By Landon Manning
As traffic issues caused one major exchange to briefly pause bitcoin withdrawals, controversy is being drawn toward a new development on the Bitcoin blockchain: Ordinals and the concept of a Bitcoin NFT.
On May 7, 2023, the influential exchange Binance put two temporary pauses on bitcoin withdrawals throughout the day. Citing increased fees on bitcoin transactions, Binance issued a statement addressing the need to “increase the withdrawal fee charged on the Binance platform for the Bitcoin network, to ensure users’ transactions are picked up by mining pools” and it was able to resume normal operations later that day. Nevertheless, this pause from one of the industry’s most stable platforms led to market uncertainty, causing the value of bitcoin to sag. This has immediately led to questions: What exactly caused these increased fees, and how can the market be normalized again?
The answer lies in the Ordinals protocol, and the recent launch of BRC-20 tokens. Dubbed “Bitcoin NFTs,” the Ordinals protocol allows unique information to be inscribed on one satoshi, the smallest unit of bitcoin, stamping that data in a unique way on the powerful Bitcoin blockchain. These inscribed units of bitcoin have been traded as collectibles and have led to the creation of BRC-20 tokens, where uniquely inscribed satoshis are treated as their own tokens. Research has found that the minting of these BRC-20 tokens represented half of all Bitcoin transactions on May 1, 2023, and have largely been responsible for increased fees for all Bitcoiners.
This, naturally, has led to a fair amount of controversy within the Bitcoin community, as even the most ardent Bitcoin maximalists can be divided on the issue. As critics point out, making units of currency “non-fungible” makes them unusable as currency, which must circulate between people. Filling up the blockchain with transactions wholly unrelated to daily Bitcoin use might have catastrophic consequences for those who actually want to adopt Bitcoin into their regular lives. On the other hand, however, protocols like Ordinals are a natural byproduct of the decentralized and experimental nature of a worldwide Bitcoin community. Unexpected benefits have come from a wide array of strange or confusing projects on Bitcoin’s blockchain, and discouraging Ordinals may also destroy its possible benefits.
Still, as developers have pointed out, years of effort have gone into overcoming previous spikes in Bitcoin’s transaction fees, with great success. Although the improved tools currently in use have been insufficient to directly deal with this issue, it is unanticipated, and in any event, the procedure to fix it should be easier than fixing previous spikes. Whatever your personal stance on BRC-20 and the Ordinals protocol might be, it seems that these difficulties are more of a speed bump than a lasting issue for Bitcoin itself.
The important thing to consider, besides the obvious demonstration of the constantly-shifting ecosystem of Bitcoin, is that the blockchain that enables Ordinals also enables every person to self custody their assets, and avoid a problem caused by Binance or any other exchange pausing transactions. As we see new experiments with the blockchain cause growing pains, it’s important to remember how this innovative spirit has created many of the best parts of Bitcoin in the first place. Even if BRC-20 specifically ends up as a flash in the pan, or creates other issues that must be resolved, it still seems safe to say that Bitcoin has a bright future ahead.
