I made up my mind on Ordinals
"Ordinals are fiat. And inscriptions aren’t rare"
— Southern Hands
Spending an outrageous amount of Bitcoin to own an specific satoshi is stupid and initially I just thought that if others want to do it, that's on them.
But with ordinals and inscriptions clogging the network and driving Bitcoin transaction fees through the roof, I came across this fantastic read by Guy Swann of a Medium post by Southern Hands titled Ordinals are Fiat. And Inscriptions aren’t Rare and I finally made my mind about them.
Inscriptions and Ordinals are absolute crap. A fool's errand.
Ordinals
Ordinal theory numbers satoshi in a certain order as they get mined. Block #0 created satoshis 1 through 5,000,000,000; block #1 created satoshis 5,000,000,001 through 10,000,000,000 and so on.
You then track satoshis through UTXOs considering a First-In-First-Out logic.
When the UTXO becomes an input to a transaction, you count satoshis starting with Input 1, then Input 2 and transfer them to the outputs starting with Output 1, then Output 2, and so on.
Ordinals count from bottom to top. But what if I want to count from top to bottom?
I hereby create SuperOrdinals. The SuperOrdinals theory goes as follows:
- The last satoshi of the last input becomes the first satoshi of the first output.
- We count satoshis using Last-In-First-Out.
- Now an specific satoshi used in an input will land in a different output compared to regular Ordinal theory.
"Ordinals are a method of, first, pretending that it makes sense for satoshis to have serial numbers, and second, stipulating a set of rules to put them in order so that we can count and assign those serial numbers. In other words, we number the satoshis by fiat."
If you're thinking that this is bogus, it's because it is. Ordinals are arbitrary and subjective. Some people have agreed to follow certain logic and apply it to the Bitcoin blockchain and that's it.
Inscriptions
Inscriptions store JPGs in one of the fields of a transaction and are associated with an specific ordinal (numbered satoshi) of that transaction. Storing a JPG takes a lot of bytes and that is why fees are going up.
If you want to sell the inscription to somebody else, you just need to create a new transaction that is structured following the Ordinal theory so that the specific ordinal lands in an UTXO that is controlled by the buyer.
The inscription remains in the original transaction where it was stored. No one can change that.
The buyer gains no control of the inscription because the buyer has no control over the original transaction. The buyer is mentally assigning herself ownership of the inscription because she used the Ordinal theory to count satoshis.
This is not different than Johnny selling me the the star Polaris. I know have a piece of paper that says that I'm the rightful owner of the star Polaris.
Anyone can see every inscription that is on the Bitcoin blockchain. As a matter of fact, the owner has as much control over the inscription as any of us: zero.
There is no real ownership of inscriptions. Just an arbitrary logic that some people have decided to follow and pay for.
My verdict
Ordinals and inscriptions are a fool's errand. They are useless and they are harming the Bitcoin network by unnecessarily raising transaction fees.
I do hope that they fade soon.
At the same time, and following Jocko's philosophy, experiencing the impact of inscriptions now is good for Bitcoin.
We, and I definitely include myself here, have been complacent with UTXO management. We could get away with it while fees were low. But now we can't.
High transaction fees and full mempools are here to stay. Today it is inscriptions, tomorrow it will be the new wave of adopters coming in.
As a result, I can't setup a friend anymore with a non-custodial Lightning wallet and then send him 50,000 satoshi as a welcome gift. High fees make this impossible.
Bitcoin needs to continue evolving to support onboarding and adoption by new users even in a high fee environment and inscriptions are giving us the opportunity to build the solution before massive amounts of people come onboard.
Notable notes
Recommendations
Odell
He saw it coming: "Mempools will never clear again."
You can follow him here.
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— Alejandro
This newsletter is for educational purposes. It does not represent financial advice. Do your own research before buying Bitcoin.