The past two years have seen a series of fruitful activity in the Bitcoin space. Taproot brings a number of new and interesting possibilities, from Schnorr signatures enabling smaller on-chain lightning channel transactions, to TapScript Merkle trees bringing innovative ways to execute through BitVM attestators. These are all real innovations in the Bitcoin space, and they are really beneficial to the Bitcoin ecosystem.
But that’s not the whole story of Bitcoin’s last two years, and as much as I’d love to portray real innovation, I had to deal with those fake, stupid, and unethical fiat (FIAT) scams, which are ordinals. It’s not something I like to do, but given the asymmetry of the argument, the fact that one side is incentivized to oppose the objective rhetoric of the unfunded truth-seekers, and now there is an urgent need to pour cold water on the good expectations of these people, and I’m here to do it.
For most ordinary people, the idea of NFTs, a unique digital asset, seems rather clunky on the surface. Whether it’s a jpeg image or a short video clip or whatever, after explaining the whole concept to people, they’re asking, “Wait, is that all? I didn’t miss anything, right?” and I’ve written about NFTs about how they’ve become scam tools like altcoins. I even think that NFTs are altcoins because they are a surrogate, and the T in NFT indicates that they are a token. For the average person, the concept of Bitcoin NFTs, or ordinals, is especially confusing. Does that mean they’re better or purer than projects on Ethereum or Solana? Not really, but we’re a little ahead of our time. Let’s start at the beginning.
1. Trolls are trolls
The whole “craze” started with Rod Armor, who used the witness discount to inscribe a skull at the end of 2022. This isn’t even really noticed by the network, as it’s only 793 bytes, which is perfectly within the normal transaction size range.
What really pushes it is the Taproot Wizards team, a bunch of disgruntled “ex” Bitcoin maximalists who want to get out of shame after backing a bunch of scams like BlockFi, Celsius, and of course, FTX. Their purpose was not to create a new asset class, they realized that inscriptions were the perfect tool to make certain blocks noisy, with the aim of getting Bitcoiners moving. So they inscribed a 4MB jpeg at the beginning of 2023, a new market opened up that made Bitcoin maximalists angry, and by August 2023, the number of inscriptions on the Bitcoin blockchain reached 21 million, which is insane. Although it is now stated that the inscription is something new “based on Bitcoin”, no one has really noticed this before.
Also at the beginning of 2023, Ordinals appeared, and given that there are a lot of degenerate altcoins that buy and sell almost everything, the attention quickly shifted to one company. Soon after, the BRC-20 token appeared, followed by stamps. Trading became active, and soon, they appeared in the trading of various exchanges. They do make a lot of money, especially from VCs who are willing to sacrifice the integrity of Bitcoin for a little ROI.
The trolls put on their suits and began arguing with Bitcoin supporters, claiming to be a legitimate part of the Bitcoin ecosystem.
Debate Focus Ordinals
Ask any Ordinals supporter why they think Ordianls will be good for Bitcoin, and they will immediately shift the conversation to things like “rights” and “you can’t stop it.” Instead of telling Bitcoin supporters what the ordinals brought, they focused on why the protocol didn’t stop them. Just like shoplifters in San Francisco, they don’t bring anything good to the table, so they focus the discussion on the fact that no one can stop them from doing what they want to do. Of course, just because you can do something doesn’t mean you should. In the words of Chris Rock, you can drive with your feet, but that doesn’t mean it’s a good idea.
That is, they don’t have a good answer. However, if you ask them, they will give a terrible answer. They give miners money to support them, or they can break other altcoin distribution platforms, or they make Bitcoin “fun”. All of these are very flimsy arguments, and they don’t talk about how their project can change incentives or undermine monetary use cases, which is why they don’t often argue. What they want to discuss is that they “can” inscribe or place ordinals or stamps on the Bitcoin blockchain, which, as mentioned above, is very puzzling.
