Feb 17, 2023

Bitcoin Ordinals - what is it ?

Since software engineer Casey Rodarmor launched this protocol on January 21, a fuss has been raised on the network: some were delighted with the new update, while others scolded the ordinals in every way. Despite all the fame, at the time of writing there are about 90,000 ordinals in the world.

What is it? Each bitcoin is divided into 100,000,000 units called Satoshi. The new Ordinals protocol allows people managing Bitcoin nodes to enter data into each sat, creating something called an Ordinary.

This data, written into Bitcoin, can include smart contracts, which, in turn, allows the use of NFT. Roughly speaking, ordinals are NFTs that can be mined directly on the Bitcoin blockchain.

However, there are several important differences between NFT and ordinaries.

NFTs on Ethereum often refer to off-chain data in IPFS, a decentralized file storage system. IPFS can be called a kind of hard disk in the blockchain, and the information in the NFT can be changed using dynamic metadata.

For example, some NFT projects update the metadata of individual NFTs to improve image quality. They can even ask their owners to click the "update metadata" button on OpenSea to get a new, better image.

This ability to change the NFT metadata indicates a flaw that Rodarmor tried to eliminate when creating a new protocol. According to Rodarmora, NFTs are "incomplete" because many of them refer to off-chain data.

Ordinals, on the other hand, are "complete" because all data is written directly on-chain. That's why Rodarmor calls them digital artifacts, not Bitcoin's NFT. Moreover, author's commissions are often attached to the NFT, while digital artifacts are not. According to Rodarmor, ordinals are "designed to reflect what NFTs should be."

The appearance of Ordinals at the end of January was made possible thanks to the Taproot soft fork. The project uses Satoshi numbering to write data to the "witness" part of a bitcoin transaction.

The popularity of the innovation led to the expansion of the use of Taproot signatures (their share jumped to 4.2% ATH). The average block size has also increased from a stable 1.5-2 MB to 3-3.5 MB. Arbitrary data in the form of images can take up space up to a size limit of 4 MB.

The most active users ran to copy the sensational collections of NFT on the Bitcoin network. Bitcoin maximalists are furious: the network is overloaded, the mempool is constantly full, the cost of transactions is growing (miners are jubilant).

Time will tell whether this is good or bad, some experts already associate part of the growth of the bitcoin exchange rate with this phenomenon, although it rather looks like an exaggeration. In our opinion, an update for the deployment of smart contracts in the Bitcoin network was necessary, otherwise the network would have simply become obsolete. However, hype for the sake of hype and NFT, sorry, ordinals for the sake of pictures are hammering nails with a microscope.

Whether this will cause irreparable damage to bitcoin - no. Rather, now certain things, for example, buying something in the real world, can really be done using bitcoin by fixing the conditions in a smart contract and receiving an ordinary as confirmation. It's interesting and it's promising.

And if you want to see the future of the ordinary market as pictures, look at the current state of the NFT market. It will be the same with ordinals, only sooner. But someone will definitely have time to earn, someone will be deceived, someone will face prosecution for copyright infringement, and the full node of bitcoin will become harder.

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