The debate over Bitcoin ordinals is a battle over Bitcoin’s future

Factions have arisen throughout history from movements and new technologies. The Bitcoin world is no stranger to this. Ethereum split from Vitalik’s contributions to Bitcoin Magazine, and since then different individuals have created a variety of altcoins. The block size wars put Satoshi’s block size limit to the test after some demanded faster scaling, with fewer transaction fees and more transaction volume – the split between “Big Blockers” and “Small Blockers.” The wars eventually led to further splitting of Bitcoin into Bitcoin Cash and a Bitcoin with activation of SegWit closer to the “Small Blocker” principles – the Bitcoin of today which mainly relies on Layer 2 solutions like the Lightning Network to move past the problem of scaling transaction. fees. Today, Bitcoin has a similar forum for debate – regarding the economic use of transactions versus their non-economic use. Specifically, some argue that ordinals (a kind of NFT import to Bitcoin) and BRC-20 tokens (an ERC-20 equivalent) could be a savior for the chain – and some argue that they are “spam”.

To begin with, it is useful to summarize some of the debates. Ultimately, Bitcoin miners will only be compensated through transaction fees. Block rewards for mining, which provide the most revenue for companies mining Bitcoin today, will cease to exist – part of the 21 million Bitcoin limit that was placed on the chain in the first place. As a result, securing Bitcoin will primarily come through transaction fees – simply put; the more people use Bitcoin, the more likely it is that companies dedicated to mining and securing it will exist. Public miners have enjoyed a boost in their income due to the high transaction fees due to people trying to place ordinals on Bitcoin. Ordinals essentially benefit from putting 4MB of data (the new block size limit after several hard forks) and associating it with a sat. They pushed NFT economics of scarcity to put non-economic data into a blockchain and force it onto Bitcoin.

Enter the two broad camps on ordinals. Some dismiss the use of Ordinals as spam, claiming that Ordinals defy the original intent behind Bitcoin to become a focused global financial network. Others think Ordinals are saviors – and have helped solve Bitcoin’s security budget far into the future – ensuring that there will always be miners.

For those who think ordinals are harmful, the original intent of Satoshi is clear. The OP_Return function that Satoshi originally designed was 80 bytes – barely enough to make small text notes for each transaction. If Bitcoin is a financial network, the focus should be on lowering transaction fees. After all, Bitcoin will compete with central banks’ digital currencies. In the design of the e-CNY, China’s digital Yuan, the focus is on keeping transaction fees for end customers at 0%.

This is critically applicable to both merchants and payers. Clearly, many people see value in a decentralized peer-to-peer network of economic value – and people are willing to pay to send transactions to others in this way. The question is: how much, and what stage of Bitcoin’s development are we in? By devoting focus and energy to non-financial uses of Bitcoin, it helps to increase fees for financial uses of Bitcoin – for example, Lightning nodes, which is not an abstract debate: Lightning fees have increased significantly for those routing payments – and the Lightning Network represents perhaps Bitcoin’s best current chance of getting the next billion people on board – and creating a medium of exchange for Bitcoin and wide merchant adoption that has so far been lacking at scale.

On the other hand, those who argue that ordinals are useful for the chain talk about the security budget and the activity that ordinals have helped create – an analysis by FSInsight points to the increased activity on Bitcoin as a reason for a bull run Mining profitability has reached new highs since March 2022 – and this has a lot to do with transaction fees rather than block reward fees. Some blocks now have more rewards for Bitcoin miners in the transaction fees than the block rewards. However, some Bitcoin mining pools are against it. Ocean, the decentralized mining pool, has a founder who is known to be very anti-Ordinal. Still, the pool of miners now offers the option of choosing a block template with minimal non-financial transactions – or the Bitcoin Core standard, which allows for BRC-20 tokens and ordinals.

Finally, a third camp (perhaps the silent majority) has feet in both camps – and wants to see less conflict over a topic that might be considered ridiculous to outside audiences for Bitcoin. Robert Hall summarized this view in Bitcoin Magazine.

Whatever your beliefs on the subject of ordinals, it’s clear that this has been a powerful stimulus for debate and discussion about Bitcoin in 2023 – and likely beyond. Which side you subscribe to depends on your belief about what Bitcoin should look like in the future – and the timeless principles and debate about the scaling roadmap needed for Bitcoin to realize its full potential.

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