Despite the critics, applications like Ordinals are the next on-ramp for Bitcoin adoption, Aubrey Strobel writes.
Source:TwelveFold (Yuga Labs)
It could not be a more interesting time in Bitcoin.
Yuga Labs, the $4 billion company behind the Bored Ape Yacht Club non-fungible token (NFT) series, generated $16.5 million from its first NFT auction using the Ordinals protocol on Bitcoin. These 288 NFTs, part of a collection called TwelveFold, created shockwaves through the crypto community on Tuesday.
The company announced its plans to launch the project last week, a move that should not be understated. Yuga Labs is a juggernaut in the NFT space – it developed three of the current top 10 most valuable NFT collections and owns the intellectual property for more – and so far has not created any NFTs on any other blockchains other than Ethereum, where the majority of digital collectibles currently exist – meaning that one of the largest companies in crypto is betting big on Bitcoin.
Interestingly enough, development on Bitcoin has been trending up during this crypto down turn. This week, there's been talk about deploying ZK [zero-knowledge] rollups on Bitcoin, the Ordinals project has kept its momentum and a buzzy decentralized social media protocol called Nostr, which uses Bitcoin Lightning payments, is gaining users.
Where did this all begin? For many years, people regarded the world’s number one digital currency as a pet rock. This is not a dig against Bitcoin, it’s a result of its careful design and stewardship. Bitcoin is meant to be sound money – and it does a fanstastic job of that. But at the same time people and companies have been asking, could Bitcoin be bigger?
Though NFTs began on Bitcoin via Counterparty, they were not popular during the last bull market because Bitcoin is not smart-contract friendly. Building on the network takes a bit more work than building on networks designed to run decentralized applications. The Ordinals project took advantage of a Bitcoin upgrade from 2021, called Taproot, and allows for digital artifacts to be inscribed on the actual blockchain.
So-called bitcoin NFTs are notably different and potentially better than NFTs on Ethereum, which often require data to be stored on external servers such as IPFS. An Ethereum NFT is an immutable token, which links back to potentially mutable data. Ordinals makes storing NFTs more secure, because settlement stays on Bitcoin’s chain forever. It's possible many other popular NFT series could follow Yuga's footsteps and deploy projects on Bitcoin.
In fact, Ordinals creator Casey Rodamor created a "burn address" that makes it possible to destroy a NFT series on Ethereum while inscribing and redeploying it on Bitcoin. It remains to be seen whether people and capital will ditch networks like Ethereum and Solana for Bitcoin entirely, but it's impossible to deny that this is a new day for Bitcoin. Instead of simply being held, more and more bitcoins will be put to use.
Yuga's embrace of Ordinals is just a catalyst for embers that were already burning. Last year, for instance, Trust Machines, a startup looking to build the bitcoin ecosystem, raised $150 million last year to build bitcoin products. Counterparty, Liquid, Stacks, RSK, Lightning and others have been around for years building sound infrastructure on which people could use their sound money.
Of course, many of those projects have been met with varying amounts of skepticism – a trend encapsulated by the love it/hate it response to Ordinals. In one camp, many believe that Bitcoin should not be a testbed for development or a home for frivolous projects. In the other, that Ordinals, Nostr and other projects are the next onramp for Bitcoin adoption.
Now, the online Bitcoin community is at a metaphorical fork in the road, because Ordinals is not going away any time soon. People want to build on Bitcoin, and because it is open source they can. This brings us to perhaps the most important element here, the on-chain evidence. One statistic you cannot deny is that the Ordinals project tipped the number of non-zero Bitcoin addresses to a new all-time high of 44 million, according to Glassnode.
Time will tell on the future of Bitcoin. Yuga's embrace of Bitcoin should be a signal that the future is bright, and there's still much to be explored in this exciting and dynamic industry.