YEREVAN (CoinChapter.com) – Bitcoin (BTC) price struggled just below the $23,000 line on Feb 7 after charting sideways since Jan 21. While the flagship crypto still faced headwinds from the broader economy, the controversy came from an unexpected angle – Ordinal Bitcoin NFTs.
Also read: Bitcoin Price At Risk of Short-term Bearish Breakdown, Dollar Rallies.
So what are Bitcoin NFTs, and can they help the BTC price recover?
Bitcoin Ordinal NFT project stirs controversy on Twitter
On Jan 20, software engineer Casey Rodarmor (@rodarmor) tweeted out that he launched inscriptions on the Bitcoin blockchain and called them ‘Ordinal Protocol.’ Rodarmor then specified that those inscriptions are like NFTs but are instead “true digital artifacts: decentralized, immutable, always on-chain, and native to Bitcoin.”
The announcement stirred a whole battle on Twitter, with responses ranging from “Bitcoin will explode” to “this is illegitimate.” One of the more consistent PRO arguments was the assumption that Ordinal Bitcoin NFTs could “permanently solve” the Bitcoin security budget problem.
Will Bitcoin NFTs solve the security budget problem?
In short, the security budget problem suggests that at some point in time, mining will stop being profitable once the fixed supply runs out. Jordi Alexander, the chief information officer (CIO) of trading firm Selini Capital, noted that the current Bitcoin mining rewards are sufficient but may not be forever should the BTC price keeps sliding.
Now we’re getting to the point where block rewards are decreasing. At some point the Bitocin price can’t keep up, and the dollar rewards will decrease further.
he said.
Meanwhile, it seems rather unlikely that inscriptions and their transaction fees could be enough to incentivize the miners. Of course, a more robust transaction fee market is good for the Bitcoin network. Thus, a potential best-case scenario for the longevity of Ordinal NFTs is that they act as a buyer of last resort for blockspace.
Also read: Bitcoin’s Security Model is Flawed — Top Analyst.
Since Ordinal NFTs are unusually large transactions, they will almost always be more expensive than normal peer-to-peer Bitcoin transactions on a per-transaction basis, even if they have low fee rates.
Ordinal Protocol could hurt the blockchain.
Rodarmor’s inscriptions have led to 4-MB Bitcoin blocks nearly full to the rim. The block size might be too large for the chain to operate at its normal speed. Thus, the possible influx of larger blocks might make it more difficult for new node participants to start up. The sheer amount of data from the Ordinal Bitcoin NFTs could accumulate over time and bloat the chain with superfluous data.
Moreover, the so-called Ordinal NFTs do have a technical requirement for a special off-chain agreement with a miner to inscribe data in excess of 1 MB, which could potentially lower the risk of the Bitcoin blockchain being a harbor of more illegal activity. However, concerns like chain bloat still remain.
Are there proponents?
As they say, even a flat pancake has two sides, and the Twitterverse saw proponents of the Ordinal Bitcoin NFTs as well. One such supporter was Udi Wertheimer, an “independent developer.”
@rodarmor has done more for bitcoin in the last few weeks than all of the people in the picture combined did in their entire lifetimes
said the developer on Feb 5, following with photos of several known BTC whales.
On Feb 7, he tweeted that a lot of “bitcoin maxis” will regret their words soon.
It is better to remain silent on ordinals and be thought a fool than to speak and remove all doubt. Many bitcoin maxis are going to regret not keeping their mouths shut. A lot of doors are being closed for the cheap thrill of likes and clicks.
he noted.
Da Held, the Bitcoin educator and marketing advisor at Trust Machinesco, was also interested in the idea of Bitcoin NFTs, evoking an old 1993 email from a famous developer Hal Finney. The tweet immediately caused another sh*tstorm and a wave of an unrelated discussion of whether Finney had the concept for NTFs in the early ’90s.
Also read: ‘Big Short’ Michael Burry tweet concurs with Inverse Jim Cramer effect – sh*tstorm for Bitcoin.
So, could the Ordinal Protocol boost Bitcoin’s price and help the token conquer the $23,000 resistance? Time will tell. For now, the Bitcoin NFTs have made a lot of fuss on Twitter but have not yet affected the BTC value in any significant way.
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