Are Ordinals An Attack On Bitcoin's Fungibility?
Luke Dashjr, one of Bitcoin’s core developers took to Twitter speaking out against the Ordinals Protocol, claiming that a recent NFT sold for .41 BTC improperly used his name and code in its initial advertisement.
When Yuga Labs announced this week that it would be debuting its first-ever Bitcoin-based NFT project, TwelveFold, later this week, it added another level of excitement to the newfound popularity surrounding Ordinal Inscriptions.
The 300 limited-edition generative art collection will see each individual art piece inscribed to the Bitcoin blockchain, which now marks one of the highest-profile launches to date on the Ordinals Protocol.
At the week’s start, there were over 100,000 Inscriptions using Ordinals as the Bitcoin Network continues to experience high levels of user traffic with an ongoing supply of images and other content.
If you’re still trying to scratch your head around Ordinals’ overnight success, don’t worry, as you’re not the only one, seeing that they really took off in early February.
The main takeaway here is that “ordinals” are also digital assets, similar to NFTs, that are the brainchild of Bitcoin engineer Casey Rodarmor who wanted to design a method to allow NFTs to exist on Bitcoin’s blockchain (rather than the Ethereum Network).
In doing this, Rodarmor developed an algorithm that creates a serial number for each and every ‘satoshi’ (the lowest denomination of a Bitcoin), in addition to a way to “inscribe” or store that data onto it.
The Ordinals Inscription process essentially exploits updates to Bitcoin’s code in 2017 with the SegWit update and in 2021 with the Taproot upgrade.
SegWit, or Segregated Witness, fixed a number of bugs in Bitcoin Core, which allowed for more transactions per block. However, the update sparked a heated debate in the Bitcoin community that resulted in a hardfork of the network. Consequently, two rival blockchains emerged — Bitcoin Cash and Bitcoin SV.
Taproot, on the other hand, allowed for all parties to a transaction to cooperate in helping to make complex transactions look more digestible and viewable, where the final viewable transaction would reflect a person-to-person relationship.
The Inscription Process
During the Inscription process, text and images are able to be written or stored on the digital assets themselves. Think about a penny in your pocket that you could then attach a piece of data to it — like an actual image.
While ordinals are still “non-fungible,” with the attached data can only belong to one owner at a time, they differ from Ethereum and Solana-based NFTs in that the data that is inscribed on a ‘satoshi’ is not a link to where the actual data is located. Rather, it’s stored on the ordinal itself.
The reason we haven’t seen these large, high-res data files stored on-chain with the Ethereum and Solana blockchains is because of how energy intensive and cost-heavy it would be to do.
Another Damaging Form of Hype?
But are ordinals everything they’ve been cracked up to be?
On Monday, a Bitcoin core developer took to Twitter speaking out against the Ordinals Protocol, claiming that a recent NFT sold for .41 BTC improperly used his name and code in its initial advertisement.
“I was not involved with the creation and sale of this or any other “NFTs”. I have not consented to the use of my code or my name for this purpose. Instead, 3rd parties are marketing my name and my code for their own monetary gain,” said Luke Dashjr, one of the Bitcoin core developers.
“I was not involved with the creation and sale of this or any other NFTs. I have not consented to the use of my code or my name for this purpose,” he continued in a nine-thread tweet.
He also called for 100% of the auction proceeds to be refunded to the buyer.
I want to make public my concern about “NFTs” which are being sold utilizing my name. Recently, a picture of code I wrote was sold at auction for .41 BTC. It was advertised as my code in the listing and presented to the public for sale and profit. ?1/9 pic.twitter.com/5TcEJu4p5e
— Luke Dashjr (@LukeDashjr) February 27, 2023
The allegedly misleading auction was hosted on Scarce.City, a new marketplace built for Ordinal NFTs. The auction’s winner, who was left anonymous by Dashjr for privacy reasons, won the NFT for 0.41 BTC (approx. $9,600 USD).
A tweet by Scarce.City recently addressed Dashjr’s tweet, stating that they have offered the buyer a full refund, but in the event they do not accept it, the full 0.41 BTC would go to OpenSea.
The buyer has been offered a full refund. If they don’t accept it, the full 0.41 BTC will go to @OpenSats
Thanks for everything you do, Luke
— Scarce.City (@scarcedotcity) February 27, 2023
“Ordinals aren’t _just_ a spam attack; they are also an attack on Bitcoin’s fungibility, and if accepted would break at least Lightning and CoinJoin,” Dashjr tweeted in mid-February.
PSA: Ordinals aren’t _just_ a spam attack; they are also an attack on Bitcoin’s fungibility, and if accepted would break at least Lightning and CoinJoin. https://t.co/600PvSl74C
— Luke Dashjr (@LukeDashjr) February 14, 2023
Austin Felders, head of strategy and communications at the Solana Foundation, also weighed in, telling Fortune that ordinals’ uses are fairly limited. “It’s decidedly an anti-scale model…here’s a version of something that sort of, if you squint, resembles fine art, in terms of its ability to create value through scarcity.”
Just two months in, it’s hard to say whether or not Ordinals are simply another mechanism of mere hype and damaging to Bitcoin’s long-term fungibility — or if there really is some long-standing utility here that can address legitimate gaps and weaknesses in the current blockchain infrastructures of both the Bitcoin and Ethereum networks.
In other news, LA Comedian Leah Lamarr Just Debuted First-Ever Comedy NFTs during ETHDenver 2023.