3. Why is it on Bitcoin?
Overall, my grievance with NFTs is that there’s no technical reason for them to appear on the blockchain. The degree of centralization of them is already obvious. They have issuers. You can’t view ordinal without other software to decide what it represents. Other trusted entities decide whether you own Ordinal or not. If they change the rules in the future, then you have to consider yourself unlucky. They are no different in centralization than the forgotten altcoins of 2011.
So if they’re centralized, why are they on the blockchain? Blockchain is a very large database that holds digital data. It’s hard to develop and scale, expensive to maintain, and difficult to upgrade. Therefore, from a purely technical point of view, there is no point in any centralized project on any blockchain, let alone a centralized project on Bitcoin. It’s faster, easier, less costly, and easier to maintain in a centralized database.
Technically, on the Bitcoin blockchain, centralized projects have become more difficult in every way.
So, what is the real reason why Ordinals is on the Bitcoin blockchain? Because it’s easy to hype up by associating it with Bitcoin’s historical success. Bitcoin represents hope, freedom, self-sovereignty, sound money, and a better world. It’s a great and beautiful thing, and even a little connection to it can be remarkable, like altcoins in the last 13 years. But altcoins have been dormant for a long time, so ordinals are a new argument, a new way to sell old, outdated, failed ideas. In other words, Ordinals are on Bitcoin because the market is already smarter than it used to be, and it’s a new way to deceive the market.
4. Venture capital response prediction
Now, Ordinals supporters will undoubtedly make excuses for why Ordinals need to be on Bitcoin. You can’t manipulate it!Ordinals have less work and real money!Both excuses are true. Bitcoin is secure through proof-of-work, which means that anything embedded in it requires astronomical hashing power to change. But you don’t need to use Bitcoin to do this. There are timestamp servers, receipts, and backup services, all of which are cheaper and offer the same service without bloating the Bitcoin blockchain. The Bitcoin blockchain doesn’t offer real protection. You’ll have to use other software to figure out if what you have is an ordinal or an inscription or something. This software can change the rules at any time, just like all altcoin software. These software are usually not backwards compatible. So what if you’re running an older version? You’re not following a centralized “consensus”.
Ordinals, like NFTs and all altcoins, is a glorified spreadsheet that can easily run on a $500 website while providing cryptographic proof that it hasn’t been manipulated. Again, the only reason ordinals appear on Bitcoin is to create more demand by marketing it as something that “benefits” Bitcoin, which is like saying that spam helps with email adoption.
5. Conclusion
Over the years, altcoins have taken advantage of Bitcoin’s clothing effect to scam many people. It’s getting harder and harder to deceive the same group of people, and in fact, there are only two ways left at the moment. The strategy of postmodern nihilism is most fully manifested in meme coins. Altcoins no longer claim to have real-world utility. The ship returned to sea in 2019. They are forced to turn to meme coins because the market doesn’t like to be scammed. Meme coins have no utility, they haven’t disrupted any industry, they’re not innovative, and they’re not promising, but at least they’re honest.
The other path is to have a stronger connection with Bitcoin than other altcoins. It’s no longer enough to be a “cryptocurrency”, for the scam right now, you have to pretend you’re a Bitcoin maximalist.
The real technical realities of these projects are not new. Colored coins appeared back in 2013, as did MasterCoin and Counterparty. But the cultural center is new. Ordinals, inscriptions, BRC-20s, stamps are all trying to dress themselves up in the cloak of Bitcoin, which is why the public will associate the benefits of Bitcoin with these projects. Of course, the value of these projects is antithetical to Bitcoin. In these projects, there is no self-sovereignty, financial freedom, decentralization, or any real hope for the future, but pure gambling. So they borrow as much value as possible from Bitcoin.
The word “fiat” literally means to create something by decree in English. Strictly speaking, these new types of altcoins are fiat currency. They were created by a centralized authority masquerading as a decentralized project by associating with Bitcoin.
Meet these new altcoins. Just like the previous altcoins.