Introduction
Bitcoin transaction fees have been skyrocketing, causing concerns about the future viability of the cryptocurrency. This surge in fees has been attributed to the introduction of something called Ordinals, which has divided the Bitcoin community. While some people believe that Ordinals are ruining Bitcoin’s value proposition, others consider them to be a positive change. In this article, we will delve into the impact of Ordinals on Bitcoin and explore whether they can survive this invasion.
Ordinals are a new invention that has shaken Bitcoin to its core. They essentially transform Bitcoin transactions into non-fungible tokens (NFTs) by identifying each individual Bitcoin unit, known as a Satoshi. Previously, Satoshis were indistinguishable from one another, but with the introduction of Ordinals, they become distinguishable and effectively non-fungible. This innovation has led to the creation of tokens within the Bitcoin network, known as BRC20 tokens, which have gained significant market capitalization.
However, with the rise of Ordinals, Bitcoin transaction fees have experienced a substantial increase. This has sparked concerns about the usability and accessibility of Bitcoin, as the average transaction fee has become prohibitively high for many users. Bitcoin core developer Luke Dasha has even labeled Ordinals as an attack on Bitcoin, as they hinder its use as peer-to-peer electronic cash.
To address these concerns, some Bitcoin developers are proposing a ban on Ordinals, aiming to filter out these transactions from the network entirely. However, this proposal has been met with mixed reactions, reminiscent of the net neutrality debate, where restrictions on certain online activities were viewed as a threat to freedom.
Despite the drawbacks and criticisms, there are potential benefits to the existence of Ordinals. They offer increased revenue for Bitcoin miners, who rely more on transaction fees as block rewards decrease over time. Additionally, the introduction of Ordinals has spurred innovation within the Bitcoin developer community and attracted more users to the ecosystem.
While the surge in Bitcoin transaction fees caused by Ordinals has raised concerns, it is important to consider the potential long-term benefits and the positive impact they have had on the Bitcoin community. Whether Ordinals can survive the ongoing debate and criticism remains uncertain, but their presence has undeniably brought about both challenges and opportunities for the future of Bitcoin.
The Rise of Ordinals
Bitcoin fees skyrocketing
Bitcoin transaction fees have been on the rise in recent times, causing concerns among the Bitcoin community. With over 300,000 unconfirmed transactions in the mempool, the value proposition of Bitcoin is being questioned. The main culprit behind these skyrocketing fees is something called Ordinals.
Introduction to Ordinals
Ordinals are a new invention in the world of Bitcoin that has split the community’s opinion. Developed by Casey Rodemore, Ordinals allow for the identification of individual satoshis based on the order they were mined. Previously, satoshis were fungible and indistinguishable from one another. But with Ordinals, each satoshi becomes technically non-fungible, akin to an NFT (non-fungible token). This development opened the door for new possibilities in the Bitcoin ecosystem.
Trading of ordinary entities
Once the Ordinary protocol was created, people began trading these ordinary entities fervently. In fact, one of these entities was even sold for 11.5 Bitcoin, valued at around $250,000 at the time. This trading frenzy led to a surge in transactions on the Bitcoin network, causing congestion and delays.
Growth of Brc20 tokens
In March, another developer named Domo figured out how to create fungible tokens on Bitcoin using the Ordinary protocol. This gave birth to the Brc20 token standard, which introduced coins onto the Bitcoin network. These tokens quickly gained popularity, reaching a combined market cap of several hundred million dollars. However, their increasing volume of transactions further clogged up the network.
Despite the drawbacks of Ordinals, such as increased transaction fees and network congestion, some believe that they bring significant benefits to the Bitcoin ecosystem. These benefits include increased revenues for miners, as transaction fees become a more critical source of income. Additionally, Ordinals have sparked innovation, inspiring developers to build applications and decentralized exchanges on Bitcoin.
The rise of Ordinals in the Bitcoin world has sparked both excitement and concerns. While some criticize Ordinals for their impact on fees and network congestion, others see them as a catalyst for adoption and innovation. The future of Ordinals in the Bitcoin ecosystem remains uncertain, but they have undoubtedly left a lasting impact on the community.
Criticism of Ordinals
Increase in transaction fees
Bitcoin transaction fees have been skyrocketing due to the surge in unconfirmed transactions caused by Ordinals. This has sparked concerns about the impact on Bitcoin’s value proposition. Critics argue that the high fees associated with Ordinals are driving up the cost of using Bitcoin, making it less attractive as a peer-to-peer electronic cash system. For instance, a Bitcoin payment in El Salvador now costs $20 in fees, which amounts to nearly 10% of the average person’s monthly salary. Such fees are simply not acceptable for end users.
Negative impact on Bitcoin’s use as electronic cash
Bitcoin core developer Luke Dashjr has labeled Ordinals as an attack on Bitcoin, as it hampers its use as a means of everyday transactions. The identification and distinction of each Satoshi through Ordinals prevent fungibility, making each unit technically non-fungible, or an NFT. Dashjr’s concern is not solely theoretical, as it has real-world consequences for users who depend on Bitcoin for low-cost, seamless transactions.
