Why Bitcoin NFTs made such hype and threaten to slow down network even more

Based on the Ordinals protocol, launched in late January, more than 11,000 NFTs have been created, according to Duna Analytics research.

The unique feature of Ordinals is that they are the first NFTs in history that were created based on the Bitcoin blockchain. Also, their appearance has caused fierce controversy and a split in the developer community, as they put additional workload on this blockchain. 

We look into this controversial phenomenon in our new article.

 

What are Ordinals?

Ordinals NFT, which is more properly referred to as the NFT protocol for Bitcoin called Ordinals, was launched on January 21, 2023. 

The Bitcoin standards don’t include features like NFT, which in itself makes the appearance of such a protocol an unexpected event. The developer of the protocol, Casey Rodarmor, has implemented the capabilities of Bitcoin’s latest extension, called Taproot, so to use NFT, you need modern wallets like Sparrow.

Objects like NFT appear by putting data into certain satoshi. Such additional content becomes integrally linked to a particular satoshi, turning it into an immutable digital artifact that can be tracked, transferred, sold, etc. A coin created in this way becomes a unique souvenir, preserving forever the information associated with it.

According to new data from Dune Analytics, about 11,000 different NFTs have already been created in the two weeks of Ordinals’ existence. There is a parabolic growth rate of new NFTs, and the project is already very popular. If this rate of growth continues, in a month, the ordinaries will be the most popular type of NFT.

7 Interesting thing about #Ordinals NFTs

– Technical Entry barrier
– No Direct Interface to Trade
– Huge Supply Crunch
– People are paying over 1BTC for some NFTs.
– Daily mints are averaging at 3K
– OrdinalS hijacked 25% of Blockspace.
– Community is divided but FOMO IS REAL.

— hitesh.eth (@hmalviya9) February 8, 2023

Reasons for the Ordinals controversy 

Meanwhile, the appearance of new NFTs caused flame wars in the developer community. Ordinals allow any artifact to be permanently stored in the blockchain, not just pictures in the traditional sense of NFT. In addition to lots of pictures, the Bible, various forbidden literature, various stolen confidential government documents, and even a video game have already been uploaded to the blockchain.

Many developers are amazed at the audacity of using the Bitcoin blockchain, which is already notoriously slow, to spread all sorts of “garbage.”

At the moment, due to the beginning of the use of Ordinals, the entire block space in the Bitcoin network is being used to the maximum, which has already caused transaction fees to rise (from an average of 0.7 at the beginning of January to 1.5 at the beginning of February). 

Therefore, the appearance of Ordinals will definitely make transfers on the network more expensive. Ordinals creator Casey Rodarmore takes the massive criticism calmly, saying that controversy helps his project progress:

“I actually love the haters, I mean, they do more to drive people to find out about the project than anybody else. I don’t know what they think when they have these massive audiences, and they go, ‘This is an attack on Bitcoin’ — it seems like you don’t want to do that if you don’t want people to use the thing.”

 

Unexpected winners

On the other hand, there are those who will definitely make money on the new Ordinals. The more data a transaction includes, the bigger the commission miners get. Right now, miners are earning most of their income through rewards per block found, but over time, transaction fees should increase thanks to Ordinals-style projects, which will increase their total income.

Vitalik watching bitcoiners mint Ordinals pic.twitter.com/Q4muoATgXi

— Will Foxley (@wsfoxley) January 29, 2023

There are already some records. On February 1, the Luxor company mined the largest block ever in Bitcoin history — the block numbered 774,628 was approximately 3.96 MB in size. Later, it turned out that this anomalous block contained a large number of Ordinals NFTs.

The representatives of the pool published a message, in which they informed the community about the historical event, causing a wave of criticism in the comments and frustration among ordinary users about the increase in commissions due to the influx of Ordinals.

Bitcoin BTC has processed its largest block in history at 3.96 MB

And it only had 63 transactions.

Why?

Users are adding jpegs to the blockchain, which is taking up space and limiting the amount of transactions every block. pic.twitter.com/pm3nKOmtu5

— Hector Lopez (@hlopez_) February 1, 2023

Some users asked questions in the comments that no one can answer yet:

“What happens when someone inevitably puts kiddy porn on a chain? I’m a dumb noob, but would this make it easier for authorities to find them or not?”

All Ordinals added to the blockchain become immediately publicly available. One important difference from standard NFTs (which in most cases are stored outside the blockchain) is that Ordinals remain permanently on the Bitcoin blockchain, which means that they cannot be removed from the network or censored in any way.

Key takeaways

• Collectors and lovers of miscellaneous art, as well as advocates of freedom of information, like Ordinals because they allow them to create timeless artifacts that can never be removed from the web after they are created. 
• Many developers are unhappy with the misuse of blockchain and also annoyed with the creation of what they consider to be a meaningless workload. Some developers are afraid that with the appearance of Ordinals a real Pandora’s Box is open because it became possible for many similar services to appear, which will eventually break Bitcoin.
• Miners like Ordinals because increased transaction fees allow them to make more money.
• Who will be primarily affected by the appearance of these NFTs on the blockchain (even if not interested in this topic) are the regular Bitcoin users who make frequent transfers, because they will have to pay higher fees.