Standard Crypto Ordinals NFT Revives Bitcoin’s Vigor

Revitalizing Bitcoin's Energy The Rise of Standard Crypto Ordinals NFT

Taproot provides more data storage capacity for Bitcoin and the ordinal protocol can associate a single Satoshi with data stored on the blockchain. NFT has three major advantages: 1. Blockchain legitimacy; 2. Complete on-chain storage; 3. BTC as a unit of account. Ordinal may become a driving factor for Bitcoin transaction fees, while NFTs, decentralized finance, and layer two solutions attract users, capital, and attention. Reviving the fun in Bitcoin is the only way.

Original title: Bitcoin Is Dead. Long Live Bitcoin.

Original author: Alok Vasudev

Original source: Standard Crypto

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Translation: Mars Finance, MK

The Bitcoin we initially encountered was dynamic. It attracted the most creative minds and talented builders in the tech industry. It was the original source of ideas that shaped the modern crypto industry. But then things changed. The initial pragmatism gradually evolved into an anti-tech dogma. A technology born out of rebellion now emphasizes compliance with orthodoxy.

We believe it’s time for doers to take back control of Bitcoin. If the Bitcoin community stifles its (diminishing) innovation, Bitcoin will face a serious crisis of ossification. After all, there is a significant difference between carefully planning and losing the ability to act. Bitcoin’s reasonable openness issues, the answers to these issues (and other issues we will inevitably face in the future) can only emerge when the Bitcoin community can build itself. After all, if your vision is clouded by the current dazzling state, how can you see the path ahead clearly?

However, the good news is that fiery eyes may underestimate the impact of small things like a hobbit JPEG…

When we first learned about Bitcoin around 2012, it was a hotbed of innovation and creativity. Many concepts flourishing in today’s ecosystems like Ethereum were born in the original Bitcoin community, such as smart contracts, sidechains/layer two, NFTs, tokens, and decentralized autonomous organizations. But for Bitcoin itself, these ideas gradually lost momentum in the mid-2010s as the community became more conservative in core protocol development.

As recent newcomers to the crypto field have seen, the development of Bitcoin is deliberate, gradual, and slow. Bitcoin’s stagnation has allowed the community to develop a cult-like fervor. To be clear, a successful non-sovereign currency requires a growing belief. But in the absence of technological progress, Bitcoin users can only rely on memes (like laser eyes, “stacking sats”) to ignite adoption enthusiasm. Bitcoin has become a way of life, with strict orthodoxy, rather than just a technological foundation. It wasn’t until the recent three seemingly harmless upgrades (collectively known as the “Taproot upgrade”) that unexpected consequences arose.

Taproot, originally proposed by seasoned Bitcoin core developer Greg Maxwell in 2018 and activated later in 2021, aims to improve Bitcoin’s scalability by increasing the efficiency of signature aggregation within blocks. As a result, Taproot released more data storage capacity per block. Combine this newly discovered Bitcoin storage with the creativity of developers on a permissionless basis, and you get the Ordos Protocol – a protocol that allows arbitrary digital data (such as text, images, JSON) to be engraved on the Bitcoin blockchain.

The Ordos Protocol, released by Bitcoin developer Casey Rodarmor in late 2022, is a simple yet powerful solution for associating individual Satoshis with data stored on the blockchain. The owner of a specific satoshi also owns the data engraved on it, whether it’s a JPEG, text, JSON object, etc. The way Bitcoin operates hasn’t changed; now the blockchain just has some additional data that can be recognized and parsed by indexers as long as the data complies with the Ordos Protocol.

By 2023, the Ordos Protocol is shining. So far this year, nearly 37 million ordos have been engraved. We have seen existing brands (such as Yuga Labs) and key emerging brands and communities (such as Taproot Wizards) adopting ordos. A range of new infrastructure supporting ordos has also emerged, including wallets, marketplaces, and explorers.

In the explosive growth of ordos, Bitcoin NFTs – images engraved on sats – have found the strongest resonance. However, the response has been polarized. Many people, especially those who feel tribal loyalty to other blockchain ecosystems, see Bitcoin NFTs as a temporary fad. However, we believe that Bitcoin NFTs are undervalued and have a reasonable chance of accumulating long-term value. Here are the reasons:

Reasons for Bitcoin NFTs

Blockchain Legitimacy

Newly launched blockchains foster NFT ecosystems to establish the legitimacy and quality of their block space. The premise is that a flourishing NFT ecosystem on a new blockchain is a sign (and will attract more) of users, developers, liquidity, and attention – all of which are essential for a sustainable blockchain.

However, unlike newly launched blockchains, the block space of Bitcoin may be the highest quality existing block space (in terms of brand awareness, historical longevity, and economic security). The quality of Bitcoin gives it persistence to anything within its block space. The problem of whether the blockchain-NFT legitimacy emerged first like a chicken or an egg does not exist with Bitcoin NFTs.

Fully on-chain

NFTs (including many of the most valuable ones) do not store their associated image data on-chain. Instead, the images are stored off-chain, and the NFT contract itself contains a URI link as metadata. Although, so far, off-chain storage dependency hasn’t hindered the accumulation of NFT value, the risk of loss of media data due to factors unrelated to the blockchain poses a threat to the persistence of NFTs.

