The following is a guest post by Kadan Stadelmann, CTO at Komodo Blockchain.
A great debate on Bitcoin Ordinals, essentially NFTs on the Bitcoin blockchain, has broken out. One side of the debate believes there is no place for Ordinals on the Bitcoin blockchain. The other side believes ordinals are the perfect innovation for the first blockchain.
Either way, the debate is now reaching fever pitch. Bitcoin core developers are looking to introduce an update that would make the minting of future Ordinals impossible. Bitcoin Ordinal proponents are protesting the change but don’t call the shots.
BRC-20, the fungible token standard that makes ordinals possible, supports creating and transferring fungible tokens in the ordinals protocol. Furthermore, Ordinal inscriptions use the Bitcoin unspent transaction output (UTXO) sets. Thus, Ordinals increase output demand and the size of the UTXO set.
BRC-20 is similar to Counterparty, which provided a way to create NFTs involving links pointing to images, but those links today are all broken after IMGUR made it a policy that their service cannot be used for NFTs. Therefore, Ordinals proponents argue that they want to put the data and images onchain to avoid such issues in the future.
Ironically, Segregated Witness (SegWit) and Taproot made Ordinal inscriptions possible on the Bitcoin blockchain. In other words, the present-day anti-Ordinals crowd made Ordinals on Bitcoin possible with past Bitcoin design decisions.
The Ordinals crowd did not change the consensus rules of Bitcoin. SegWit and Taproot made Ordinals possible. Therefore, Ordinal proponents argue that the network already allows such functionality. Pay the fee, post the data—no matter what the data—onto the Bitcoin blockchain.
SegWit altered the transaction format of Bitcoin to defend against transaction malleability while decreasing transaction times by increasing block capacity and speeding up validations by storing more transactions in a single block.
Taproot offers a new way to perform Bitcoin transactions by enhancing privacy and flexibility for users. It also activates Merklized Alternative Script Trees (MAST), which condense complex Bitcoin transactions into a single hash, reducing transaction fees, minimizing memory usage, and improving Bitcoin’s scalability.
Detractors view Ordinals as an attack on Bitcoin, undermining Bitcoin’s strength as digital gold and adding unnecessary risk and scams to the blockchain. Ordinal detractors think that people want to use Bitcoin to skirt issues of our day, such as financial censorship, which might get priced out of the blockchain as increasing numbers of NFT images are added to the Bitcoin blockchain.
Proponents argue that Ordinals are meeting market demand, as evidenced by people paying for the Ordinals. In addition, they argue that Ordinals pushes the boundaries of Bitcoin, making it stronger. Ordinals are a way to battle-test Bitcoin to develop mitigation strategies for various threats rather than have that risk latent in the protocol for when mass adoption comes to fruition. In short, Ordinals are pushing the acceleration of the Bitcoin protocol.
For instance, Ordinals have proven a fee structure would incentivize miners to keep mining without needing to introduce subsidies or inflation into the system once the last Bitcoin has been mined entirely in approximately 116 years (the year 2140). Simply put, Ordinals are presented as innovation.
With the debate now raging, all parties need to take a deep breath and do their best not to create a divisive environment in Bitcoin. For those on the outside looking in, Bitcoin’s future looks uncertain with such animosity inside the industry. At the same time, some of the biggest players on Wall Street are moving into the Bitcoin market. Some remain suspicious of their motives.
The entire industry would be better off uniting behind the original principles of Bitcoin while working on differences quietly rather than squabbling at one of Bitcoin’s biggest turning points in its history.
