Bitcoin NFTs — What are ordinals and why are they booming?

Bitcoin nfts are the hottest Trend in Crypto right now jpegs pictures and Other types of content can be uploaded To the Bitcoin blockchain thanks to a New protocol called ordinals in the last Few weeks over a hundred thousands of These nfts were created causing a spike In the average block size and Transaction fees many have welcomed Ordinals as a revolutionary use case for Bitcoin but purists see them as a Potential danger for bitcoin's original Function as a peer-to-peer Cash System But how do nfts on bitcoin actually work Are they here to stay or it is just hype And do they really pose a threat to the Bitcoin blockchain I discussed all this With one of the most vocal proponents of Ordinals Bitcoin OG Udi berthheimer I'm Giovanni on this show we challenge the Ideas that shape the world of crypto in Each episode we assess a crypto Narrative a macroeconomic Outlook or a Potential disruptive technology only the Most solid ideas will make it to the Other side Foreign Bitcoin are and how are they different From usual lfts people know so ordinals Is the name of the protocol it's it's Made by a bit score in an open source Bitcoin developer whose name is Casey Watermore and at the very basic level What order rolls mean before we even

Talk about jpegs and whatever what order Knows mean is there's just an accounting Method to keep track of of Bitcoins and Satoshi's moving through the system so You could say well here's this one sad It was mine you know today or maybe it Was mined in 2009 and you can track how It moved through the Bitcoin blockchain So that's at the very base level that's What ordinals are and then on top of That ordinals protocol Casey also out of the way to do what he Calls inscriptions and inscriptions are Basically a way to attach any arbitrary Data to bitcoin transactions and Those ordinals that we talked about Before they point at those inscriptions So you could say okay I'm gonna put an Image of you know let's say 50 kilobyte On the Bitcoin chain as an inscription And that inscription is going to point At a specific ordinal so that that Ordinal represents it so essentially you Have a you have this Bitcoin set the Satoshi and you can move it around and It represents this inscription this jpeg This whatever sort of arbitrary data That you put on chain according to the Latest data blankly over 76 000 of scriptures have been created So Far So at the Block size the average Block size of Bitcoin has been monster Spiking we also saw a spike in Transaction fees a lot of critics say

That this new trend of creating these Inscriptions is creating a backlog in The network and so creating problems for People that are using it that want to Use it in the normal way so just Transacting uh money basically so what Is your response this sort of concerns Yeah so you know at the most basic level Bitcoin is you know it's an uncensorable Network and people can use it however They want there isn't Any way that I can see to say that a Certain transaction is legitimate and Another transaction isn't legitimate it Shouldn't happen Um there isn't any you know Council or Any uh CEO that can look at transactions And say oh this transaction is good and Should be allowed and this other Transaction is bad and should not be Allowed this is the entire point of Bitcoin no one no one can make such a Claim Um To me it seems that there's you know This movement of ordinals and Inscriptions found this new use case for Bitcoin Um and it seems like people are very Interested in this use case so they're Willing to pay uh transaction fees there Are higher than other people uh if if You want to make a purely Financial Bitcoin transaction that does not

Involve uh inscriptions at all then all You have to do is is compete with the Rest of the Bitcoin users and and put You know assign a transaction fee that Is high enough in order for your Transactions to be included in the block If you have to sum up what the benefits Are that this new trend this is a new Way of building nfts on bitcoin uh how Is that positive work for Bitcoin and Forth adoption in general Yeah so the first and most obvious thing Is what we call the security budget So Eventually Bitcoin miners are going to Stop receiving Um rewards based on like new Bitcoin Mind so the amount of new Bitcoin mine Is going to flatten and people are going To receive very small rewards from that And most of the reward for miners is Going to come from fees Um right now Bitcoin fees are not super High but they're higher now than they Were two weeks ago and ideally what we Would want is for the fees to go up so That miners eventually Maybe not today But you know 10 20 30 years from now Will be paid enough from fees Alone Um that it will still be worth worth it For them to provide security to a Network so use cases like inscriptions They show a lot of hope that because the Block space is scarce and because There's demand for stuff like

