The launch of BRC-20 tokens and Ordinals NFTs on Bitcoin has transformed the No. 1 blockchain overnight into a clunkier version of Ethereum.<\/strong><\/p>\n The core developers and miners who signed off on the network\u2019s Taproot upgrade in November 2021 never envisaged this would be the result. Bitcoin now suffers from many of the same problems that have bedeviled Ethereum for years, including scammy memecoins and shitcoins, NFTs of monkey pictures hogging block space and skyrocketing transaction fees.<\/p>\n The network is even having to deal with incidences of miner extractable value (MEV), whereby miners profit by reordering pending transactions.<\/p>\n \u201cI\u2019m kind of upset at myself for not realizing,\u201d says Quantum Economics founder Mati Greenspan, a Bitcoiner since 2013. <\/p>\n \u201cIt took these guys starting to hype up JPEGs on Bitcoin until I was like: \u2018Oh shit, what did we just do?\u2019\u201d He laughs ruefully.<\/p>\n Some Bitcoiners on Bitcointalk and Twitter refer to the impact of Ordinal NFTs and BRC-20 tokens as an attack on Bitcoin, an exploit of Taproot, or simply as spam clogging up the network.<\/p>\n It\u2019s sparked a fierce debate over whether unexpected outcomes are precisely the sort of outcomes you should expect from a permissionless protocol, or whether something needs to be done to get rid of them.<\/p>\n BRC-20 tokens were only launched by anonymous developer Domo back on March 8. They use Ordinal inscriptions of JavaScript Object Notation (JSON) data to deploy token contracts, mint tokens and transfer tokens. Some argue this is horribly inefficient and costs four times as much in transaction fees as if they just used binary.<\/p>\n Alongside the inefficiencies, there\u2019s also a gold rush for minting memecoins. Someone will deploy a contract with a ticker for a new token and a max supply, and then traders rush in to mint as many as possible in the series, on a \u201cfirst come, first served\u201d basis, at whatever fee rate gets them priority. These tokens have already surpassed $1 billion in market cap \u2014 even though Domo argues they will be worthless.<\/p>\n But they are here to stay \u2014 at least in the short term \u2014 with major wallets already adding support for BRC-20 tokens. And newer developments, such as the launch of a Uniswap fork that amassed $500,000 in trading of \u201csmart BRC-20\u201d tokens (SBRC-20) in just a few days, suggest that the building of a permissionless new ecosystem on Bitcoin is set to continue.<\/p>\n Greenspan points out that while the flurry of interest has seen Bitcoin transactions hit an all-time high, the number of unique addresses plummeted, meaning fewer people are accessing the network. And while transaction fee revenue has overtaken the block reward \u2014 seen by many as the only way to ensure Bitcoin\u2019s security after another couple of halvings \u2014 it comes with a lot of issues.<\/p>\n \u201cI spoke to one miner yesterday who said his revenue has doubled, which is nice, especially ahead of the halving, so it\u2019s good for miners, but it\u2019s terrible for the countries of Nigeria and El Salvador, for example, where, suddenly, the average cost to send a transaction is $30,\u201d he says. \u201cThe dream of financial inclusion on Bitcoin has been temporarily postponed.\u201d<\/p>\n Read also: <\/strong>What it\u2019s actually like to use Bitcoin in El Salvador<\/strong><\/p>\n Interestingly, this isn\u2019t the first time someone has put a token or NFTs onto Bitcoin. Counterparty led the way with NFTs on Bitcoin, with Spells of Genesis and Rare Pepes in 2015 and 2016. And stablecoin Tether also launched a token on Bitcoin back in 2014 via the Mastercoin protocol (which later became Omni).<\/p>\n On Bitcointalk, there is much discussion of fighting off the \u201cattack on Bitcoin,\u201d with some claiming it\u2019s the work of malicious Bitcoin SV devs. Users are talking about a soft fork to \u201cenforce strict Taproot validation script size,\u201d ways the protocol can filter out what they see as \u201cspam\u201d or even a hard fork to reverse Taproot.