Bitcoin Ordinals Are The Latest Web3 Craze (BTC-USD)

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piranka

FOMO kills but it kills at the end of the cycle not at the beginning. To make the ‘big’ money you have to be early and you most certainly have to be brave. Brave is not the same as foolhardy, but the emotions you feel can be the same. For me, you look for the very early opportunity and if you think it’s good you leave it alone. If you know it’s great, you grab some. I repeat this saying over and over because it works: ‘If you think it’s gold it isn’t, if you know it’s gold it is.’ I learnt this up to my thighs in a freezing cold river panning for nuggets. There you definitely want to believe the glint in your pan is gold not mica, but when you get a speck of the real thing, you know it’s gold. Just like the saying goes, when you think it’s gold, it is always mica; a glinting false positive.

So, there is a new craze in Bitcoin, and I think it is gold. It is Ordinals.

An Ordinal is a piece of information written onto the Bitcoin blockchain and referenced by a unique address also held in the blockchain data structure. It’s like an NFT, but somewhat different and that difference is important. An NFT is a crypto token that references a piece of data somewhere else on the internet like the IPFS (InterPlanetary File System), which holds the actual data connected to the token. The data might be somewhere else so the trouble is, if that file or its storage goes away the NFT data is gone leaving the token pointing to thin air. It’s like holding a Super Bowl ticket for last year’s game.

This means Ethereum could be doing its thing in a hundred years, but the Bored Monkeys or Punks may have long since evaporated in a cloud of bit-decay with the stored images no longer where their NFT references (of course someone might bodge a fix for this, but you see that this is different from holding the monkey inside of the blockchain itself).

An Ordinal is actually stored in a Bitcoin block so while Bitcoin or any of its consequential forks live, the data is there. The only way for it to vanish is for Bitcoin to stop existing and for every instance of the blockchain to be erased. That is almost impossible. If there was a zombie apocalypse replete with survivalists you can bet someone, somewhere would be running Bitcoin on solar. An Ordinal, like the cockroaches, would be amongst the last things to go extinct.

All sorts of things are being stored as Ordinals, which can be up to a limit of 4 megabytes of information in size. However, storage is not cheap as it must be mined into the blockchain rather than dangled off a remote server somewhere. I used ordinalbots.com and paid to ‘inscribe’ a 25K byte image onto the Bitcoin blockchain; it cost $115. Megabytes would cost thousands. The attraction is the fact the Ordinal of the art piece I created will never disappear; like a neolithic cave painting in Lascaux or Native American glyphs this work is forever. While it didn’t take many years for 5% of van Gogh’s paintings to go missing, my piece is guaranteed to be nigh on immortal.

If you want to take a look it’s Ordinal 8041535 and for 1 BTC it’s yours (I can’t resist a side hustle).

When I visited the Miami Blockchain show on the 19th there were eight million Ordinals in existence and four days later there were nine million. The creation of Ordinals is exploding. As such, it is a land grab moment and anyone wanting to try and capture that initial opportunity should get their skates on now.

Meanwhile this development is, or maybe isn’t, great news for Bitcoin.

It has certainly exploded transaction fees.

Here is a chart.

Bitcoin transactions (bitinfocharts.com)

Quite a few ‘Bitcoin maxis’ aren’t a fan. Bitcoin is their digital gold; Bitcoin is for serious economic purposes not frog pictures. It’s like taking gold and making earrings out of it….oh wait! To the Bitcoin hardcore, Ordinals are not part of Satoshi’s vision. It is a clever ‘hack’ to create new but unwanted functionality.

Sadly – for them – it can’t be stopped as Ordinals use legitimate Bitcoin structures and functionalities to do their ‘inscription’ thing.

However, the Bitcoin maxis’ concern is real. If there is huge value in storing things like pictures and text in the Bitcoin blockchain it will drive up the cost and muscle out financial transactions, and that seems like a threat. Alternatively, it will drive low value transactions off Bitcoin altogether and onto Layer 2 solutions in the same way Polygon serves a similar purpose for Ethereum. Long gone are the dreams of Bitcoin being cheaper than TradFi, and it will never be the case that sending money normally within your country via an old school bank will cost dollars a pop.

Then again, Ordinals may be a fad doomed to die out. It could happen, like the death of so many crazes. However, I believe that is not going to happen because even the silliest crypto stuff takes on a life of its own and refuses to die. That’s not just a crypto thing. Take, for example, obsolete timekeepers. They sell for tens of thousands and right now are all the rage; the same is still true for postage stamps. Mad economics is not simply reserved for blockchain economics. More likely Ordinals will spark a new wave of activity for Bitcoin where new use cases appear that go beyond its previous incarnation. All the while, it will remain the Layer 0 of all crypto.

The fact transaction levels have shot up and driven a bonus for miners, many of whom were struggling until a sudden flow of Ordinal fees came pouring in, should be enough to prove that Ordinals are a breakthrough not a bane.

Everyone at the Miami Bitcoin show was using the clich? ‘down the rabbit hole.’ Ordinals are another ‘rabbit hole’ to fall down, and one I expect to be extremely profitable. I believe they are going to be a huge financial opportunity for the early, and no doubt once again a trap for the late FOMO crowd.