This is an op-ed by Stephen Hay, writer, former dealer and art dealer.
The Ordinals debate is still raging and looks set to flare up again soon. Although the Ordinals block space usage was heading down Since March 23, 2023, the Notable groups The growing obsession with BRC-20 tokens appears to have reversed this trend.
If the competition for block space between ordinal numbers, BRC-20 tokens, and purely monetary transactions remains high, so will fees. And if the fee gets high enough, the appalling shades of blocks war May rise again to torture all sort of bits.
The case against the Ordinals
Fees aren’t the only flashpoint. While Bitcoin has certainly had its share of negative headlines over the years, the protocol itself has so far escaped the same level of accusations. Exchange failures, drug sales, countless scams – these are all things people have done with Technology, not any fundamental error in the technology itself. Not so with Ethereum, for example, where simple smart contracts are part of the hardware.
With the Ordinals circulating on the integration of the Bitcoin blockchain with all sorts of notorious Ethereum innovations (like NFTs and tokens, and maybe soon, Smart contracts), the reputational risks of the bitcoin protocol are growing. How long until a token is released directly on Bitcoin which goes by the Howey test And so it runs against the US Securities and Exchange Commission?
Moreover, in this regard, Ordinals is also significantly lowering the barrier to introducing illegal or confidential content into the Bitcoin blockchain.
As for losing user money due to rug withdrawals, bugs, hacks, and takedowns, all of those boxes have already been ticked under Ordinals. The latest developments, Funding arrangement Pulling a carpet of $1 million, albeit on the Ethereum side of the ledger. a little earlier, UniSat It fumbled the market launch of the BRC-20, which led to twice the cost attacks and a long market hiatus. before thatmany major markets succumbed to legal pressure from Yoga Labs And cross off monkey-related groups from the list.
Moreover, all these “hiccups” occurred against the background of A.S insect It was discovered in the all-important cataloging system of the Ordinals. Finally – and I hate to say this – more problems of this kind are to be expected. Consider that one of the biggest Markets by users and volumeAnd Ordinals Wallet as well as the important Ordswap marketplace hold the keys in the browser Local Storage, according to what I’ve heard on Discord, which Acts against recommended security practices (at least).
I think the above paragraphs sum up the case against the Ordinals from the perspective of several Bitcoin radicals – whom I have ranked myself, at least up to ordinal. Spiral purity Helter Skelter is gone. And while these concerns are well-founded, there is one particular complaint that I think deserves not being mentioned; That ordinal is a scam.
When willing buyers and willing sellers exchange goods with informational consistency, without any pretensions about future price hikes, well, that’s the definition of honest business – and that’s the current state of affairs in Ordinals Markets. Prove me wrong.
In defense of the arrangement
A point in favor of the Ordinals is that It is possible to trim its content from the stored blockchain data. Pruning solves the problem of blockchain file size bloat, which is rather trivial considering I would expect the bloat to be easily outpaced by the growth of affordable data storage. More importantly, pruning ensures that anyone running a full node can unstorage any illegal material (which, to be fair, was on Bitcoin’s blockchain long before the Ordinals).
In terms of the reputational and legal risks to Bitcoin arising from the Ordinals’ content stored on the blockchain, these can be mitigated – but not eliminated – by appropriate communication. The main point has to be made (and not just for the Ordinals) that Bitcoin’s uncensored and unauthorized architecture has certain unavoidable drawbacks which, in general, greatly outweigh its advantages.
On the technical front, it’s possible that the post-shock stress of the high volume war is leading some to view the Ordinals as a massive attack on Bitcoin’s core layer…but as a completely optional layer 2, the Ordinals have more in common with the Lightning Network than From Bcash and its ilk. Inclusion of content in witness statements has also been granted, but this process is overseen by fees…
expenses? Lightning? Let’s not jump ahead to solve this ranking controversy!
As for the loss of user money to cyber bandits or tech gremlins, those losses will likely remain limited due to the relatively small size of the Ordinals economy. like estimated total value Of all the Ordinals collections at the time of writing, it’s currently around 1,628 BTC, worth $45 million, nothing approaching the amount of suspicious files plaguing cryptocurrencies even at this point:
Lots to play defense. The truth is, Ordinals is attracting new users, developers, artists, and companies into the Bitcoin space. This will certainly have multiple benefits beyond the immediate boost to the value and prestige of the entire ecosystem. Having more users of all types is the surest way to speed up your forex trading process. And if Bitcoin succeeds, the world will be freed from the death grip of central banks – but let’s put the sapphire quartz visor back and refocus.
