Bitcoin Ordinals, a technology that allows text, images, and code to be added to a satoshi—the smallest unit of Bitcoin (BTC)—continues to inspire debate among the Bitcoin community.
Shortly after the introduction of Bitcoin Ordinals in January 2023, critics of the technology began to worry about its shortcomings, citing problems such as increased transaction costs and slowness.
On the contrary, supporters of ordinals claimed that technology offers more opportunities, improves decentralization and guarantees freedom of expression.
Since the number of Bitcoin Ordinals signups has doubled, Going from 2.5 million to over 5 million in just eight days, Cointelegraph takes a look at the technology and the controversy surrounding it.
Cost, speed and security vulnerabilities
The undeniable and unwanted impact of Ordinals on the capacity and scalability of the Bitcoin network is one of the biggest arguments of Bitcoin purists, who believe that BTC should exclusively follow the peer-to-peer payment mission prescribed by Satoshi Nakamoto.
The continued increase in activity of BRC-20 — which uses ordinal inscriptions — has caused a sharp increase in BTC transaction fees. The trading frenzy of BRC-20 memecoins as Pepe (PEPE) has driven Bitcoin transaction costs to the highest levels since 2021.
As users continue to pour in BTC to mint new tokens settled through Ordinals signups, the blockchain has also experienced massive congestion. On May 7, the Binance exchange temporarily halted BTC withdrawals due to 400,000 pending transactions clogging the mempool.
Given recent events, can we just agree to rename the mempool to memepool? pic.twitter.com/6jHQKvjPW2
— alphaleek (me/uhh/hmm) (@alfaleek) May 3, 2023
Given recent events, can we just agree to rename the mempool to memepool?
Enrico Rubboli, CEO of Bitcoin layer 2 sidechain Mintlayer, told Cointelegraph that the technology behind Ordinals is “very flawed” and does not follow the “core axioms of the Bitcoin community.”
“The developers of the standard and the tools are not affiliated with Bitcoin, they are anonymous, and their software has not been thoroughly tested on this application”Rubboli said. The executive also believes that Ordinals could cause additional regulatory scrutiny for Bitcoin, as the new BRC-20 tokens could be considered unregulated securities.
Rubboli further argued that, with the Ordinals, the protocol is vulnerable to scams. “The entire ecosystem was created to be confusing and misleading,” he said, arguing that BRC-20 was created to “capture the popularity of Ethereum’s ERC-20 token.”
Furthermore, he stressed that the anonymous creator of BRC-20, Domo, warned users in the first place that the tokens were “useless”. Before launching BRC-20, Domo took to Twitter to underline that the token is “just a fun experiment.”
gm. I’m glad that some people like the experiment. Some additional notes.
1. These will be worthless. Please do not waste money mass minting.
2. Due to how some registration tools are set up, the ‘balance’ may be minted to the intermediary address used in https://t.co/mja39YGIow…— domo (@domodata) March 9, 2023
gm. I’m glad some people like the experiment. Some additional notes.
1. These will be useless. Please don’t waste money coining en masse.
2. Due to how some enrollment tools are configured, the ‘balance’ may be minted to the intermediary address used in…
“They will be worthless. Please don’t waste your money by mass minting,” wrote the creator of the BRC-20.
Arguments from Bitcoin Ordinals Supporters
The ability of Bitcoin Ordinals to unlock new value on the Bitcoin blockchain is a major counter-argument by Ordinals supporters. Some Ordinals supporters also believe that issues like higher transaction costs will disappear over time.
“Ordinals is a beneficial exploration for Bitcoin application and helps to unlock greater value in the Bitcoin network,” F2Pool chief marketing officer Li Qingfei told Cointelegraph, adding:
“The network congestion that comes with it should be temporary, and there will be good solutions to solve the problem and reduce transaction costs, and increase the speed of transactions, just like the Lightning Network.”
Li stated that the increase in transaction fees will encourage more miners to participate in network maintenance after the next Bitcoin halving in 2024. As an active advocate of ordinals, F2Pool launched a special series of non-fungible tokens called “10² Islands” to celebrate its 10th anniversary.
Roundtable21 co-founder Brandon Dallmann echoed Li’s remarks, stating that BRC-20 is currently undergoing stress tests against Ethereum’s ERC-20 protocol.. “Since it is not yet complete, the Bitcoin network is unable to meet the demand and is becoming congested,” he told Cointelegraph.
Dallmann also advised users to use multiple cryptocurrency platforms instead of keeping the entire stake on one to avoid problems caused by congestion on the Bitcoin network.
Some community members questioned why Bitcoin’s transformation from “magic internet money” to a more complex technology should be hindered.
“I see the reaction of many BTC purists, but I don’t think anyone should use their platform to try to censor transactions and try to discern between what is a ‘valid’ and ‘invalid’ transaction on any network”AngelBlock founder Alex Strzesniewski told Cointelegraph.
Many Ordinals supporters have also highlighted the contribution of technology to free speech. “I know everyone hates Ordinals, but whether it’s text or images, the ability to post unobjectionable information on the Bitcoin time chain makes free speech objectionable around the world forever,” wrote on Twitter Bitcoin watcher BitPaine.
perspective is the most important thing
Despite the competing perspectives between supporters and detractors of ordinals, it is important to note that much of the reasoning for or against depends heavily on perspective.
For example, for layer 2 technology creators, it is natural to oppose Bitcoin base layer developments like Ordinals. Conversely, miners probably won’t object to something that could increase their income.
Bitcoin Ordinals are hardly changing anything for hodlers, who probably don’t care much about transaction fees or mempool size. However, they are causing a lot of problems for traders and other market participants, such as cryptocurrency exchanges.
Regardless of whether ordinals are here to stay, the community has yet to see the full potential of the technology and its true consequences.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.