The world of non-fungible tokens (NFTs) has been gaining significant attention in recent years, with the global NFT market expected to grow to $25 billion by 2025. NFTs are digital assets that represent ownership of unique items such as digital art, music, and video game items. The rise of NFTs has led to the development of various protocols and blockchains for creating, buying, and selling them.
One such protocol is the Ordinals Protocol, which has recently made headlines after reaching a significant milestone. According to Dune Analytics, the cumulative number of inscriptions on the Ordinals Protocol has exceeded 500,000, with transaction fees exceeding 100 BTC (about $2.74 million) in March 2023. This is a remarkable achievement for the protocol, which was launched in 2019 with the goal of creating a new type of transaction that could encode arbitrary data, including metadata, into the Bitcoin blockchain.
Unlike Ethereum NFTs that require off-chain data on IPFS, Ordinals Protocol allows for all data to be written directly to the blockchain, resulting in perfect NFTs. This makes the Ordinals Protocol unique among other NFT issuance protocols, which typically use the expression “minting” when issuing NFTs, while Ordinals Protocol refers to it as “inscription.” An inscription is data inscribed in Bitcoin, including smart contracts, and is a combination of media files such as JPEG of images and text.
The success of the Ordinals Protocol has sparked debates within the Bitcoin community. Critics argue that the use of the Bitcoin blockchain should be limited to financial transactions and that storing NFT data on it undermines the original mission of Bitcoin, which was to enable peer-to-peer financial transactions without banks or third parties.
There are also concerns about the energy consumption of Bitcoin’s proof-of-work and its limited storage capacity. The maximum storage space for Bitcoin data is 4 megabytes, and the larger the storage capacity, the faster one block is consumed. Transaction fees increase with more transactions on the network, resulting in slow transfer speeds and significant gas costs that are inconsistent with NFTs.
However, supporters of the Ordinals Protocol believe that it will lead to a cultural change and technical improvement in the NFT space. According to a report by Galaxy Digital, the Bitcoin-based NFT market is expected to grow to $4.5 billion by 2025, and the profitability of miners can be strengthened if transaction fees increase with various transactions, including NFT inscriptions. Increased demand for Bitcoin blocks will increase the scarcity of Ordinals Protocol and users will be willing to pay more fees.
Furthermore, the use of the Ordinals Protocol can help secure the liquidity of Ethereum-based NFT markets such as OpenSea. Users can take care of the security of proven assets with Bitcoin, Dapps, and layer 2 protocols running on the Ethereum virtual machine. The inscription market is expected to grow through marketplaces such as Gamma, and layer 2 protocols such as Stacks using Bitcoin will emerge outside the realm of existing financial transactions.
In conclusion, the Ordinals Protocol’s success highlights the potential for Bitcoin to expand beyond its traditional use in financial transactions and into the NFT space. As the market for NFTs continues to grow, it will be interesting to see how Bitcoin and other blockchains continue to evolve to meet the demands of users and developers alike. While there are criticisms and concerns surrounding the use of Bitcoin for NFT inscriptions, the Ordinals Protocol’s growing popularity suggests that it may play a significant role in the future of NFTs.
Read more:
- Bitcoin NFTs Built On Inscriptions & Ordinals: A $4.5bn Market By 2025, According To Galaxy Research
- Yuga Labs Plans To Mint New NFT Collection On Bitcoin Network Using Ordinals Protocol
- First-Ever Bitcoin Ordinal NFT Sells For 1.21 BTC
- Bitcoin NFT Protocol Ordinals Issues Record High Of 400,000 Tokens