Inscriptions there's a lot of hope that We will get enough people who want to to Pay fees in order to keep the Bitcoin Network secure this is great for Bitcoin Developers so there's you know there's This group of Open Source Bitcoin Developers and contributors who are very Skilled at understanding the Bitcoin Network understanding the Bitcoin code Base Um building on top of it and it's kind Of a rare skill skill right now and so Far especially in the last two three Years They just didn't have a lot of Opportunity to work on little creative Things you know they worked on a lot of Open Source projects but not on a lot of Commercially successful projects And with all of that interests around Ordinals and inscriptions I expect that There is going to be like a very big Ecosystem that is built around that There's going to be a lot of new Startups that that build infrastructure For inscriptions like you know wallets And and and marketplaces and a ton of Other things that we need Um so we're going to have teams building That and they're going to need Bitcoin Developers yeah of course like one of The main criticism around Bitcoin was That it was not very attractive for Developers while now we have a new use

Case that could potentially as I said a Traffic morning development activity on It some of the criticism that came Around was not from just you know Regular Bitcoin Maxes it was from also Uh Bitcoin core developers so even Adam Back expressed his skepticism towards This new trend he said that he agrees With you that this uh thing cannot be Said sir because Bitcoin is by Definition accessible but he still makes The point that that doesn't mean that It's recommendable to use it like that So that there are ways to use that are Long worthy than other ways to use it so Foreign Cash as it was originally I guess Um kind of conceptualized by Satoshi is A more more worthy way to use Bitcoin Than minting uh nfts so what do you make Of Adam back's view on this And you know without without referring To any specific person's remarks I think That in general Um The culture of Bitcoin core development Has a problem Um I think that for a long time now it's Not it's not a new problem for many Years now uh Bitcoin for developers have Ignored what the actual Bitcoin users Want Um the decisions that Bitcoin core

Developers make or do not seem to be Informed by what Bitcoin users desire or Demand Um it seems to be informed based mostly On you know personal preferences Um you know whatever passion projects They want to work on Um which is which is okay but I think That if if they're a goal or interest is To make an impact and to make Bitcoin Better and to make you know the Community stronger I think they're They're not getting there Uh simply because they don't seem to be Very interested in what users want and What users demand there is other Controversy so precisely because this uh Jpegs these uh other pieces of content That you can inscribe into the Bitcoin Blockchain uh are immutable there that Have been quite a bit of concerns around The type of content that can be Described on this uh stoshes for example We saw there was a case for aboriginals In on the ordinals website someone uh Basically inscribed a shock form image Online Satoshi and that showed up on the Website of ordinals and that created Quite a bit of a bit of noise so how do We prevent if if we prevent these Situations from happening Yeah so you know first thing to say is There's there's like two aspects to this One is the inconvenience of of having to

Look at chalkboard and and that's you Know that's fixable because at the end Of the day something like ordinals.com Or any other like you know overalls Explorer that people might use those are Centralized services and and people can Install like you know you know image Filters on them that will remove any you Know kind of porn related stuff from the Website it will not remove it from the Chain and if you want to find it on the Chain you will always be able to but Will not be there on the website where People can see it by accident and and And and be shocked by it when they're Not interested to do so also luckily you Know there isn't there isn't an Economical use case for people to host Like you know shock porn or whatever on On on bitcoin Um the reason that inscriptions make Economical sense is because they're Collectors items and people buy them and Collect them in order to eventually sell Them in the future you just can't do That with shock porn because one no one Wants to collect that and two even if You wanted you would have a very hard Time Um marketing that and promoting that Later so economically it doesn't make Sense what I was wondering is uh in the Future we kind of expect or we we hope That Bitcoin is going to be used as a

Peer-to-peer Cash System among people so Potassium future we expect to have like So much more transactions going on with Bitcoin like uh millions of people Transacting with it at that point the Fees will be a completely different uh Story and so how do you see uh nfts and Like inscriptions survive in a future Where Bitcoin is being used on an Everyday basis by millions of people as A week transact with each other Yeah so what I would expect for Inscriptions precisely for this reason Right precisely because block spaces Scarce and we're not going to get more Of it than I would expect the Inscriptions are not going to be a mass Market thing right you're not going to Have millions of them and millions of Users of inscriptions just because the Math doesn't add up what Bitcoin is Going to do that is special is that I I Think it's it's going to become this Market for luxury items so items there Are rare expensive not everyone can know Them but very like sought after and very Um in demand because they're going to be So rare so yeah I would expect that it Will become more and more difficult to Inscribe the new stuff in the future if You will want to do it you will have to Pay a lot in order to do it yeah that Makes sense and I'm really excited to See how it is gonna evolve if it's gonna

Be just a short-term sort of pipe or if It's going to be like a long-term sort Of uh experiment so yeah It was brilliant thanks a lot yeah this Was very fun