Ordinals: Will the Future of NFTs Be Written on Bitcoin?

NFT and Bitcoin, two topics where everything is against. The first one is unique and indivisible, the other one wants to be the embodiment of digital money exchange of the future. In 2014, after many debates about the functionality of Bitcoin, a compromise was found in the community. Recently, however, this status quo has been challenged by an initiative that aims to create NFTs fully embedded in Bitcoin.

Bitcoin: Currency or Database?

Bitcoin being Bitcoin, its community faces an existential question: is the queen of cryptocurrencies intended to be used for financial transactions or, conversely, to act as a secure database to support various applications?

The answer to this question is crucial because it will determine where Bitcoin in the blockchain trilemma:

  • If the protocol is intended for financial transactions, the entire transaction history will only require an external hard drive. This allows anyone to upload the blockchain to verify information about it.
  • Conversely, if the protocol is intended to be a database, blocks will contain more information and it will be more difficult for the general public to verify transactions themselves.

This issue, which goes directly back to the block size, caused a lot of controversy, so much so that years later it gave rise to the “block war” in the community. But let’s go back to 2010, when Satoshi still lived on the bitcointalk.org forum and found time to express himself on the matter.

BitDNS: finally a DNS service on Namecoin

Idea to use one year after publication Bitcoin its solidity and security for anything other than financial transactions began to appear. One of the first ideas proposed on Bitcointalk was BitDNS, a DNS service embedded in the bitcoin protocol.

While the idea was sound, the problem remained the same: it ran the risk of dramatically increasing the size of the blockchain, deviating from Bitcoin’s original purpose. Finally, Satoshi Nakamoto spoke on the subject:

Aggregating all the world’s proof-of-work quorum systems into one database is not scalable. Bitcoin and BitDNS can be used separately. Users should not have to download both together to use one or the other. »

Satoshi (December 2010)

Satoshi, who always puts the end user at the center of his priorities, believes that no, Bitcoin was not created to support. BitDNS but another protocol could very well do it. And so it happened, BitDNS would finally be supported by the blockchain Namecoinmore calibrated for information exchange.

But another blockchain is not Bitcoin. Discussions continued until a compromise was reached in 2014, which the teams now stand behind BitcoinCore They accepted the OP_RETURN function. In 2016, this feature allowed messages to be included in transactions within the 40-byte limit, and then the 80-byte limit.

OP_RETURN function and Taproot

Thanks to the OP_RETURN function, transactions can contain text such as haikus, a link to an image, or an IPFS hash. used by Opposite side for Rare Pepe, Veriblock (altcoin) or Omni For the first version of USDT, this function was less and less valued in favor of other protocols that better support data exchange.

These three projects have generated around 32 million OP_RETURN transactions, adding 10GB to the blockchain in the process. Bitcoin (Weighing about 450 GB in January 2023). Fortunately, these operations are said to be “predictable”, meaning that nodes are bound to download them, but they no longer need to be stored in memory.

New in 2021 soft fork would happen: Taproot. Its goal was to increase its privacy, flexibility, and above all, its scalability smart contracts thanks to three Bitcoin Upgrade Offers (BEEP):

But he offers unwillingly Tapscript Will it be impossible to exceed the size limit set by OP_RETURN? In 2023, a new NFT protocol for Bitcoin will answer this question: Ordinals.

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Ordinals, a new NFT protocol on Bitcoin

Before going into more detail about the tour that Ordinals attempted, let’s go back to the concept of fungibility. A so-called fungible asset can be replaced by another asset having the same characteristics, quality and quantity.

You might think that 1 BTC = 1 BTC, but actually it depends on their usage date, because the smallest satoshi can be tracked like a ledger. If the activity in the history displeases the potential buyer (for example: bitcoins were used for purchases on the darknet), he may prefer to buy freshly mined bitcoins. Thus, the condition that the asset must be of the same quality for it to be fungible is no longer met.

Ordinals will use this variable quality matching principle to convert each satoshi into potential NFTs without compromising their nature or quantity. To achieve this balance, exchanges can only be made between users who wish to use software-defined satoshis.Ordinals. Bitcoin software that does not follow this method uses satoshi as payment for transaction fees, in which case the NFT will be lost.

Lost, yes, because Ordinals NFTs are 100% stored onchain. But what about the 80 byte limit imposed by the OP_RETURN function Ordinals Got room for bigger files? Using the latest update Root rooteases restrictions on the size of cookie data (e.g. signatures) in a transaction.

So an Ordinals transaction can fill 4MB of a Bitcoin block, which is 5000 times more than the limit set by OP_RETURN!

The failures of this feat

we managed to benefit tapscript this way it was not originally planned by the developers of Taproot. But while Ordinals operations are cautious, they raise a number of questions and criticisms.

First, by bypassing cookies, transaction fees are cheaper than using the OP_RETURN function. Next, operations that occupy the entire space of a block Ordinals the risk of not leaving room for other financial transactions.

Of course, it is more suitable for other blockchains and services minter NFTs in many publications. However, the ability to fully deploy NFTs on the most secure blockchain today ends the status quo regarding this part of Bitcoin’s identity.

Is this a good thing or a bad thing? As the author who inspired this post said, I don’t think I’m smart enough to answer that question.

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