The Ordinal inscription protocol, which adds NFT minting functionality to the Bitcoin network, was launched in January 2023 by a software engineer Casey Rodarmor and immediately divided the crypto community. Amidst growing concerns from Bitcoin purists aka Bitcoin Maxis, who see this invention as a threat to the network’s core mission of banking the unbanked, there are also many excited NFT enthusiasts. Some of them overfill the blocks with superfluous data just to annoy the Ordinal haters.
As the creator of Ordinals, Rodarmor has received a great deal of criticism. Ordinals are often accused of their potential capability to increase the cost of block space. They are blamed for promoting speculation and affecting the fungibility of satoshis, as the inscription of a serial number into one sat makes it easier to identify and track its owner. Finally, many devotees of Satoshi Nakamoto view this innovation simply as a violation of the original invention.
In his interview with Coindesk, Rodarmor admitted that his first reaction to critics was to defend himself. Over time, however, he realized there are many thoughtful critics in the Bitcoin community whose opinions can be valuable.
For instance, he mentioned his conversations with Fedora Linux founder Warren Togami as an example of a thoughtful criticism. Togami sees advantages in differentiating fees based on the purpose of Bitcoin use:
"NFT as reference pointing to off-chain data wouldn't bother me at all. Arbitrary data storage on-chain would bother me less if that use case paid a relatively higher fee rate."
Although Rodarmor does not think this solution is practical, he believes it could be useful for Bitcoin in the future.
In particular, Rodarmor finds the fears expressed by many Ordinals critics about chain bloat to be valid. Inscriptions inevitably lead to the accumulation of an excessive amount of data, which can make it rather difficult for the new node participants to join the network. Meanwhile, the steady influx of new nodes is essential for Bitcoin's decentralization.
How do Ordinals work?
The way Ordinals operate is quite different from the smart contracts that enable minting NFTs on Ethereum. Ordinals allow minting digital artifacts directly on the Layer-1 Bitcoin blockchain. The protocol outlines the algorithm for adding serial numbers to satoshis, the smallest Bitcoin units, and "inscribing" data up to 3.9 MB.
In this way, NFTs, or as Rodarmor himself prefers to call them, digital artifacts, are stored directly on the Bitcoin blockchain rather than in another storage location, with only the links encrypted on the blockchain. This is also how Stacks, the Bitcoin layer for smart contracts, works.
The minting mechanism of Ordinals makes them truly immutable, unlike NFTs based on smart contracts, which can be removed by their developer.
Despite all the criticism, many Bitcoin enthusiasts believe Ordinals to have a considerable value for the network. The protocol has created immense opportunities for the blockchain to capture its own market share and attract NFT creators who previously relied on other chains.
Ordinals also contribute to the increased stream of income for miners, who can earn substantial amounts of money on sales of satoshi-based NFTs. For instance, an Ordinal Punk, a clone of an NFT from the successful CryptoPunks collection, was sold for 9.5 BTC in February. At the time of sale, the Ordinal Punk was worth about $215,000.