Are Bitcoin NFTs Worth The Hype?

Bitcoin has been around since 2008. As the blockchain grew, it assumed an unspoken “Boomer” status. Other chains were newer, faster, and cheaper. But recently, the network registered its highest transaction fees in over a year. This was due to an explosion in the number of transactions.

The reason? Someone named Casey Rodarmor invented Bitcoin NFTs. The November 2021 upgrade, called Taproot, aimed to improve the network’s privacy and performance. It also opened up new possibilities for developers.

These included the ability to build native apps and store text or images in transaction data. Unlike IPFS storage, which is centralized, Bitcoin “inscriptions” allow native on-chain storage of media. The name coined for this new class of digital asset is “Ordinals.”

IPFS storage allows for changes to the contents. This is why your Ethereum or Solana NFT metadata can be updated. Ordinals are immutable, permissionless, and fully decentralized, hence the appeal.

The most obvious thing to do with this technology was to find a way to print money. And, of course, the most obvious way to do this was to make JPEGs and sell them at outrageous prices. It is what it is.

To be fair, the process of inscribing requires a full node. That’s like using your neighborhood’s power grid to manufacture a single toothpick. The larger the amount of data being inscribed, the higher the tax. Already, we have seen record-breaking transaction sizes.

How does it work, anyway?

Right now, trying to m̶i̶n̶t̶ “inscribe” an ordinal may be the least daunting part of the whole deal. The process of buying and selling them is extremely risky. Storing ordinals in the same wallet where you hold bitcoins is a surefire way to get them mixed up forever and ever.

At the moment, everyone seems to agree that Sparrow wallet is the best way to store ordinals. If reading nerdy stuff on Github sounds boring, here’s a video that could help you get started.

Ordinalsbot and Gamma are also worth a mention. They are services being built to reduce the threshold for creating inscriptions. Think of them like a mint page or launchpad for ordinals.

You’re up to speed with the hype now. But that’s only half a lemon, and you deserve the full squeeze. As with every new meta, there are bad actors lurking in the shadows. You’d be better off knowing what to watch out for.

DERIVATIVE ORDINALS

A burgeoning meta is that of Ethereum NFTs “bridging” to Bitcoin. This is an obvious play to ride the hype wave and earn some quick bucks, as well as bragging rights. For the average degen, it’s a no-brainer.

Some of these projects are legit, but a huge chunk of them are sketchy. Grifters are pumping out “ordinals” as fast as hungry degens can buy these hot potatoes. In fact, you just might be buying a knockoff.

On the other hand, some of these NFTs are simply derivatives launched on the Bitcoin network. Sure enough, you’ve seen influencers gushing about them on social media. Let’s face it, though: you’re more likely to get rekt.

OTC TRADES

Due to a lack of technical know-how, there are no functional marketplaces for ordinals. Most trades happen in the shadowy halls of random Discord servers. You’ll find self-appointed local sheriffs playing the role of “escrow agent” for OTC trades.

These guys will bark at anyone else who tries to act as an escrow agent because it’s a fairly lucrative gig. Splits can see them raking in 0.05–0.5 BTC per trade. Just remember, they only care about your money. Anyone who downloads the Bitcoin Core software can run a node and be a middleman.

FAKE COLLECTIONS

This is an obvious risk, but we’re in unfamiliar territory, so indulge me anyway. Scammers are creating fake OpenSea and social media links as fast as new collections are dropping. Due diligence is non-negotiable here.

Verdict:

While they may be a hot topic, the reception to Ordinals hasn’t been all sunflowers and rainbows. On one hand, Bitcoin purists are upset. How dare Bitcoin be tainted by the fad that is overpriced cartoon JPEGs?

They have a point, though. Bitcoin block sizes were not designed to hold heavy media files. The largest block ever was mined by a project encoding doodles of wizards onto Satoshis. It’s not exactly what Satoshi envisioned fifteen years ago.

Conversely, miners are happy to record revenue increases. Degens are happy to play another game of hot potato. And grifters are happy to suck some liquidity out of the ecosystem.

I believe the technology itself can be put to much better use than speculative asset creation. It could pave the way for innovation in supply chain management, proof of ownership services, etc.

The Bitcoin network has been on the back burner since Ethereum shook up the industry. It’s nice to see some excitement that isn’t related to the token price. Some say capitalism kills innovation. They may be right.

We should be having conversations about where this new technology can lead us instead of letting NFTs steal the show. That’s like driving at full speed on a highway and trying to lick ice cream off your nose. Eyes on the prize!