<\/p>\n Bitcoin developer Luke Dashjr stated that \u201caction should have been taken months ago. Spam filtration has been a standard part of Bitcoin Core since Day 1. It\u2019s a mistake that the existing filters weren\u2019t extended to Taproot transactions [\u2026] since this is a bugfix, it doesn\u2019t really even need to wait for a major release.\u201d<\/p>\n If Ethereum devs ever did anything remotely close to the below email, there would be absolute hysterics. People say ETH devs are too centralized with too much power. Look in the mirror. https:\/\/t.co\/yBVNk2kixW<\/p>\n \u2014 Hal Press (@NorthRockLP) May 9, 2023<\/p><\/blockquote>\n<\/div>\n<\/figure>\n Glassnode\u2019s lead on-chain analyst, Checkmate, tells Magazine that he believes this sort of censorship is against the entire ethos of Bitcoin and notes there are already optional mempool rules enabling node operators to filter ordinals if they choose.<\/p>\n \u201cFrom my view, any attempt to ban or censor these transactions is far more of an attack on Bitcoin than leaving them be. They are within consensus rules, and when a loud minority of individuals want to change the rules to stop something they don\u2019t like, that is the real attack.\u201d<\/p>\n But podcaster Chris Blec made the case on Twitter that limiting transaction types to ensure the health of the network wasn\u2019t censorship.\u00a0<\/p>\n \u201cIf it doesn\u2019t depend on the content of the message or the sender of the message, then it\u2019s not censorship,\u201d he said. <\/p>\n Hass McCook, a former member of the Bitcoin Mining Council and a Bitcoin true believer, is no fan of Ordinals but thinks trying to get rid of them is a step too far, saying:<\/p>\n \u201cThe only thing more important than Bitcoin is freedom. My general take is I personally don\u2019t like it and don\u2019t see value in it. But I don\u2019t want to censor it. I think that could go down a very dark path.\u201d<\/p>\n<\/blockquote>\n \u201cIf the protocol allows for something and somebody is happy to pay to do that thing, then it is what it is.\u201d<\/p>\n I haven't heard one coherent argument yet as to how limiting spam on Bitcoin (including that which enables ordinals) equates to “censorship”.<\/p>\n If there is one, please provide it here.<\/p>\n \u2014 Chris Blec (@ChrisBlec) May 9, 2023<\/p><\/blockquote>\n<\/div>\n<\/figure>\n Andrew Poelstra, director of research for Blockstream, is one of the inventors of Taproot. He doesn\u2019t like the upgrade\u2019s \u201ctoxic\u201d offspring either but doesn\u2019t see any practical way to stop them.\u00a0<\/p>\n \u201cAs near as I can tell, there is no sensible way to prevent people from storing arbitrary data in witnesses without incentivizing even worse behavior and\/or breaking legitimate use cases,\u201d he wrote.<\/p>\n Read also: Is Bitcoin a religion? If not, it soon could be<\/strong><\/p>\n \u201cIt\u2019s not going to be possible just to ban \u2018useless data,\u2019\u201d he said, noting that people could just hide useless data like NFTs inside of useful data like \u201cdummy signatures or public keys.\u201d<\/p>\n \u201cDoing so would incur a 2x cost to them, but if 2x is enough to incentivize storage, then there\u2019s no need to have this discussion because they will be forced to stop due to fee market competition anyway.\u201d<\/p>\n The best-case scenario \u2014 and the most likely, according to interviewees for this piece \u2014 is that interest in the tokens and NFTs will die down as the memecoin fad plays out.\u00a0<\/p>\n \u201cNetwork congestion on Bitcoin is not a new thing, right?\u201d says Greenspan. \u201cIt usually comes with hype. But also it leaves when the hype is over.\u201d<\/p>\n \u201cWhat\u2019s most likely to happen is people are gonna run out of money.