrast, miners are unlikely to object to anything that can increase their income.

Bitcoin Ordinals hardly change anything for hodlers, who most likely won’t care much about transaction fees or the size of the mempool. However, they cause many problems for traders and other market participants such as crypto exchanges.

Whether Ordinals are here to stay or not, society has yet to see the full potential of the technology and its true consequences.