Bitcoin NFTs were virtually unheard of in web3. Although NFTs that originate from Bitcoin, such as the "Rare Pepe" collection that was minted in 2014, have been around for a long time, such collections are not true Bitcoin NFTs because they have been reconfigured to work on the Ethereum network. However, the Ordinals have made NFTs on Bitcoin a reality.
What are the Ordinals?
On January 21, 2023, software engineer Casey Rodarmor launched the Ordinals protocol, which allows users to mint their own NFTs on the Bitcoin network.
In the Bitcoin network, each Bitcoin is divided into 100,000,000 units called "satoshis." The Ordinals protocol then works by allowing users, those who run Bitcoin nodes, to individually mint each satoshi with data, which is not limited to JPEGs but even includes videos and audio files, and in doing so, create an Ordinal.
How are Ordinals different from typical NFTs?
On the Ethereum network, NFTs come from off-chain data in the interplanetary file system (IPFS), which is a decentralized file storage system that can be modified using dynamic metadata. If you are well-versed in NFTs, you have probably heard the term "refreshing the NFT metadata," especially if you have just minted a new NFT. Updating an NFT's metadata will update the cover image of your NFT and reveal which NFTs you have minted and how rare they are.
In contrast, Ordinals have their data directly stored on the chain, rather than the directory-like connections that conventional NFTs have with servers, making them true immutable digital artifacts interwoven into the Bitcoin network, which is why they are also called "inscriptions."
Additionally, typical NFTs that follow the ERC-721 token standard or its equivalent have their values defined by the rarity of the art based on its attributes, as well as its supply. However, Ordinals derive their rarity from the sats on which they are minted, where key events like halvings would likely add levels of rarity.
As such, the launch of the Ordinals protocol was quite monumental, but as the hype built up and more eyes were drawn to it, controversy followed.
Why are Ordinals controversial?
The birth of the Ordinals protocol has fractured the Bitcoin community, as the age-old question that has enveloped the entire Bitcoin network resurfaced: what is the true purpose of Bitcoin? Was Bitcoin created for processing financial transactions? If so, should it then be used for non-financial and superfluous purposes like minting NFTs? For many Bitcoin maxis, it's a question of what Bitcoin represents as the very first cryptocurrency; it serves as a rallying symbol of defiance against centralization, against banks and governments worldwide. For them, Bitcoin paved the way for unauthorized action in the financial world.
And so, when NFTs, which are taken less seriously in the space, were introduced into Bitcoin, the maxis felt that the historical value and symbolism of Bitcoin were apparently diminished, to the point that some even claimed that the Ordinals protocol was an attack on the Bitcoin network. One of the reasons for this is that Ordinals are fully stored on-chain, bypassing the limitation of non-financial data on the Bitcoin network (80 bytes), where an inscription broadcast could even take up an entire 4 MB block. Additionally, because the NFT is stored in witness data, a quirk of Taproot means that users enjoy a significant 75% discount when minting Ordinals.
There was also a growing concern.#crypto2023 #BTC #ordinals