Will the use of Bitcoin NFTs result in a more centralized network over time?

0xMarko|2023

The crypto community is divided over whether the launch of the Ordinal protocol on the Bitcoin mainnet will have a positive impact on the Bitcoin ecosystem.

Ordinal NFTs (aka digital artifacts or inscriptions) allow users to mint non-fungible tokens onto Bitcoin's blockchain.

Ordinals take advantage of Taproot & Segwit witness data to store JPEGs, videos, games, etc.

Ordinal Theory is the fundamental idea behind Ordinals.

It allows for the creation of Bitcoin-native digital artifacts, "inscribed" to individual Satoshis.

This allows for non-fungible characteristics to be imbued in these Satoshis, similar to traditional NFTs.

Inscriptions leverage capabilities based on Taproot Bitcoin soft fork to store content in Taproot script-path spend scripts.

These scripts have fewer limitations, allowing for the inclusion of content in Taproot outputs.

Inscription data is always stored on-chain and cannot reference any off-chain content.

This feature of inscriptions results in increased durability, as the content cannot be lost, and scarcity, as creators must pay fees that are proportional to the size of the content.

Inscription data is extra non-financial data and will be forever included in the blockchain.

Adding unique traits to Satoshis may harm Bitcoin's privacy and fungibility in the long run.

Inscribed Satoshis will forever differ from those without inscriptions.

If NFTs were to take off on Bitcoin, the increased storage and bandwidth requirements could lead to higher technical requirements for running a full node.

This can result in a potential centralization of the network.

Ordinal protocol has the potential to change the way people interact with the Bitcoin network and make Bitcoin more appealing to the NFT community.

Excited to see where it goes from here. 🚀