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What the heck is happening? Just as the world was getting comfortable with the thought that Bitcoin is gone. It came again with something new, and people are going crazy for it.
This is dope, that people are not willing to give up on a technology, that all state actors are discouraging. Maybe humanity has finally stopped living in fear. Many of my friends, do sometimes ask me, about the utility behind digital artefacts, like NFTs and Ordinals. I am using NFTs and Ordinals separately, because as a terminology, NFTs are more associated with Ethereum, and ordinals are assets on Bitcoin, with similar features, yet different fundamentals.
Haha, just added them at the last moment for fun.
Today, we will talk about Ordinals, and how they are fundamentally different from NFTs. We will try to get into detail, that how Bitcoin managed to ignite the world of non-fungible digital assets, in its unique way. And, towards the end, I will also share the utility of the various art forms, that are exploding on this ecosystem.
So, how it all started?
It started long back in 2017 when the Bitcoin network was upgraded through the SegWit (Segregated Witness) upgrade. In every Bitcoin transaction, the sender signs the transaction with its private key, to authorize the transaction. Earlier, this signature data was saved in the block, along with the transactional level data, limiting the total amount of transaction data, that can be stored in each block.
With SegWit, the transaction data and signature data were segregated, resulting in better data placing of transaction data in a Bitcoin Block. Then came the Taproot Upgrade in Nov 2021, which used the power of Schnorr’s signatures to further compress the signature data. I will not get into too many details, my friends looking for further depth, can try DYOR (Do your own research).
Bottomline, by 2021 bitcoin block had enough space to save up to 4 MB of data on itself, from earlier 1 MB effectively. So far good? It will be technical, blockchain is a technology, so can’t help much. But just try to keep imagining, things happening in a block.
Now in January 2023, the Bitcoin Ordinals Protocol was launched. And man, it just picked Woop, in a matter of a few weeks, millions of ordinals came into our world. Figuratively.
The ordinals protocol, enabled to breakdown of Bitcoin, into Satoshi, and the number those Satoshi. Here, 1 BTC = 100 million Satoshi. Satoshi acts as a point of reference on the chain and can be tracked. This provides them with basic NFT features. Ordered and uniquely identifiable.
Now, people started inscribing these Satoshi, by adding metadata like pfp, text, voice, video, etc. on them. Here comes the pixelated images that people are going crazy for. The image quality is a serious trade-off here because the space on the block is limited. And, since everyone is competing for the block space. Large data inscriptions on Satoshi are costly.
Ok! Enough of Mathematics Sci-fi, what are their utilities?
Before starting on real life, we would talk about an issue Ordinals solved for its mother chain, Bitcoin. Fam is first, right?
The Security Budget Fix
Bitcoin is a decentralized blockchain. Hence it is very important that the decentralized participants are rightly rewarded, this keeps them committed towards the well-being of the complete network. Once the participant can see more benefit in damaging the network than the reward it can gain by being honest to the network. If not all, a handful will surely try to do the same.
Currently, the miners/participants, earn their reward by getting more bitcoins from the protocol once they mine a block. These rewards will be continued until all the bitcoins are mined but will keep halving every four years. All the bitcoins are estimated to be mined by 2140.
Since the reward will keep on depleting, surely the participants need another source of income that will keep them motivated to support and maintain the network. This reward is envisioned to be taken care of by the transaction fee. To increase the transaction fee surely the network requires a greater number of transactions. Also, the network will require different types of transactions, like fees collected for the transfer of bitcoins or Satoshi, transfer of ordinals and inscribing on Satoshi.
Ordinals are the Mascots of innovation.
When was the last time you joined a social group of like-minded people? May be on social media, in your school, college, or near your home. How do these groups keep a note of their members? On Registers, online repositories, or a wall of fame? When a limited supply Ordinal collection is released on Blockchain, it gives a chance to the seekers, to be part of a community.
Where each community member has reached this place, post paying a price, just like you. Some are more committed and believers in the community, so they are invested deeper into it. Some are just looking to make some quick money, so they will come and get fade, eventually. This community is a birthplace, of new friendships, new partnerships, new ideas, and industry knowledge.
Don’t believe me? Go join the discord channel of Bitcoin Frogs, a collection of 10K images of colourful pixelated frogs.
And, then come back to the real world. Look around you, how many things around you are just the mascots of your past tales, your present vibe, and your future aspirations? Added to this, these ordinals communities can make you a lot of money as well.
They are in-trade speculative assets.
The whole ecosystem is running around finance, and transfer/creation/ownership of value. If one could ask, what is the utility of stocks? It provides individuals to invest in an idea, that they think can work. There is no utility other than that, accept IPOs. The issuer can buy back or do halving, whatever. Yet thousands of people bet on it every day, making calculations, which one will go up, which one can go down, basis on the things they know, happening in the world, or pure statistics.
Here, there is another market, that is not working on centralized exchange but is a decentralized peer-to-peer network. The majority of the projects will be shite, cash grab, FUD, and rugs. Hence, it is important to DYOR (Do your own research). Having said that, there are some good projects too, the majority of them are building communities, and others are working to innovate the Bitcoin chain.
One thing that I noticed, in my tenure in this outlaw industry (Figuratively). That it is full of awesome artists, creators, and builders. Basically, it means that in the global Bitcoin network, the user profile is the most vibrant and versatile. Any user base of any financial institution, does not stand a word, leave a chance.
Earn micro revenue stream, by sharing stuff.
Uber made people share their cars, and earn from it, Airbnb did the same with vacant rooms. But there is a lot of scope left. Imagine a physical device tagged to a digital asset on Bitcoin, or a similar chain. You can earn money, by sharing extra resources, like electricity, broadband, hard drives, temperature sensors, front door camera feed, your vacant room, your self-driving car, food, etc.
These resources are needed by the organizations for providing the most accurate and measured services. And, decentralized nodes, hopping in voluntarily, sharing weather details, and sharing spare electricity back to the grid, can help in unexpected ways. Inscribed upon an immutable ledger. This will ensure fairness in the system, smart contracts, and automatically executing fund transfers once certain conditions are met. Faulty or dishonest participants/nodes/devices getting ignored automatically.
I have said it many times, blockchain is a way of doing the same things, differently. Everything around us works on a ledger, money, asset, karma, favours or whatever. Blockchain Technology just enables maintaining these ledgers transparently, more securely, and in an immutable manner. And people are going crazy about it.
The Ending Notes…
Our world is full of laughter, tears, joy, and pain, every day we are trying our best to make this world a better place for ourselves. We always wish to do things that we love, but often find ourselves doing things that are ‘okayish’ but are important as they generate a revenue stream for us. Thanks to the Internet the flow of information and digital service is seamless, But the flow of money is still hindered.
And the truth is, it would be nearly impossible to make the flow of money seamless considering the current financial structure of our planet. It is divided into small bubbles, that have made a wall around them so thick, that irrespective of how many holes you pop out of them, you’ll still find them less.
A blockchain like Bitcoin presents an opportunity to create a global financial system that is supported by participants from across the globe. No one controls the network, it is controlled by the majority and hence is truly democratic. The mere idea of such a system existing is making people go crazy about it. This feels like a completely new financial world which is being created in parallel to the existing one. Of course, the existing financial system might see this as a threat to its existence when it is rather just an opportunity to learn and evolve.
I wish you my friend a very warm and loving learning curve ahead. If you wish to learn more about blockchain, start from scratch, and you will learn so many surprising things along the way. Also, you would not stop yourself from getting connected to this electric and exciting ecosystem of fun people, that runs 24/7.
Thank you.
~R
Featured image credit: Asia Crypto Today
An Observer 