While most early Bitcoin customers joined the service out of technical curiosity or ideological motivation, subsequent waves of adoption were likely driven by economic factors. Many of these later arrivals lingered around because they realized it Bitcoin is a revolution disguised as a get-rich-quick scheme. While we wait for the next bullish cycle, Ordinals is attracting a new group of users, made up largely of young creators.
Should these optimists really be diverted away, to wander the shitcoin swamps?
the solution
Ordinal numbers prove strong demand for Bitcoin NFTs, tokens, and smart contracts. While such things have been experienced on Bitcoin in the past, by any combination of factors, the time is clearly now. a Glance When calculating the inscription over time (currently over five million after about five months) it is enough to confirm this. The fee-related effect was also evident:
Note that the previous two spikes, around the beginning of 2018 and 2021, coincided with the resolution of massive bull markets. From January this year, the markets have been fairly quiet and the recent rally is attributed to the Ordinals. This raises the question of how high the horrific fees will be if the current Ordinals volume continues to peak into another bull cycle…
In my opinion, this is the only critical issue made by The Ordinals; A looming problem with the potential to outweigh the benefit of fostering adoption. with Charges up to over 600 Seats Per Virtual Byte (BB) nosebleed levels Last seen in late 2017 and early 2018, Bitcoin may lose as many (or more) users to other chains as it earns from Ordinals.
The solution to the high fees of the day was the SegWit soft fork, which greatly reduced transaction matching volume and fees. SegWit also enabled the launch of the Lightning Network, a layer on top of Bitcoin designed to process low-value transactions. One advantage of Bitcoin is its fixed fee and data structure, where the cost and space required to send $1 in BTC is equal to that of sending $1 billion in BTC. Offloading low-value transactions to Lightning frees up block space, which results in lower bitcoin fees. Combined, these two promotions ensured that when bitcoin soared to an all-time high in 2021, fees remained reasonable.
So why should the solution to the high fees arising from Web3 stuff on Bitcoin be any different?
RGBAnd taroAnd Stacks – These are all techniques for transferring Web3 transactions and data from the Bitcoin blockchain to Layer 2. While the approach seen in Ordinals and Stamps to write content directly to the Base layer provides unparalleled stability and stability, it is also very expensive. For example, an artist I spoke with recently told me that he spent $3,800 to record a set. Especially in these tough economic times, there is a lot for the young creator to gamble in an unpredictable market!
Keep in mind that as of this writing, 200 sets of kits have been tracked OrdinalHub opinion zero The volume of all times, as in no sales at all. This number barely scratches the surface of the market’s failures. Sort groups over 1,000 years old The best in the slot Through reverse weekly sales volume reveals hundreds with no sales. See for yourself How many undervalued collections on Ordinals Wallet have achieved zero volume or sales over the past week. Pending the right analysis, my hunch is that less than 1 in 100 engravings listed on the market will turn a profit.
The Ordinals’ novelty will wear off, but the high costs will remain. Since Layer 2 solutions do not store data on the blockchain, the costs of creating them will be much lower. high-end groups, eg Bugatti espresso eggsmay still be listed in The Ordinals as the ultimate luxury and survival option, but the vast majority of creators will opt for cheap alternatives that are still tied to Bitcoin, even if indirectly.
Cost is not the only factor behind the inevitable migration of most users to Layer 2. The size limitations of Bitcoin blocks make massive content (such as high-resolution images or audio, complex code and all but the shortest videos) unaffordable or even impossible to record. With generative AI making it easy to create high-resolution image content – and soon audio and video content too – how long will it take the average creator to pay a relative fortune to insert small still images and text?
Layer 2 base layer
The way I see it, The Ordinals has proven that the market demand for Bitcoin-based NFTs, tokens, DeFi, etc. – is as unpalatable as some may find that demand. Regardless, the cost and relative slowness of these assets on the base layer should eventually drive most users to the second layer solutions, which are already nearing completion. Perhaps the base layer will become the digital equivalent of the Louvre, housing only the most important works under the strictest security measures. The second layer will host everything else.
Ordinal antagonists should be noted. Twitter denounces bloggers as attackers for adding monkey JPEGs to the blockchain only incite fun and encourage challenge. A $100 or even $25 fee is a much more effective disincentive, is already built in and doesn’t require keyboard bashing. To defuse the looming threat of high fees, a proactive strategy would be to contribute or donate to the development of Layer 2 solutions.
This is a guest post by Stephen Hay. The opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.