The largest digital asset manager in the world, Grayscale, has published a report stating that Bitcoin Ordinals are a positive indicator for the future of the cryptocurrency. Bitcoin Ordinals, also known by some as Bitcoin NFTs. According to Grayscale, ordinals could rekindle developer enthusiasm for Bitcoin and increase mining fees.
Bitcoin Ordinals set to renew enthusiasm in BTC
In a blog post titled “Market Byte” on April 27, the company suggested that Ordinals offer two significant benefits to the expansion and development of the Bitcoin ecosystem. The first is a significant increase in fees paid to miners since the introduction of the protocol in January.
The advent of ordinals has led to an increase in total fees paid to miners […] which could potentially establish a sustainable baseline level of transaction fees to incentivize miners.
Grayscale
According to Grayscale, this will assure “continued network security throughout the lifetime of the Bitcoin network.” According to sources, more than $600,000 was paid to Bitcoin miners in less than two months after its inception, purely as a result of fees produced by Ordinal inscriptions. As of the time of publication, that sum has surpassed $6.5 million.
Source: Dune Analytics
Bitcoin Ordinals refer to the position of a particular transaction in the order of transactions on the Bitcoin network. Grayscale’s report suggests that transactions with high ordinal values are often associated with increased demand for Bitcoin and could indicate future price increases.
While some criticize ordinals, warning against bloating the blockchain or harming fungibility, Grayscale believes that ordinals represent one of the larger opportunities for Bitcoin adoption, especially given the Bitcoin network’s reputation as a rigid blockchain ecosystem.
Source: Grayscale
Bitcoin Ordinals distinguish themselves from other BTC NFTs due to their independence from Layer 2 solutions. Ordinals employ previous Bitcoin network enhancements, such as SegWit and Taproot. In the end, ordinals allow data to be embedded directly within the witness segment of a Bitcoin transaction. Ordinals can contain almost any form of data, including images, videos, and applications.
Grayscale’s stand on BTC ordinals
In addition to the benefits of BTC mining, the investment firm believes that Ordinals and the “velocity of NFT adoption” could lure new Bitcoin users and spur further network development.
We believe the emergence of ordinals is likely to promote a development-oriented community and culture in support of the Bitcoin network.
Grayscale
Ordinals’ meteoric ascent has been a contentious topic in the broader Bitcoin community, with Bitcoin maximalists criticizing them for deviating from Bitcoin’s original purpose as a peer-to-peer electronic currency and clogging up valuable block space.
Grayscale acknowledges the validity of the concerns regarding Bitcoin Ordinals. This is due to the fact that the original Bitcoin whitepaper does not account for unique digital assets, additional data that contributes to blockchain congestion, or inscriptions that could reduce fungibility.
However, Grayscale contends ordinals are a byproduct of utilizing the Bitcoin blockchain as it currently exists and subsequent crypto innovations, even if Bitcoin’s creator did not initially envision them.
We believe that ordinals are positive for the Bitcoin network in two key ways: resulting in an increase of Bitcoin miner fees, and potentially contributing to a cultural transformation within the Bitcoin community.
Grayscale
Grayscale went further to compare ordinals and the ERC721 standard. The comparison was on the grounds of on-chain data, immutability, and simplicity. And according to Grayscale, the ERC721 standard falls short compared to ordinals.
Grayscale says that ultimately, unlike ERC721s, ordinals are a straightforward manifestation of non-fungible digital assets due to their immutable nature, lack of programmability, and mandatory on-chain inscription requirements.
Although Ethereum NFTs have greater programmability and currently dominate the NFT market in terms of volume and popularity, ordinals may be an appealing alternative for those looking for a simple, scarce digital asset on the most established blockchain available.
