Although non-fungible tokens (NFTs) already had their peak on the Bitcoin blockchain with the "Rare Pepes" between 2016 and 2018 and have since been more commonly used on other networks like Ethereum, the topic of Bitcoin NFTs is currently being hotly debated once again. A new protocol called "Ordinals" uses a loophole in the Taproot update to write arbitrary files directly onto the Bitcoin blockchain. This protocol comes with both advantages and disadvantages, and has strongly divided the community.
Ordinals is a new NFT protocol on Bitcoin that allows data to be stored directly on the blockchain. The protocol tracks individual Satoshis (the smallest unit of Bitcoin) and uses inscriptions to assign them non-fungible properties. The system resembles an
accounting standard in the finance world, the FIFO or LIFO principle. The inscriptions are stored entirely on-chain, thus receiving all the benefits of Bitcoin, such as immutability, security, and decentralization.
Bitcoin Ordinals can even use HTML, JavaScript, and CSS as long as no content outside the blockchain is referenced. This is done in a closed environment to ensure that no malicious HTML code can affect the Bitcoin chain. With Taproot, arbitrary data for Ordinals
can now be stored in the output scripts.
Overall, Bitcoin and NFTs have the potential to fundamentally change the world of finance and ownership. Be a part of these fascinating developments and join us on our journey through the history of Bitcoin. Although Ordinals is considered a promising
protocol, there are also critical voices expressing concerns. One main criticism is that storing large files on the Bitcoin blockchain could dramatically increase the size of the blockchain and thus affect scalability. A larger blockchain means higher
requirements for storage space and bandwidth, which could ultimately affect transaction costs.
Another criticism concerns the potential legal consequences, as storing illegal content such as child pornography or hate speech on the blockchain could lead to serious problems. This could not only have negative effects on the reputation of Bitcoin, but
also lead to legal consequences for users.
It is also argued that storing NFTs on the Bitcoin blockchain does not fulfill Bitcoin's original purpose of creating a decentralized and secure peer-to-peer system for transactions. Bitcoin NFTs could lead to further centralization of the blockchain, as
large companies with more resources are likely to be able to store more NFTs on the blockchain than smaller companies or individuals.
In summary, it can be said that Ordinals are a promising concept, but should also be viewed critically. It is important to recognize and address potential risks and challenges to ensure that Bitcoin continues to be a secure and decentralized currency.
Read more about Ordinals on the official Ordinal Handbook:
https://docs.ordinals.com/