Bitcoin community erupts in existential debate over NFT project ordinals

This month’s debut of the Ordinals protocol, which stores non-fungible tokens (NFTs) on the Bitcoin blockchain, is driving a wedge between Bitcoin purists who say the blockchain should be limited to financial transactions and those who see the network as vast and versatile. enough to host a variety of use cases – even if that means meme-themed art.

Ordinal’s creator Casey Rodarmor states that the protocol uses “inscriptions” or arbitrary content such as text or images that can be added to sequentially numbered satoshis or “sats” – the smallest units in Bitcoin – to create unique “digital artifacts” that can be held and transmitted across the Bitcoin network as all second rate.

Ordinals, in their current form, would not be possible without Bitcoin’s 2017 Segregated Witness (SegWit) upgrade and the more recent 2021 Taproot upgrade. SegWit helped scale Bitcoin by introducing a blockchain to hold “witness data” – signatures and public keys for Bitcoin transactions. Potential vulnerabilities forced developers to impose limits on the size of this data. When Taproot arrived, it solved these security issues, removing the old SegWit restrictions and paving the way for large chunks of NFT data to be stored on-chain. It turns out it’s the perfect foundation for Ordinals.

The new protocol has revived an age-old debate about whether Bitcoin should be used for non-financial purposes. In 2010, the pseudonymous inventor of Bitcoin, Satoshi Nakamoto, answered with a resounding “no”.

Long before Ordinals, a few old school Bitcoiners floated the idea of ​​incorporating a Domain Name System (DNS) into Bitcoin. The project, called BitDNS, was quickly shot down by Satoshi.

“Stacking every proof-of-work quorum system in the world into one dataset does not scale,” Satoshi wrote, sealing the fate of BitDNS, which eventually morphed into a separate chain called Namecoin.

With that as a backdrop, some members of the Bitcoin community characterize the NFT project as an “attack,” even as others try to embrace it.

“My answer to that is, you know, Bitcoin isn’t really for anything, it just exists.” Rodarmor explained. “It has truly surpassed the intentions of its creator.”

Opponents of the protocol argue that Ordinals will compete with traditional payment transactions by draining blocks and increasing transaction fees. Rodarmor disagrees. “To that I say, well, there’s this fee market pricing mechanism that bitcoin has, which allows people to pay the amount of fees according to how valuable the transaction is to them,” Rodarmor told CoinDesk in an interview. “And that applies both to financial transactions and to inscriptions. And so, the fee market already handles what people pay for transactions, what they think they’re worth, and then miners only pick the transactions with the highest fees. So it kind of fits into Bitcoin’s security and incentive model.”

Satoshi’s silence did not settle the debate, and two conflicting schools of thought emerged – those who supported non-financial applications of Bitcoin and those who opposed it.

Rodarmor has put fuel to the burning debate with the launch of Ordinals. “It’s also fair game for miners to censor the crap as a form of discouragement,” Blockstream CEO and renowned Bitcoin cypherpunk Adam Back said in a now-deleted tweet.

He later posted: “We can recognize that we can’t really stop them and it’s a free world of anonymous miners. But we can also educate and encourage developers who care about Bitcoin’s use case to either not do it or do it in a space-saving way, such as timestamping.

Others are in the hard-no camp. Longtime Bitcoin Core developer, Luke Dashrtold CoinDesk that Ordinals are an “attack” on Bitcoin.

On the other side of the debate, some thought leaders have embraced Ordinals, hailing it as a solution to the ever-decreasing Bitcoin block support – the amount of bitcoin (BTC) a miner wins for solving a block.

“Ordinals = NFTs on Bitcoin. This is good for Bitcoin,” tweeted Bitcoin Educator, Dan Held.

The Bitcoin grant – the amount of bitcoin awarded to a miner for successfully mining a new block of data – is halved every 210,000 blocks (roughly every four years). The current grant is 6.25 BTC, which will decrease to 3.125 BTC at block height 840,000 in 2024. As this amount continues to decrease, miners will become more dependent on transaction fees.

If Ordinal Inscriptions actually increase competition for block space, the higher transaction fees could make it worthwhile for miners to continue securing the Bitcoin network, or so the theory goes.

Another Bitcoin Core developer, Peter Todd, says it can be much ado about nothing.

“This freakout about wordalls is stupid,” Todd tweeted. “You’ve always been able to put as much data as you can pay for into BTC transactions. Taproot didn’t change that.”

Surgeon and longtime Bitcoiner, Dennis Pourteaux, wrote a blog post detailing the connection between Taproot and Ordinals.

“Taproot basically made it so that the transaction size is unlimited,” Pourteaux told CoinDesk in an interview. “Other than that, of course, it has to be smaller than a block itself.”

Pourteaux is a self-confessed NFT aficionado, but he does not take sides in this debate. He believes the controversy over Ordinals is a boon for the Bitcoin community.

“That’s how we keep Bitcoin safe,” Pourteaux said. “By having these technical debates and by putting the smartest minds together and figuring out the next step if any next step is needed.”

As far as Rodarmor is concerned, NFTs on Bitcoin are simply decentralized, permissionless fun.

“My vision is that Ordinals is a fun art project and I hope that it encourages people to learn more about Bitcoin,” said Rodarmor. “To use Ordinals and to create inscriptions requires you to run your own full node. And then I hope people will be interested in running their own full nodes because I think it’s good for Bitcoin. There’s no sidechain, there’s no token, it will never be a token. It just uses regular bitcoin.”

DIRECTION (03:54 UTC): Fixed Luke Dashjr’s last name in paragraph 13.