In contrast, ordinal NFTs and their associated media are entirely stored on-chain, completely avoiding off-chain storage issues. Bitcoin blocks can store up to 4MB of data, enough to store, for example, images. Furthermore, new ideas like recursive carving allow creators to bypass the storage restrictions of a single block. As long as the Bitcoin blockchain maintains its integrity, Bitcoin NFTs and their associated media will also remain intact.

BTC as a pricing unit

Another underestimated aspect of Bitcoin NFTs is that they are priced in BTC. The currency pricing unit of an NFT is the reserve currency of its blockchain. Ethereum’s NFTs are priced in ETH, Solana’s NFTs in SOL, and ordinal NFTs are priced in BTC. For NFT collectors, cheap and expensive are functions of the quantity of cryptocurrency units (e.g., 0.01 vs. 10) rather than considering the US dollar price.

However, the high USD price of an NFT changes its external perception. Like other currency value stores, NFTs are reflective assets, with a positive (or negative) feedback loop between price and intrinsic value. High-priced NFTs (in USD) attract attention and develop cultural significance (think of the public reaction when a CryptoPunk sold for over $1 million). NFTs priced in BTC enjoy a 19x multiplier in USD compared to NFTs priced in ETH, due to the USD price ratio between 1 BTC and 1 ETH. A $10,000 NFT is “just” 0.3 BTC but a “costly” 5.5 ETH.

Three key factors of Bitcoin NFTs:

1. Blockchain legitimacy: Newly launched blockchains nurture the NFT ecosystem to establish the legitimacy and quality of their block space. However, the block space of Bitcoin may be the highest quality existing block space; therefore, the issue of blockchain-NFT legitimacy doesn’t exist with Bitcoin NFTs.

2. Fully on-chain storage: Unlike many NFTs, ordinal NFTs and their associated media are entirely stored on-chain, avoiding off-chain storage issues. Bitcoin blocks can store up to 4MB of data, enough to store, for example, images.

3. BTC as the pricing unit: Bitcoin NFT is priced in BTC. The currency pricing unit for NFT is its blockchain’s reserve currency, which gives Bitcoin NFT an advantage in pricing.

With the support of these three powerful factors, we believe that they have greater potential than many people initially expected. After all, if Bitcoin is digital gold, then NFTs are like digital jewelry.

But in our view, Bitcoin NFTs are just the beginning. They are a Trojan horse. NFTs have also sparked experiments in adjacent categories, such as fungible tokens on Bitcoin and even decentralized finance protocols. These designs, though primitive and inefficient, indicate the potential desires being built from the bottom up on Bitcoin. For us, the grassroots energy sparked by NFTs is in stark contrast to the top-down commands about how Bitcoin should evolve, which are increasingly feeling like they’re coming from above. We have also witnessed early attempts at Bitcoin layer 2 solutions to address the specific application demands of NFTs, such as ZK-Rollups. We see all the hallmark signs of a vibrant ecosystem forming around NFTs that injects new life into Bitcoin innovation.

It is worth noting that NFTs and the subsequent phenomena they bring about could become a meaningful transaction fee driving force for blockchain, helping address recognized challenges to Bitcoin’s long-term economic security. As Bitcoin block subsidies decrease by 50% every four years, the incentive to mine blocks will increasingly need to come from transaction fees (which in turn come from blockchain usage). Many are concerned that a forward extrapolation of today’s fees will not sufficiently cover the decline in block rewards, leading to a degradation of Bitcoin’s overall economic security. The reintroduction of NFTs and a broader return of vitality to Bitcoin could meaningfully affect the fee market for Bitcoin, thus safeguarding Bitcoin from future (life or death) fixes.

NFTs are not without controversy or potential drawbacks. Many Bitcoin proponents see Bitcoin’s narrow scope of application as an advantage – Bitcoin’s robustness as a currency is enough. In the eyes of these Bitcoin supporters, NFTs blur the clear purpose. Worse yet, they fear that NFTs introduce potential technological and regulatory risks that Bitcoin was previously immune to.

We do not dismiss the criticisms/concerns about these NFTs; however, we ultimately support experimentation. Bitcoin is no longer the place where the brightest and smartest people in the crypto field spend their time, and it hasn’t been for many years now. That’s a problem. Deliberately avoiding vitality is a choice, but losing the ability to innovate is a death sentence.

Early Bitcoin enthusiasts envisioned a blockchain where altcoins could experiment on the fringes while the best ideas were brought back to the mothership. Instead, we allowed a mindset of burying our heads in the sand to develop, turning Bitcoin into a museum artifact that can only be admired but not touched. Thanks to NFTs, the dormant giant in Bitcoin’s development, Parasite, may have just awakened. NFTs, decentralized finance, and layer 2 solutions have attracted users, capital, and attention to the new blockchain ecosystem. For Bitcoin, it makes sense to experiment in these areas. But for us, the most exciting (and still unknown) thing is how Bitcoin’s trajectory will differ from other blockchain ecosystems. The only way to find out is to keep building. It’s time to reawaken the fun in Bitcoin.

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