Why Bitcoin NFTs Raise Questions About Censorship
Bitcoin is not the first blockchain that comes to mind when you think of non-fungible tokens (NFTs); that would be Ethereum.
Over the past two weeks, however, NFTs have entered Bitcoin’s orbit, thanks to Ordinals.
This newly launched protocol allows users to “enter” images in satoshis, the lowest denomination of Bitcoin – images that then live forever on the anonymous blockchain.
See: What is Bitcoin and how did it start?
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What happened next shouldn’t surprise anyone familiar with Bitcoin’s immutable infrastructure.
With grim inevitability, a user used Ordinals to enter an offensive image onto the blockchain.
This image – as with all other information about Bitcoin – is permanently inscribed on satoshis. These images also appear automatically on Ordinal’s homepage, in this case forcing creator Casey Rodarmor to take action and manually remove the image from the site.
What Mr Rodarmor could never do, however, is remove the image permanently.
As such, this incident – which may seem frivolous and insignificant to some – has raised serious questions about censorship resistance.
And this is a principle that sits at the heart of the cryptocurrency industry and certainly at the heart of Bitcoin, which is by far the most censorship-resistant of all chains.
Why bother with censorship resistance?
There are mixed views on Bitcoin’s censorship resistance.
Bitcoin proponents argue that it is one of the network’s strongest advantages, a characteristic ensured by its high level of decentralization and absolutely essential to the network’s overall health.
Others – including those longing to see stronger regulations brought to the cryptocurrency industry – believe that some level of censorship may be necessary to weed out those who use blockchain to launder money, finance illegal businesses or publish offensive images, for example.
While block explorers can enforce their own moderation policies, users are free to post any image they want on the blockchain.
Of the Ordinals scandal, Mr Rodarmor observed: “The inscription is still on the chain and if you run your own copy of Ordinals – which everyone is free to do – it won’t have the configuration file and you’ll see [image] if that’s what you want.”
The question is, should we care about this? If someone chooses to use their own money to deface a satoshi with an offensive image or worse, does that warrant our concern?
More than that, does it warrant censorship of Bitcoin or any other blockchain?
The costs of economic freedom
In my opinion, Bitcoin’s uncensorable, immutable and permissionless nature is one of its greatest strengths as a currency, and Ordinal’s imbroglio is unrelated to currency.
Instead, it relates to the “freedom” of everyday users to add their own non-financial contributions (digital objects, etc.) to the network.
A use case that Satoshi Nakamoto, for all his brilliance, could not have foreseen.
There are clearly benefits to some level of censorship when discussing Web3 features such as those offered by Ordinals.
I don’t think any of us can be blasé about the prospect of criminals being able to freely stamp, for example, NFTs with grim images.
We can strongly oppose such degeneration, while being ardent supporters of Bitcoin’s transactional immutability.
Currently, Bitcoin’s fundamental mission as a transparent, independent currency and store of value available to every citizen is under threat.
Cryptocurrencies — in pictures
The predominance of centralized banks and companies adding Bitcoin to their portfolio, not to mention offering crypto custody services to money managers, significantly threatens the network’s decentralization.
In this case, centralized censorship is certainly something to resist, and we can be thankful that Bitcoin is hard-wired against it.
As the past year has shown, centralization is not only a bane of basic principles of the blockchain and cryptocurrency project, but in this space, frankly dangerous.
Decentralization is the only way to ensure the safe growth of a truly censorship-resistant, fully accessible financial ecosystem.
Bitcoin remains the flagship project for this mission, and we should not let an NFT experiment detract from it, regardless of the sensational headlines it attracts.
What we can say in favor of the Ordinals NFT project is that it has brought a new wave of interest in Bitcoin, resulting in an expanded average block size as more users join the network.
But while this is a welcome development, we must not forget basic principles of Bitcoin as a blockchain and currency that can resist censorship and manipulation by central and investment banks, something fiat currencies like the US dollar cannot.
The future of finance may not be Bitcoin, but it must and will be decentralized and censorship resistant.
Stefan Rust is the founder of Laguna Labs, a blockchain development house, and former CEO of bitcoin.com
Updated: 15 February 2023 at 04.00
