Ordinals brings NFTs to BTC, upsetting small blockers once again

A new technique called “Ordinals” is causing a stir in the BTC world. The concept, which allows non-fungible tokens (NFTs) to transact directly on the BTC blockchain, was immediately unpopular with BTC purists who circled wagons to protect their digital gold from non-financial use cases, with some even suggesting NFT transactions be banned.

What are ‘Ordinals’?

The term comes from the “Ord” protocol developed by Casey Rodarmor and described in this blog post from January 21. It allows “inscriptions,” or “digital artifacts,” by inscribing additional information onto a single Bitcoin “satoshi” or “sat” (the smallest transactable unit on Bitcoin protocol-based networks).

Once inscribed, that satoshi becomes unique… forever. As Ordinals’ documentation says, “Ordinal theory concerns itself with satoshis, giving them individual identities and allowing them to be tracked, transferred, and imbued with meaning.”

Ordinals can be sent to/from any BTC wallet and retain their unique properties, but these would be invisible to specialized wallets that can interpret the extra data. Associated data files (such as jpegs or any other type) would not be stored on-chain, only the inscribed reference. In this way, Ordinals are similar to NFTs on Ethereum, where transactions/contracts record a reference to files stored elsewhere in the cloud, like IPFS.

In many ways, it’s similar to past concepts like Colored Coins and Mastercoin, which also used Bitcoin Script to record additional information onto regular Bitcoin transactions to create new assets and tokens, hoping to expand BTC’s use cases. Both those projects gradually withered away as BTC became congested and too expensive to use for anything other than essential financial transfers. The split between BTC and BCH in 2017 over block sizes and BTC’s addition of segregated witness (SegWit) sent the on-chain scaling crowd (“big-blockers”) to BCH and later Bitcoin SV (BSV), while those resistant to on-chain scaling (“small-blockers”) became even more zealous about keeping capacity small. BTC, which once upon a time had an intention to increase transaction block sizes in small increments over time, now considers any block size expansion (or even discussion thereof) a heresy.

Ordinals’ real purpose is adding to the heresy: to allow NFTs on the BTC mainnet. Rodarmor stated, “this is 100% a meme-driven development,” and the tracker at Ordinals.com displays several now-familiar NFT art style examples. With Ordinals, NFT trading mania could take off on the network least designed to handle it.

BSV, which runs today on the protocol most resembles Satoshi Nakamoto’s original Bitcoin, has theoretically unlimited transaction block capacity (commonly called “unbounded scaling”). It also already has a number of NFT protocols, including “Stas” tokens, which inscribe unique data onto individual satoshi units in a way that closely resembles Ord.

How many anonymous Bitcoin Core devs contributed to this “accident” in Taproot that adds the BSV-style features of Ordinal to BTC? pic.twitter.com/m3nIzeTZhW

— Kurt Wuckert Jr | GorillaPool.com (@kurtwuckertjr) January 29, 2023

Rodarmor’s Ord protocol announcement and subsequent discussion immediately caused palpitations among the stream-blockers at Blockstream and their associated community. Blockstream is the company that develops sidechains, sponsors “Bitcoin Core” protocol developers, and is most responsible for keeping the flame burning for small-capacity Bitcoin. Small-block BTC encourages using sidechains, which supports Blockstream’s business model, and… you get the picture.

CEO Adam Back, along with others such as Jameson Lopp and Luke-jr, immediately decried Ordinals as potential “spam” and “bloatware,” with data that is “unprunable” and can’t be removed. Worst of all, it leads BTC down a path that is almost BSV-like. That latter thought is so awful to BTCers that Back was forced to refer to popular BSV applications by name.

“We don’t need an on-chain weather app,” wrote Randy Holloway.

“Right, or a Twetch” Back replied.

right, or a twetch 🙂

— Adam Back (@adam3us) January 29, 2023

Why Ordinals are controversial (for BTC)

We should point out that Ord and similar concepts are controversial only for BTC. That’s because the content isn’t a separate sidechain or protocol but something that runs on the mainnet and main blockchain. While the extra data-on-satoshis itself wouldn’t break BTC’s transaction size limits, popular usage would probably increase the total number of transactions, and if there’s one thing BTC maxis really hate, it’s more transactions. More transactions mean more congestion and even higher fees.