\u201d<\/p>\n<\/blockquote>\n But if Ordinals continue to have an outsized impact on the network, there\u2019s always the nuclear option of forking Bitcoin to modify or remove Taproot. Blec and many others have raised the possibility, though it seems mostly hypothetical at this stage.\u00a0<\/p>\n If enough Bitcoin ecosystem participants (users, node operators, miners) reach a consensus that Bitcoin should be forked in a way that reduces spammy txs, that's not censorship.<\/p>\n You can still mine & use the current fork and mint your dumb jpgs there.<\/p>\n \u2014 Chris Blec (@ChrisBlec) May 9, 2023<\/p><\/blockquote>\n<\/div>\n<\/figure>\n Greenspan says, while it\u2019s always possible to implement a hard fork, \u201cit\u2019ll split the network. And nobody wants that.\u201d<\/p>\n McCook says the market chose Bitcoin, rather than Bitcoin Cash or Bitcoin SV during the scaling wars in 2017, and he predicts the current version would win over a fork with Taproot.<\/p>\n \u201cI\u2019d take the Ordinals one. So, even though I don\u2019t find any value in Ordinals, maybe I need to inscribe something in the future that I need to have absolute censorship resistance,\u201d he says.<\/p>\n \u201cThis could potentially have pretty powerful implications. Let\u2019s say Julian Assange decided to do his WikiLeaks info dump as an inscription, this is a very useful thing.\u201d<\/p>\n<\/blockquote>\n Greenspan also believes the benefits of using Bitcoin to store data have only just begun to be explored.<\/p>\n \u201cPeople are now aware that Bitcoin has the ability to store files. And I\u2019m excited to see what, you know, forward-thinking developers will do with this new tool. More than just creating memes.\u201d<\/p>\n Read also<\/p>\n Features<\/span><\/p>\n Crypto is changing how humanitarian agencies deliver aid and services<\/p>\n<\/p><\/div>\n Features<\/span><\/p>\n Unforgettable: How Blockchain Will Fundamentally Change the Human Experience<\/p>\n<\/p><\/div>\n<\/div>\n<\/div>\n When he released BRC-20, Domo added, \u201cI believe there are almost certainly better design choices and optimization improvements to be made.\u201d<\/p>\n Plenty of people agree. One of the easiest improvements would be to use binary rather than the JSON format, which developer John W. Ratcliff argues is \u201cone of the most inefficient data formats anyone could use.\u201d He believes this would reduce BRC-20 tokens from 89 bytes to 19.<\/p>\n \u201cThis means that they are paying over four times as much in fees to commit these BRC-20 tokens than necessary,\u201d he said.<\/p>\n Hashrate Index researcher Colin Harper says that using binary code \u201ccould reduce bandwidth by as much as 80%.\u201d However, this wouldn\u2019t entirely solve the problem, as Bitcoin influencer Udi Wertheimer points out, given the spike in fees is due to token minting degens bidding up fees to get their transaction prioritized into order to mint or snatch up low serial number tokens before the supply runs out. <\/p>\n There\u2019s also another way to issue assets on Bitcoin called Taro, which Domo says is \u201ca better solution. Taproot Asset Representation Overlay is a proposed protocol that will allow people to issue digital assets on Bitcoin that can be transferred to Lightning for fast and cheap transactions.\u201d<\/p>\n Read also: Attack of the zkEVMs! Crypto\u2019s 10x moment<\/strong><\/p>\n A much more radical and experimental approach is being taken by Trustless Computer, which is behind a Uniswap v2 fork called Trustless Market that enabled $500,000 worth of swaps in its first three days. <\/p>\n The project\u2019s documentation states it\u2019s working toward a Turing-complete virtual machine called BVM built on top of Bitcoin to enable a DeFi ecosystem.<\/p>\n Core team member @punk3700 tells Magazine it \u201cis not a layer 2, it\u2019s a \u2018protocol within layer 1\u2019\u201d that works like Ordinals but uses SBRC-20s.<\/p>\n Instead of writing \u201ctext files to Bitcoin, Trustless Computer writes smart contract transactions to Bitcoin. Raw files vs. programs\/logic\/apps.