Bitcoin isn’t known for smart contracts , so how?
NFTs and Bitcoin
The advent of NFTs (Non-Fungible Tokens) has sparked a revolution in the digital world, providing a new avenue for artists, musicians, and creatives to showcase and sell their work. However, the adoption of NFTs on the Bitcoin blockchain has been a contentious topic among Crypto Twitter, with opinions divided on how best to link digital assets to the quintessential blockchain. The latest project, Ordinals, is set to challenge the status quo and has sparked a new debate.
NFTs are blockchain tokens that serve as proof of ownership for digital assets, including artwork, videos, music, and memberships. Ethereum and Solana have emerged as popular platforms for NFTs, but Bitcoin developers have also sought ways to bring NFTs to the world’s largest cryptocurrency. The main issue hampering the development of NFTs on Bitcoin is the need for smart contracts, which Bitcoin has limited support for.
Why NFT on Bitcoin is so hard
Bitcoin was designed as a digital currency that aims to provide a decentralized and secure way to transfer value from one person to another. It does not have the capability to execute smart contracts, which are self-executing agreements with the terms of the agreement between buyer and seller being directly written into lines of code.
This lack of smart contract functionality can hinder the creation of NFTs on the Bitcoin blockchain. NFTs often require the ability to attach various types of information and assets, such as artwork, music, or collectible items, to a token. This requires a level of flexibility and programmability that is not present in Bitcoin.
Without the ability to execute smart contracts, developers must rely on workarounds or resort to using another blockchain that supports smart contract functionality. This added complexity can make the creation and management of NFTs on the Bitcoin blockchain more challenging and less accessible to the general public.
Furthermore, the limited capacity of the Bitcoin blockchain means that adding large amounts of data, such as images or videos, could potentially congest the network and drive up transaction fees. This could limit the potential use cases for NFTs on the Bitcoin blockchain and make it a less attractive option for creators and collectors.
Overall, the absence of smart contract functionality in Bitcoin can make it difficult to create and manage NFTs on the blockchain, and limits the potential use cases for NFTs in the Bitcoin ecosystem.
Bridging the gap
To bridge this gap, previous projects such as Counterparty and Stacks have developed solutions that settle their transactions back on the Bitcoin blockchain, while still using a native token for the contract piece. Counterparty, launched in 2014, was the first layer-2 solution for digital assets using the Bitcoin blockchain. Although it has fallen 97% since its all-time high of $91, it still has an active community and is best known as the home for Rare Pepes, which still command significant sums on secondary markets.
Stacks, launched in 2017 as Blockstacks, is a blockchain network that can run smart contracts and settles all its transactions on Bitcoin. Its NFTs started to attract the Bitcoin faithful, and in February 2022, an NFT collection called Satoshibles launched a cross-bridge to send NFTs to the Ethereum network. Despite its popularity, Stacks has not developed a particularly active or valuable NFT market.
The recent arrival of Bitcoin NFTs is marked by the launch of Ordinals. Unlike conventional NFTs, Ordinals takes a novel approach by incorporating NFT-like assets directly onto the Bitcoin blockchain. This new platform, created by Casey Rodarmor, a former Bitcoin Core developer, enables users to manage, transfer and receive individual units of satoshis, the smallest unit of Bitcoin (1/100,000,000 of a BTC), which can be linked to information such as images or videos. The practice of adding data to individual satoshis is referred to as “inscription” and is recorded in the signature of a Bitcoin transaction.
However, the concept of filling Bitcoin blocks with multimedia content like images, videos and even video games has met with opposition from some members of the Bitcoin community, who have raised concerns that the integration of NFTs into the Bitcoin network could cause an increase in transaction fees.
Marginalized peoples in developing countries will have to pay more to run their Bitcoin nodes and send transactions because privileged wealthy whites want to put JPEG drawings on the blockchain as status symbols. Just because you can doesn’t mean you should.— Bitcoin is Saving (@BitcoinIsSaving) January 29, 2023
In conclusion, NFTs have the potential to revolutionize the digital world, providing a new avenue for artists and creatives to showcase and sell their work. Ordinals’ innovative approach brings the quest for NFTs on Bitcoin closer than ever, and while it remains to be seen whether it will be successful, it has sparked a new debate in the community. Regardless of the outcome, it is clear that some developers are still trying to use the decentralized network of Bitcoin to power new use cases.