Proposal to ban ordinals
In response to the challenges posed by Ordinals, some Bitcoin developers have proposed banning them altogether. This proposal echoes the debate surrounding net neutrality, where internet providers could restrict access to certain websites. However, the majority of people seem to oppose banning ordinals, as it would infringe on the principles of freedom and open innovation. Critics argue that banning ordinals would be a far greater threat to Bitcoin than allowing their existence.
While Ordinals have resulted in higher transaction fees and raised concerns about Bitcoin’s use as electronic cash, the proposal to ban them is seen as a more significant threat. The debate surrounding Ordinals highlights the need for ongoing discussions within the Bitcoin community to find a balance between innovation, usability, and affordability.
Benefits of Ordinals
Increased revenues for miners
Ordinals have significantly increased revenues for Bitcoin miners. As the amount of Bitcoin earned from mining a block is halved approximately every four years, miners increasingly rely on transaction fees to generate revenue. With ordinals, the high transaction fees contribute to a long-term incentive for miners to continue operating within the network. According to Galaxy research, if the unused block space from 2022 was utilized for ordinals, miners would have earned 5700 Bitcoins in total from transaction fees, representing a 6.1 percent increase in profits for them. This increased revenue for miners ensures the security and stability of the Bitcoin network in the face of diminishing block rewards.
Boost to Bitcoin developer community and user adoption
Ordinals have sparked innovation and development within the Bitcoin community. The ability to create non-fungible tokens (NFTs) on Bitcoin through the ordinary protocol has attracted developers and inspired the creation of new applications. The Bitcoin 2023 conference in Miami saw developers showcasing their creations based on ordinals, such as Bitcoin wallets with added security features. This increased activity within the developer community and the availability of innovative applications on Bitcoin can accelerate user adoption and attract more users to the Bitcoin ecosystem. Prominent Bitcoin advocate Michael Saylor supports ordinals, stating that every time someone builds a compelling application on Bitcoin, it serves as a catalyst for adoption.
Ordinals bring benefits such as increased revenues for miners, long-term incentives for their participation, and a boost to the Bitcoin developer community, leading to increased user adoption. These positive effects demonstrate that ordinals should not be banned from Bitcoin but should be embraced as a forceful positive change.
Supporters of Ordinals
Michael Sailor’s endorsement
Michael Sailor, a prominent figure in the Bitcoin community, is one of the supporters of ordinals. He believes that every time someone builds a cool application on bitcoin, it serves as a catalyst for adoption. In his view, the innovative and usable nature of these applications attracts more users to bitcoin, boosting its popularity and value. This endorsement from Sailor highlights the potential positive impact of ordinals on the broader Bitcoin community.
Success of applications built on ordinals
Ordinals have also inspired developers to create various applications on the Bitcoin network. At the Bitcoin 2023 conference in Miami, several developers showcased their projects that were made possible by ordinals. For example, a team of developers created a Bitcoin wallet with features related to ordinals, which secured second place in the infrastructure category of the startup competition. These successes demonstrate how ordinals enable the development of practical and usable blockchain applications, which is crucial for the growth and adoption of Bitcoin.
The support for ordinals comes from influential figures like Michael Sailor, who recognize the potential of these innovations. Additionally, the success of applications built on the ordinals protocol showcases the positive impact it can have on the Bitcoin ecosystem. These developments suggest that ordinals should not be banned, as they contribute to the growth, innovation, and adoption of Bitcoin.
Conclusion
In conclusion, the introduction of Ordinals in the Bitcoin ecosystem has stirred up controversy among the community. While some argue that Ordinals are ruining the value proposition of Bitcoin and causing skyrocketing transaction fees, others believe that Ordinals bring positive changes and opportunities for innovation.
Critics of Ordinals point out the significant increase in transaction fees and the negative impact on end users, such as high fees making Bitcoin payments unaffordable for some. Bitcoin core developer Luke Dasha even considers Ordinals as an attack on Bitcoin’s original purpose of being a peer-to-peer electronic cash system. He proposes banning Ordinals altogether to protect the network from these issues.
However, proponents of Ordinals argue that they provide long-term benefits for Bitcoin. The increased transaction fees generated by Ordinals contribute to miners’ revenues, ensuring the security and stability of the network. Additionally, Ordinals have inspired the development of new applications on Bitcoin, like decentralized exchanges, which attract more users and drive adoption.
Overall, while the high fees and potential drawbacks of Ordinals should be acknowledged, it seems that banning them would do more harm than good. The benefits in terms of miner incentives, community growth, and user adoption outweigh the challenges. Ordinals have become a catalyst for innovation and demand for Bitcoin, solidifying its position as a leading cryptocurrency.
