NFT is one of the most popular tracks on Ethereum, and its transaction volume has exceeded 36 billion US dollars. Bitcoin, as the world's largest cryptocurrency blockchain, has rarely seen similar use cases.
Now, some cryptocurrency practitioners hope to change this situation and launch a new protocol. It is surprising that the construction of the NFT protocol on Bitcoin has caused dissatisfaction in the community.
On January 30, the NFT protocol "Ordinals" created by software engineer Casey Rodarmor was officially launched on the Bitcoin mainnet. artifacts)" to support JPEG image, PDF, video or audio format content. Similar to many NFT projects on the Ethereum chain, these "digital artifacts" will be minted on the Bitcoin network.
#1
Minting NFTs on the Bitcoin Chain Sparks Controversy
As the creator of the Ordinals protocol, Casey Rodarmor explained that the protocol’s NFT is created by writing arbitrary content on a “satoshi” (the smallest unit of bitcoin, 1 bitcoin equals 100 million satoshis).
According to the description of the Ordinals protocol document, all "satoshi" written into the NFT content can be saved or transferred to other bitcoin addresses, and the transaction will display the inscription content on the bitcoin blockchain, which has thousands of "staoshi" content. Inextricably linked, the Ordinals protocol will turn these contents into an immutable "digital handicraft" product, and allow users to track, transfer, store, buy, and sell.
Inscriptions will be minted on the Bitcoin mainnet, requiring no sidechains or other tokens — in short, users will be able to insert large amounts of “data or content” into transactions through the Ordinals protocol, including creating collectible “pictures” on the network. ".
Generally speaking, when NFT projects are launched on the Ethereum chain, there will always be a wave of community attention and transaction boom, but after the release of the Ordinals protocol, controversy broke out in the Bitcoin community.
Supporters believe that the NFT protocol can provide more financial use cases for Bitcoin, while opponents say it deviates from Satoshi Nakamoto's vision of Bitcoin as an electronic cash system, because the price between Bitcoins may no longer be the same. Moreover, NFT may occupy block space on the Bitcoin network, thereby driving up transaction fees.
Not only that, they also believe that NFT avatars are a privileged status symbol that only wealthy investors have the opportunity to obtain. If network fees increase significantly, more people will be excluded from the Bitcoin network, which is not conducive to promoting encryption. use.
However, there are also people who are optimistic about the Bitcoin NFT market. Former Kraken executive Dan Held is one of the supporters of the Ordinals protocol. He believes that although the NFT protocol will increase the demand for Bitcoin block space and increase transaction fees, it will also give Bitcoin Bring more financial use cases, "If you pay transaction fees, it's a 'garbage' transaction, Bitcoin is permission-free, and in any case can't stop anyone from BUILD on the Bitcoin chain."
In addition, with the launch of Segregated Witness (SegWit) in 2017 and the launch of Taproot upgrade in 2021, today's Bitcoin can fully satisfy protocols like Oridinals to expand NFT functions on the network.
#2
Breaking the Ethereum NFT monopoly?
NFT is considered an important part of reimagining the Web3 Internet. Games, social media, and financial services can all meet user needs through NFT. But the problem is that NFT has long been "occupied" by Ethereum, which already has about 70% of NFT sales.
For a long time in the past, many blockchain networks (such as Cardano, Solana, Polygon, etc.) have been labeled as "Ethereum killers" and hope to get a share of Ethereum's market share in Web3 or NFT , but so far the effect is not obvious.
Yehudah Petscher is an NFT relationship strategist at CryptoSlam, a blockchain data aggregation service platform. He believes that the Bitcoin blockchain can break Ethereum's NFT monopoly through its "historical advantages." "Bitcoin has existed longer than any other cryptocurrency." Both are long and have a large user base. So from the perspective of adoption, compared to other blockchains, Bitcoin can compete with Ethereum in the NFT field faster.”
However, Ethereum still has many advantages. Due to the early exploration of NFT use cases, many NFT tools have been created on the Ethereum platform, while Ordinals is currently only an NFT protocol on the Bitcoin network.
#3
What's next?
According to data from the blockchain analysis platform Dune Analytics, the Ordinals protocol has minted more than 1,000 NFTs so far, and 420 NFTs were minted on February 2, setting a record for the highest minting in a single day, while the average transaction fee of the Bitcoin network reached $1.53, the highest since Dec. 27, 2022. According to Hashrate Index data, when Ordinals was launched on January 21, the highest percentage of network transaction fees in miners’ block rewards was 2.1%; however, this figure rose to 3.44% on January 24, and even more rose to 3.86%.
The numbers don’t lie, and rising transaction fees are indeed a side effect of NFTs being added to the Bitcoin mainnet. Bitcoin transaction fees depend on the amount of data in the transaction and the speed at which the user wants to complete the transaction. Once network traffic increases, users who want to prioritize transactions need to pay more to push the transaction to be confirmed in advance.
However, the real change that Ordinals will bring to the Bitcoin network may not be just to create new types of digital collectibles, but to demonstrate that developers can "BUILD" on the oldest blockchain and change market dynamics. Although "Bitcoin maximalists" have always insisted on Satoshi Nakamoto's original intention of making it a peer-to-peer electronic currency, the Ordinals protocol has undoubtedly made the Bitcoin network more practical.
Strictly speaking, NFT is also a financial asset, and Bitcoin can fully support the exponential growth of such assets on its network, even if there is a risk of pushing up regular transaction fees. What's more, the additional effect of using BTC to trade NFTs may also further increase the price of BTC, which means that both miners and long-term holders can benefit from it.
Overall, the Ordinals protocol is a positive development for the Bitcoin network. It is up to the community and users to decide whether BTC will only be "peer-to-peer electronic cash" forever, and it is unrealistic to limit the use cases of Bitcoin.
In fact, people have been exploring and experimenting with Bitcoin since its inception, otherwise there would be no second-layer solutions like the Lightning Network-after all, nothing is impossible in the decentralized world.
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