\u201d He claims this cuts down the bandwidth required for the tokens by 80%\u201390%.<\/p>\n \u201cI think the BRC-20 in their current form (using text files) are a flash in the pan,\u201d he says. \u201cYou can\u2019t use paper and pen to build an alternative scalable financial instrument.\u201d<\/p>\n \u201cOur SBRC-20 implementation is different. We use smart contracts, the same ERC-20 smart contract on Ethereum. It works exactly as programmed.\u201d<\/p>\n \u201cOrdinals is v0.1 of what is possible on Bitcoin. Trustless Computer shows that you can build a full DApp ecosystem on Bitcoin.\u201d<\/p>\n He expects that we\u2019ll see MakerDAO, Aave, Compound and other smart contracts deployed soon, which, if it works as he claims it will, would be a huge change for Bitcoin.\u00a0While the project has recieved coverage in other major crypto news outlets, Magazine hasn\u2019t verified their tech works as promised, and the extent to which you can integrate smart contracts with Bitcoin is debateable, so tread carefully.<\/p>\n The influx of NFTs and token minting on Bitcoin has shown the blockchain remains unable to scale to deal with increased demand, meaning the more popular it gets, the worse it works.<\/p>\n The Lightning Network is usually touted as the solution, but Nostr creator Fiatjaf noted it has been unable to cope with the recent fee spike. \u201cChannels are too fragile, it costs a lot to open a channel under a high fee environment, to run a routing node and so on,\u201d he wrote, stating that users instead had to rely on the centralized Lightning providers. <\/p>\n Read also<\/p>\n Features<\/span><\/p>\n The Vitalik I know: Dmitry Buterin<\/p>\n<\/p><\/div>\n Features<\/span><\/p>\n Here\u2019s how Ethereum\u2019s ZK-rollups can become interoperable<\/p>\n<\/p><\/div>\n<\/div>\n<\/div>\n Greenspan believes that gradual progress toward scaling is the only safe solution to ensure Bitcoin remains bulletproof.\u00a0<\/p>\n \u201cWe\u2019ve seen Segway; we\u2019ve seen Taproot. I mean, these are, these are good progressions and steady scaling. Which is what\u2019s best usually for a decentralized network of this size. You don\u2019t want to rush things because you might break them. As we\u2019ve seen.\u201d<\/p>\n Read Also: <\/strong>Reformed \u2018altcoin slayer\u2019 Eric Wall on shitposting and scaling Ethereum<\/strong><\/p>\n Various parties, including StarkWare and blockchain researcher Eric Wall, have been investigating scaling Bitcoin using zero-knowledge (ZK) rollups, which is Ethereum\u2019s plan to solve its very similar challenges.<\/p>\n But ironically, while the surge in demand caused by Ordinals has shown that further scaling is required, it\u2019s also made it much less likely the community would agree to a new hard fork to enable ZK-rollups. After all, they voted for Taproot and look what happened?<\/p>\n \u201cI doubt that will ever happen,\u201d says Checkmate.<\/p>\n \u201cI am also skeptical of even a soft fork since the unintended consequences of the witness discount have woken everyone up to the risks of change.\u201d<\/p>\n Subscribe<\/p>\n The most engaging reads in blockchain. Delivered once aWhy are Bitcoin fees so high?<\/strong><\/h2>\n
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Fees too high to bank the unbanked\u00a0<\/strong><\/h2>\n
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Ban the spam, say Bitcoin maxis<\/strong><\/h2>\n
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Impossible to ban Ordinals<\/strong> anyway<\/strong><\/h2>\n
Ignore them, and they\u2019ll go away<\/h2>\n
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Fork Bitcoin to get rid of Ordinals<\/strong><\/h2>\n
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Make the tokens better<\/strong><\/h2>\n
Build a virtual machine on top of Bitcoin<\/strong><\/h2>\n
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Can we scale Bitcoin with ZK-rollups<\/strong>?<\/h2>\n
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