Original compilation: 0x 11 , Foresight News
Original compilation: 0x 11 , Foresight News
The purpose of Bitcoin transactions has been a topic of debate in the community since its inception. Is Bitcoin primarily used for financial transactions, or is it supposed to be a secure distributed data storage system for everything from application data to domain names? This debate has been quiet for many years, but the emergence of a new NFT protocol called Ordinals broke all that. Here I will describe:
Early debate on what constitutes a "legitimate" bitcoin transaction
Limits established by OP_RETURN,
And how SegWit and Taproot allow Ordinals to break through these limitations.
This is an area of controversy within the Bitcoin community, and my goal is to lay out the differing views in different historical contexts.
In 2010, a proposal to support the Bitcoin DNS service BitDNS was vigorously debated on the Bitcoin Talk forum. The proposal advocates hosting website domain names on Bitcoin to reap the benefits of Bitcoin's decentralized trustless and permissionless nature. However, there are concerns (including Satoshi Nakamoto) that this would bloat the Bitcoin blockchain, making it more difficult to verify financial transactions, which are considered Bitcoin's main (or only?) use case:
Heaping all the proof-of-work quorum systems in the world into a single dataset is not scalable. Bitcoin and BitDNS can be used separately, users should not download data from both but only use one of them.
- Satoshi Nakamoto (December 2010)
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Namecoin: Altcoin Born As BitDNS Adoption Blocked On Bitcoin
However, the debate continues: should the Bitcoin ledger be (1) used only to record financial transactions, or (2) be a secure distributed data storage system for any potential application. Considering that blockchains are inherently unscalable, option 1 is more sustainable as Bitcoin grows into a global financial network. Option 2 allows for more experimentation to grow the Bitcoin ecosystem in the short term and provide miners with additional income.
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The release of these OP_RETURN Bitcoin Core clients shows that the core developers are allowing the use of the Bitcoin Ledger for non-financial data storage
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Rare Pepes: Bitcoin OG NFT using Counterparty (based on OP_RETURN)
Veriblock, Omni, and Counterparty met a similar fate as BitDNS: they have been discontinued, as has OP_RETURN itself. Even Rare Pepes is now wrapped on Ethereum. Despite crash, Veriblock and Omni commit to Bitcoin blockchain in 32 million transactionsAdded about 10 GB of dataimage description
OP_RETURN adoption dwindles as Omni, Veriblock and Counterparty fall out of favor, source: opreturn.org
Until now, OP_RETURN is hardly ever used, Bitcoin blocks don't fill up very often, and block space is cheap. However, this situation may be about to be reversed, as a design in Taproot (Bitcoin 2021 upgrade) inadvertently allows unlimited Bitcoin data storage shortening the block size limit without using OP_RETURN at all. This feature has been programmed into Bitcoin's new NFT protocol, called Ordinals.
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NFTs on Ordinals are called "inscriptions" and are assigned to specific satoshis. Here are the latest inscriptions about Bitcoin including images, audio, video, pdf, etc. These are actually stored on the Bitcoin blockchain and are stored by all full nodes, they are not links to images on servers. Source: ordinals.com
I think this method of making an NFT (called an "inscription") out of a single satoshis is very elegant because it achieves the functionality of a non-fungible token without compromising the fungibility underlying Bitcoin's design. Moreover, these NFTs get all the benefits of the Bitcoin blockchain (immutability, security, decentralization) and do not require any changes to the Bitcoin protocol. You can send one of these NFTs to an existing Bitcoin address today. Challenges remain, however, because existing bitcoin software doesn't obey "ordinal number theory," so satoshis you've assigned a personal value to can accidentally be sent as transaction fees or as payment. Therefore, there is Ordinals specific software that allows you to track these individual satoshis so they are not used accidentally.
As far as I know, the composition of the Ordinals architecture is uncontroversial. This excites me because I'm a Bitcoin long-termist, and I also love NFTs, which I believe are one of the few areas in cryptocurrency that can achieve lasting product-market fit. I've spent a lot of time experimenting with other NFT and token proposals (like Counterparty and Omni) on Bitcoin, finding them clunky, inefficient, and frankly deprecated due to poor maintenance.
One part of Ordinals that is sure to be controversial within the Bitcoin community is how NFTs are stored as inscriptions.
