NFT-like Assets Could Be Here To Stay
One million NFT-like assets have been inscribed on the Bitcoin network, as the popularity of the Ordinals protocol surges on the world’s most valuable blockchain.
Ordinals use jumped at the beginning of the month and passed the million mark on Sunday.
Inscriptions’ growing popularity a little more than two months after their debut suggests the new asset class is here to stay, a fact that could have long-term implications for the financial health of the Bitcoin network.
On Apr. 10, Bitcoin traded above $30,000 for the first time since June 2022. The digital asset is up 80% this year.
BTC Price, Source: The Defiant Terminal
“Long term, I think it greatly increases both the security and the durability of the bitcoin network,” Alex Miller, CEO of Bitcoin developer tooling company Hiro, told The Defiant.
Former Bitcoin core engineer Casey Rodarmor led the team that developed Ordinals, and the protocol was first used to “inscribe” data, such as images and videos, directly to the Bitcoin blockchain in February. Ordinals leverages upgrades that came to Bitcoin in 2017 and 2021, and has kicked off a debate over the proper use of the network.
Adam Back, the founder of Blockstream, for example, cited the “sheer waste and stupidity of an encoding.”
But in Miller’s view, however, Ordinals “increases usage and demand for the bitcoin network.”
Because Inscriptions take up storage space, they increase the fullness of each block that miners compete to append to the chain. Fuller blocks are worth more, and miners should, in theory, be willing to invest to boost computing power and increase their odds of winning the mathematical lottery that grants them the privilege of appending the next block and earning the resulting bitcoin payout.
That Inscription-filled blocks are worth more will matter a great deal as the Bitcoin-denominated reward for producing blocks halves every few years.
“Ordinals have already contributed tens of millions of dollars to the Bitcoin security budget,” Miller said. “If you want to maintain the budget of [Bitcoin] security … so that people are still willing to spend a lot of money to mine, which increases competition and makes it harder to attack the network, miners need to be able to make money from somewhere [other than block rewards].”
Ordinals have attracted Ethereum-native projects like CryptoPunks to the Bitcoin network, but have also given rise to grassroots collections, such as Taproot Wizards.
“The fact that it has had this staying power and the rate of inscriptions has kept up and grown … I think that is a big deal,” Miller said. “Crypto sees plenty of things that pop up, are hot for a week or two, and then just disappear.”