Back even appeared at one point to suggest BTC mining nodes might block transactions where Ord data was present. However, this is essentially transaction censorship, which is also a no-no in BTC. Back later removed his post on the topic.

Whoever is behind Ordinal (and I'm not saying it was me, or that I know who it is,) they got Adam Back publicly calling for transaction censorship.

I'd call that a win.

Just sayin'

— Matthew Zietzke (@MZietzke) January 29, 2023

He later clarified his stance with a softer approach, noting that miners wouldn’t/shouldn’t actually stop Ord transactions. BTC, he said, is “designed to be censor resistant” and downgrading his criticism of Ord to “sheer waste and stupidity.”

"you can't stop them" well ofc! bitcoin is designed to be censor resistant. doesn't stop us mildly commenting on the sheer waste and stupidity of an encoding. at least do something efficient. otherwise it's another proof of consumption of block-space thingy.

— Adam Back (@adam3us) January 29, 2023

Debates over what constitutes a “legitimate” use for the Bitcoin blockchain go way back, almost to its earliest days. It’s closely associated with the block size/scaling issue, which was only “solved” through formal separations into today’s BSV, BTC, and BCH camps and new arguments over who is entitled to call themselves “Bitcoin.”

Satoshi Nakamoto’s 2008 white paper description of Bitcoin as “a peer-to-peer electronic cash system” is succinct and could be the definitive one. However, Satoshi never claimed it should only be that, and developers have at various times expanded the technology’s capabilities to include whatever the given protocol, and blockchain capacity, allow.

The BTC/small-blocker camp has so far attempted to stifle all non-cash uses through limits on transaction block capacity. Even with so-called alterations like SegWit, BTC blocks can only be 1-4MB in size. BTC’s efforts to limit itself have been so successful, in fact, that BTC barely functions even as a digital cash system. “HODL” is the cry, and “digital gold” describes an asset that (supposedly) accumulates ever-increasing fiat value while rarely moving from its vaults. Its dilemma is summed up pretty well in this brief Twitter exchange:

The illusion of believing that you will be very rich in a few years

— 1dead 1b2 (@1dead1b2) January 30, 2023

Capacity/scaling issues aside, the debate is also a cultural one. NFTs are also seen as a fad use-case that encourages speculative hype, price pump-and-dumps, and irresponsible investment. In the case of NFT artwork aimed specifically at traders, that’s probably true. But there are also plenty of more responsible uses for NFT technology like tokenized “real” assets like real estate, business processes and responsibilities, logistics, and environmental/IoT data (including the now-famous “weather app” meme). All these use cases exist as real applications on BSV, where users see nothing wrong with this expanded universe. Unbounded scaling on the mainnet means you don’t have to worry about use cases that don’t interest you. Apps like Twetch, CryptoFights, or Haste Arcade can continue to entertain their users whether BSV’s Big Data/enterprise fans care or even notice them.

Since BTC does very little other than allow its holders to dream of getting rich at the next Tether pump or extended bull run, the stated small-blocker goal is to use BTC’s limited blockchain as a “settlement layer.” This deploys separate protocols like Lightning and Taproot to handle daily transactions and contracts, which “settle” transactions in bulk on the BTC main chain only when necessary. BTC’s limited capacity and high transaction fees mean it’s no longer feasible to use it for small daily purchases, and definitely not millions of micropayments.

So it’s easy to imagine why something like Ordinals tosses another wrench into the BTC/small-blocker plan for world domination. Time will tell if Ord and NFTs can become popular on BTC or if BTC’s limited capacity even allows them to function. The only thing we can almost guarantee is BTCers will maintain a relentless negative social media campaign against them until it is exorcised.

What’s the dilemma, then, for Ord/NFT fans? There really shouldn’t be one. They can continue to try running their protocol on BTC, with all the issues mentioned above… or they could just use BSV. BSV, in the end, can run any token protocol without a whiff of protest. BSV also allows full token data to be stored on-chain, reducing losses. It is also, as Satoshi wanted, a cheap and fast peer-to-peer electronic cash system.

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