NFTs on Ordinals (“inscriptions”) are stored entirely on-chain. Looking at NFTs broadly (like on Ethereum), this is often seen as a positive attribute, since the "art" is truly stored in a decentralized way, not just pointing to a centralized server that can be changed at will jpg on . Many of the top rated NFT projects on Ethereum (like CryptoPunks) actually store the jpgs on Ethereum (not the "cloud"), so the jpgs are as secure and censorship-resistant as Ethereum itself.
However, the size limit on OP_RETURN is intended to limit the ability to store non-financial data on Bitcoin. This limit is set at 80 bytes, essentially a short text string. However, Ordinals only launched on the Bitcoin mainnet a few days ago, and people are already storing not only images, but short videos, and even pdfs of Satoshi Nakamoto’s Bitcoin white paper. To reiterate, these are not links to white papers or videos, but actual white papers and videos that become a permanent part of the Bitcoin blockchain and must be downloaded and stored by all full nodes. Why are Ordinals able to store such large files on the Bitcoin blockchain despite the OP_RETURN limit?
Ordinals leveraged the recent Taproot upgrade to store NFT data in the Taproot script path spend script. SegWit relaxes restrictions on the size of witness (signature) data, Taproot makes it easier to store arbitrary witness data in Bitcoin transactions, allowing Ordinals developersCasey Rodarmorimage description
NFT ("Inscription") text containing "Hello, world!"
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I minted my CryptoPunk on Bitcoin using Ordinals (with the help of a friend). The NFT was "inscribed" on a certain satoshi mined in 2009. The size of this NFT is 220 bytes (approximately 3 times the OP_RETURN limit). This will not be possible until Taproot relaxes the witness data size limit
Is this a good thing or a bad thing? I can't answer that question yet, but I've discussed this new use of Bitcoin with active advocates and opponents. Before diving into their differing views, let me list a few points on which they basically agree:
Using tapscript to store arbitrary data was not the intent of the Taproot developers
There probably isn't any way to limit the use of this tapscript
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Uniswap generated 5 times more fees than the entire Bitcoin network in the past 7 days. Source: Cryptofees.info
The flip side of this conclusion is that Bitcoin block space, while cheap today, is very limited as the global financial network of the future. The Bitcoin base layer can no longer support a single transaction for everyone (e.g. everyone opening their own Lightning channel), let alone scale to non-financial use cases. Therefore, non-financial uses of Bitcoin block space may crowd out "legitimate" financial transactions. Bitcoin is a peer-to-peer cash system whose main goal is to be used for financial transactions. Skeptics of Ordinals and Inscription also point to more efficient methods of tokenizing Bitcoin, like the upcoming Taro (also enabled by Taproot), and assert that Ordinals is an abuse of tapscript that breaks the rules for on-chain data storage. OP_RETURN limit rule. If entire blocks were filled with witness data for Inscription transactions, it could delay the confirmation of "legitimate" financial transactions, thereby damaging Bitcoin's reputation as a reliable financial network.
There's another problem: the part of a Bitcoin transaction that stores NFTs is called witness data. SegWit allows for a massive 75% discount on witness data compared to data from other parts of the transaction such as inputs, outputs, and even OP_RETURN values. This means that those who choose to use this feature of Taproot to mint NFTs or store data on Bitcoin enjoy a significant discount relative to those conducting more typical financial transactions. This in turn limits the contribution of such data storage to the fee market, especially relative to the size of the data stored on the blockchain, increasing the risk that these discounted transactions will crowd out financial transactions.
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These standard animal pfp NFTs have other platforms that are more suitable. Public chains other than Bitcoin are cheaper, so these projects have little incentive to use Bitcoin. This is "Solana Monkey Business"
The Bitcoin community has debated the relationship between financial transactions and data storage almost as long as Bitcoin itself. While the debate seemed to be temporarily settled with OP_RETURN in 2014, the debate is about to be reignited as tapscript inadvertently breaks free from data storage size limitations. The most hard-line Bitcoin holders insist that cryptocurrencies have many interesting applications beyond financial transactions, and NFTs are one such example. Of course, financial transactions are the most important part of the Bitcoin network, and any non-financial use ideally supports rather than undermines this principle.
Special thanks to those who helped me get started quickly:Casey Rodarmor 、RijndaelOriginal link
Further reading:
https://twitter.com/pourteaux/status/1361821171709337601
https://bitzuma.com/posts/op-return-and-the-future-of-bitcoin/
https://opreturn.org/op-return-per-month/
https://docs.ordinals.com/
