Anatomy of a Breakthrough: The Bitcoin Ordinals Story
Anatomy of a Breakthrough: The Bitcoin Ordinals Story
The 10-year journey to ordinals, inscriptions, digital artifacts, and the return of Bitcoin NFTs
Hi 👋 welcome to Brian’s Bulletin. I write essays about blockchains, cryptocurrencies, and NFTs to figure out what’s happening and where it’s going next.
Bitcoin transaction fees hit their highest level in over 2 years this week. Up 30x from just a few months ago. Demand for the network is rocketing. And it’s because of ordinals and inscriptions. (See last post for an intro.)
As I researched them, I was struck how the creation story follows a familiar path as many other crypto breakthroughs. It seemed like a surprise at first, but after digging deeper I found a decade-long evolution in thinking and technology that led to this pivotal moment. The confluence of the right people, technology, and market conditions set fertile ground for the Cambrian explosion of development.
All the familiar signs that we could be living through a special moment.
Here's the back-story.
Motivation
Casey Rodarmor is a programmer with past jobs as Google, Oculus, and Chaincode Labs. He hosts the SF BitDevs meetup which is where the grassroots Bitcoin developer community meets. I went to a few NYC BitDevs meetups around 2017 and the Bitcoin ethos and revolutionary energy was palpable, even though 90% of the discussion was over my head.
Although an active crypto developer, Casey couldn't morally justify participating in the Ethereum NFT boom. He's a bitcoiner, a generative artist, and has controversial opinions on the Ethereum tech stack.
His view (4:50 in this video) is that Ethereum's smart contract language is "complicated and insecure." And that (3:30 in this video) NFTs have weird properties, such as the content is often stored off-chain, meaning it could be removed or changed.
For high value art, he says, we expect it would be stored on-chain. Many people are surprised it's not. So in 2022, he set out to build a way to bring the digital art and artifacts to Bitcoin.
10+ Years of Development
From 2011-2014 a few projects experimented with NFTs in the Bitcoin community: Colored Coins, Namecoin, and Counterparty are some examples. Counterparty "had a significant role in successfully introducing NFT culture to the Bitcoin community for the first time," says Galaxy Research. It is the foundation for the most famous Bitcoin NFT project to date, Rare Pepe Cards. Yet it is not very relevant today, and has some features that the Bitcoin community typically rejects, as Casey points out, namely that it has its own token and separate layer on top of Bitcoin L1.
Then from 2017-2022, NFTs on other chains (e.g. Ethereum, Solana, Flow) exploded into a multi-billion dollar industry, currently valued over $15 billion. A flurry of developers built a broad NFT ecosystem and even breached into a mainstream consumer base. NFT became a household acronym. It seemed like every media, fashion, and entertainment company was developing their NFT strategy, from Nike to Starbucks to the NFL.
During this period, applications like ArtBlocks ushered in a new era for generative artists. NFTs are a perfect fit for generative art—both are digital native mediums and NFTs are a way for digital art to prove authenticity and ownership. This is one of only a few areas with product-market fit in this industry, and it caught the eye of Casey who also creates generative art. But again, after his reservations with Ethereum, he decided to hold back.
Technology Upgrades
Meanwhile in this period, Bitcoin released two upgrades that would set the stage for ordinals and inscriptions. The two upgrades, SegWit and Taproot, effectively opened a space for arbitrary data storage that could sufficiently house the digital artifacts. These were the necessary building blocks. For a deeper technical explanation, let me bring back Galaxy Research to explain:
"First, the Segregated Witness upgrade (BIP 141) that enacted in 2017 reorganized transactions by moving the signature data (witness) to the end of the transaction, replaced the concept of bytes (data size) with virtual bytes (weight), and recalculated the weight of signature data such that each byte of it counts as only ¼ of a weight unit. This change resulted in an effective block size increase, particularly when lots of data is stuffed into the witness portion of a transaction. Bitcoin’s next (and most recent) major upgrade, Taproot (BIP 341), activated in 2021 and brought several upgrades to the network. Importantly, though, Taproot allows for much more complex scripting in the witness portion of a transaction and also removes the size limit for witness data, among several other changes."
"When Segregated Witness was implemented, it created the new “witness” section of a transaction where signature data was moved to." - Bitcoin Magazine
"Inscription content is entirely on-chain, stored in taproot script-path spend scripts. Taproot scripts have very few restrictions on their content, and additionally receive the witness discount, making inscription content storage relatively economical." Ordinal Theory Handbook
Market Conditions
Then in 2022, the crypto market crash ushered in our current bear market. People are looking for something new, something interesting, and many are out of a job from the tech sector layoffs.
Amid the slumber, Casey works on Ordinals. He wants to bring digital art and culture to Bitcoin. His discovers that creating serial numbers for satoshis has been debated before, but never implemented. He finds inspiration from satoshi atoms, included but commented out of the original Bitcoin code, and a BitcoinTalk forum in 2012. Then in December 2022, Casey pushes his ordinals code live.
Breakthrough
Today, in May 2023, ordinals has become the building block for so much activity attracting headlines like "Bitcoin Network Struggles with Unprecedented Traffic." There’s over 4 million ordinals inscriptions. You can view them at Ordinal.art.
Much is left to be written, but this journey through technology and people and market cycles is a familiar symptom of a breakthrough moment.
And hopefully we can achieve the most important of Casey's goals:
