Some interesting things are happening in Bitcoin lately, not just “price goes up” or “price goes down.” The analogy to heavy gold bricks sitting in a bank vault is really no longer valid.
Ordinals – what are they?
Ordinals are bits of, well, Bitcoin – called satoshis (sats) – that come with an extra “attachment.” Like the toy in a McDonald’s Happy Meal. Or any other bit of information, inscription, or art/NFT someone might want.
The Bitcoin Ordinals Protocol is a program that allows users to search for and transfer specific satoshis that have specific attachments. Up until now, if you bought/used/paid with Bitcoin, you would do so with any generic interchangeable Bitcoin amount. That is the entire meaning of the term “fungible.” Essentially, the Ordinals Protocol gives each satoshi a serial number, like you might find on any US paper-money note.
The creator of the Ordinals Protocol prefers to think of these Ordinals as “digital artifacts.” They do not require any updating, and they cannot be changed once they are “on chain.”
This is really a huge step forward in the versatility and utility of Bitcoin.
There has been a rapid increase in the number of Ordinals minted over the past month. The price of Bitcoin has increased significantly despite the ongoing slow economy of 2022/2023.
Some issues with Ordinals
As noted by Cryptopolitan below, not many people know how to purchase them OR produce them.
It is the job of the node operator to ensure that an attachment gets added. The miner essentially needs to be paid (or bribed) to create the Ordinal, especially because it could take up a lot of space in their new block. It is estimated that miners have made over 600,000$ in under two months from the creation of Ordinals alone.
In the rush to create and obtain Ordinals (including switching NFTs from other services to Bitcoin, perhaps most notably Solana), the composition of each Bitcoin block has changed dramatically.
“Ordinals accounted for less than 3% of total Bitcoin transactions on Wednesday, yet they used roughly 70% of Bitcoin block space.”
Importantly, there are currently no NFT marketplaces like OpenSea that support Bitcoin Ordinals. It is difficult to claim that these particular NFTs are investments, unless you can easily sell them when you want to.
Interested in making your own Ordinal Sat? See below
The Lightening Network
The LN is a “layer-2 solution” specifically for Bitcoin, intended to help users move/use/pay/send/receive Bitcoin both quickly and cheaply. It does this by temporarily taking the transaction “off chain.”
Apparently, Nakamoto Satoshi himself was involved in envisioning and creating something akin to the LN, recognizing early potential limitations of day-to-day Bitcoin use.
There are several “layer-2 solutions” out there for several other blockchains, especially Etherum. Indeed, there are even two “layer 2 solutions” for Bitcoin that involve using Ethereum as the intermediary.
The LN has the greatest possible utility in peer-to-peer exchanges, small local business transactions, and even “tipping” on Twitter and Substack. On the flip side, major store chains will most likely plan to rely on a debit card or credit card type of situation when the time comes to start using crypto in real life. The major card companies are definitely already planning for this.
LN has some issues
Unfortunately, a LN users would need to use a specific type of wallet… and so would the other person/store receiving the Bitcoin.
Additionally there are some security concerns surrounding the LN, because so much of the transaction is occurring “off line.”
Fortunately Lightening Labs has Elizabeth Stark at the helm (no relation to Iron Man, though she is equally brilliant). They just might achieve their goals soon.
Then no one will dare call Bitcoin “gold” again.
UPDATE: 21/21/2023
Now Litecoin supports ordinals as well…
