How Ordinals Fractured the Bitcoin Community (and Why It Was Necessary)


The new Ordinals protocol has made it more difficult for everyone to answer the question, “What is Bitcoin?” The protocol was launched by Casey Rodarmor, a software engineer, on the Bitcoin mainnet on 21 January. It allows digital artifacts such as images, programs and video games to be engraved directly on the Bitcoin blockchain. Ordinals is a synonym for NFTs on Bitcoin.

The Bitcoin community is experiencing a split because of this upgrade. Some call Ordinals an attack against Bitcoin. Others use it to troll the Maxis, a group of over-serious Bitcoin enthusiasts, who load as much unnecessary data into every block as they can. Inscribing data to Bitcoin blocks is not a new idea, despite the urgency of the NFT debate. A few Bitcoiners from the past suggested that a domain name system be integrated into Bitcoin. Satoshi quickly scuttled the BitDNS project. Satoshi stated in 2010 that “Piling all proof-of-work systems in the world into one dataset does not scale.”

Petty as it may appear, the Ordinals drama has brought back a fundamental and old (in crypto terms), question: Should Bitcoin be used to fund non-financial activities? First, let’s understand why the debate is going on.

What is the fuss about Ordinals?

The addition of NFTs to Bitcoin’s mainnet changes our perception of it as the most ubiquitous cryptocurrency. This is evident in the divided response from the crypto community. We must first understand the meanings that people attach to Bitcoin in order to understand the chaos surrounding Ordinals.

Bitcoin is an identity to the Libertarian-leaning Maxis. It’s an investment tool that protects savings and fights inflation. It’s also a political statement. It allows anyone to transfer money instantly, without authorization and at a low cost. They see Bitcoin as a middle finger to all banks, including the federal reserve and government. GoFundMe withheld millions in dollars from Canadian truckers protesting COVID vaccine orders. In 2022, the Bitcoin community evaded financial regulations and sent hundreds of thousands of Bitcoin directly to truckers’ wallets.

These anti-government, pro-inflation, and anti-everything Bitcoin purists can identify themselves by both who they are and what they don’t. They sure aren’t the NFT-flaunting melords on either side. It’s like painting with a broad brush that can’t fit in a semi truck trailer. The Bitcoin community is composed right-leaning freedom advocates, while the NFT community is left-leaning creators.

The average NFT enthusiast sees Bitcoin as just another cryptocurrency and the mainnet as another digital playground. However, putting NFTs on Bitcoin is a challenge to the average Bitcoiner. Maxi is not going to tell you what their thoughts are about Bitcoin adding NFTs. It’s like asking a monk whether you can urinate in his holy water. What would you expect him to say? It might seem like water, but Bitcoin is just water. Another elixir could be made holy by the same alchemical incantations. Holy water isn’t just water for the monk; Bitcoin isn’t just another chain for the Maxis.

Maxis might be blinded by their religious obsession with Bitcoin’s purity, and miss the implications of NFTs or other data on Bitcoin mainnet for the future success of their beloved chain.

Why Bitcoin Ordinals are so good

One question that is being asked in the crypto community is “Why do NFTs have to be on Bitcoin?” The lazy answer is that it creates more uses for Bitcoin. This answer does not get to the core of what is at stake for Ordinals, Bitcoin and cryptocurrency culturally. Perhaps Bitcoin is not meant to be used in more ways than its enthusiasts and users. Use cases are for their own sake, which is the main criticism of crypto.

We are now in the second quarter this blistering century. As more companies sweat and grunt under the exhausting task of onboarding the next billion users into Web3, their efforts will be successful. Blockchain technology will be used by more people, regardless of whether they are aware. There will also be people who are in the background, perhaps in quiet, tavern-like areas of the internet, and look at the celebrated advances all around them, asking why that particular item (digital or otherwise) should be on the chain.

We may be witnessing an early version of a conversion that we will continue to have with the Ordinals argument. Why NFTs are necessary to be on Bitcoin? Some people respond that they could be. Isn’t this what Bitcoin is all about? Once you regulate what data can and cannot be minted on the blockchain, it leaves you with the question of who decides. Perhaps the Ordinals debate has shown us a way forward. We no longer question why items are on-chain. Instead, we ask “Why’s that item on this Chain?”

They have some real benefits beyond the philosophical implications they have on Bitcoin and cryptocurrency writ large. The 2017 SegWit upgrade made Ordinals possible. This created a new field in each transaction called a “witness” and allowed people to enter more data, such as scripts or smart contracts. In 2021, the Taproot update made Bitcoin smart contract capable. This led to Ordinals in 2023.

Bitcoin’s transaction charges are determined by how much data is in each transaction. Ordinals adds more data each block. This caused Bitcoin’s transaction costs to spike significantly following the Ordinals launch. Taproot Wizards, a group that trolled the network with larger blocks and 4MB of data, was a major reason.

Some supporters of Ordinals might argue that miners will be able to make more from larger blocks, which will lead to increased demand for block space. This could result in wider markets and stronger block space demand, which would be a welcome boost for the ecosystem. For example, miners could prioritize transactions with higher fees to increase their revenue. As miners are incentivized, this could increase the security of the network.

It is possible to argue that the same spirit which drove trolls “exploit” Ordinals protocol and clog Bitcoin network with unnecessarily big blocks of data is the same spirit that drove Bitcoin Maxis illegally to send money to protesting truckers. Bitcoin is about permissionless action. Doing something because you can, and not letting anyone else stop you. That’s at least what it has become.

What do Ordinals signify for Bitcoin’s future?

Satoshi’s whitepaper doesn’t mention permission or permissionless one time. He instead mentions trust as one of his first points. Satoshi wanted an answer to the inherent problems of trusting financial institutions that facilitate electronic payments. Satoshi noted that mediation can increase transaction costs and limit the size of transactions, as well as limiting the opportunity for casual transactions.

Satoshi was determined to make micro-transactions around the globe without any third-party trust or intervention in 2008. This original vision of Bitcoin seems to be being shattered by increased transaction fees, larger block sizes, and moderation of lewd images within days after Ordinals launch.

Are NFTs on Bitcoin able to enable Satoshi’s original goal? Most likely not. Maybe that is not the right question to ask. As fundamentalists of all religions can be steadfast to the literal words in their founding documents, so too might many of us, Maxi or not, have stayed too close to the words of the Bitcoin whitepaper and lost sight on the original ideals.

The question isn’t whether we have the right or not to use Bitcoin for purposes beyond Satoshi’s original vision. It’s about more than “JPEGs” on the mainnet. It is up to us to decide if we have the obligation of reimagining Bitcoin and its potential future. The use cases for Bitcoin will change in the same way that NFTs on Ethereum will transform JPEG monkeys into digital housing deeds and medical records.

They are right. You can’t mint NFTs on Bitcoin, but is what you need. NFTs on Bitcoin may not be the only use case. Satoshi might be shocked at the behavior of his holy chain. It’s possible that NFTs will lead to a wider adoption of Bitcoin. A wider adoption could mean that more people can exchange small amounts of currency without trusting in a third party, as Satoshi intended. Sometimes, it is necessary to depart from your original vision to reach it. And sometimes, the practical uses cases are only the result of the inpractical.

The post How Ordinals Failed the Bitcoin Community and Why It Was Necessary appeared first on nft.

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