Bitcoin’s 14th year has been a transformative one. Activity has surged on the network thanks to Ordinals Protocol. Bitcoin NFTs emerged off the back of Ordinals’ launch, helping transaction fees soar. While the crypto community is divided, I think rising fees could benefit the network in the long term. Let me explain.
What are Bitcoin Ordinals?
With Ordinals, Bitcoin users can make “inscriptions” in satoshis. Bitcoin Inscriptions write data for content such as images and can also prove the owner. This led to a frenzy for Bitcoin NFTs in early spring. Now, people are using Ordinals to create BRC-20 tokens, which are fungible assets sharing a similar name to Ethereum’s ERC-20 tokens. The current wave of BRC-20 tokens are DOGE-like meme coins.
The first Bitcoin NFTs and BRC-20 tokens have helped network fees soar. Some aren’t happy about this. Bitcoin purists—popularly known as “maximalists” or “maxis”—argue that Ordinals Inscriptions are attacks on the network.
“I think rising fees could benefit Bitcoin in the long term.”
This viewpoint stems from the idea that Bitcoin is the only true cryptocurrency token. Bitcoin’s most ardent maxis believe that other tokens stop Bitcoin from achieving its goal. They also believe that BTC’s beauty is its simplicity, arguing that it should only serve as a “digital gold.” While Bitcoin’s anti-centralization philosophy has helped it grow, many disagree with these more hard-lined takes.
Bitcoin’s security issue
The rising fee issue is the latest point Bitcoiners have flagged as a problem. Yet rising fees may benefit the network in the long term. This is because they could solve Bitcoin’s biggest existential threat: its security issue. Bitcoin has a maximum supply of 21 million BTC. Once the network hits 21 million coins in 2140, miners will only receive transaction fees for securing the network. This means that they will only be incentivized to secure it if the fees outweigh their costs.
“Ordinals has revived interest in the top crypto network.”
Like many Ethereum supporters, I believe Ordinals Protocol has pushed Bitcoin forward. It’s simply innovation that’s revived interest in the top crypto network. I think there’s a world where we have new tokens like NFTs on Bitcoin, and BTC is still viewed as crypto’s digital gold. It’s worth remembering that Layer 2 solutions like Lightning can also help reduce fees on top of the network, as they are doing on Ethereum mainnet.
A potential fix to Bitcoin’s security issue is also a positive for the space. For now, Bitcoin is the space’s leader. If Ordinals solves its security problem, we should all be celebrating it.
Mel Gelderman, CEO of token.com
Please note: Investing in cryptoassets is risky. Due to the volatile nature of the cryptocurrency market, investors run the risk of losing their funds when they make an investment. Returns from cryptoasset investing are not guaranteed, therefore users should always be aware of the risks.
