As many people start building hype around Bitcoin Ordinals, I want to try to answer the question – what is so great about them?
Why so many scams in NFT?
The traditional ERC721 NFTs that everybody saw rising in 2018-2022 were just a prototype of a very good technology that proved to be huge success.
Now it might look like every single NFT project was a scam, but it is not true. We saw the same happening with ICOs in 2017-2018. The problem is that it takes time to build a real project, while the consumers were demanding anything that has NFTs.
Imagine that you have to feed a hungry crowd.
Will they be happier if you prepare a tasty BBQ for them? Or just give them ready-made Big Macs? Mostly, the hungry crowd will settle for a Big Mac if it is quicker to get it than to wait for a fire to get started, for meat to get marinated and to cook the meat.
The same happens with blockchain technology every single bull run. The crowd is so hungry, that good projects just are not fast enough to get developed, and many scammers get away with 95% of investments just because they were quicker to announce at least something.
Let me name at least 5 great NFT projects that definetely are NOT scam:
- The Sandbox
- Bored Apes Yacht Club
- Oveit (NFT Tickets)
But still, I believe that even these great projects will have to go through multiple steps before becoming really interesting to the end user.
What will happen with ERC721 NFTs?
I want to compare the situation with ICOs.
The 2017-2018 ICO bull run made a lot of great tokens, such as USDT. But let me ask you – on which blockchain the main usage of USDT happens? It happens on the Tron version of USDT, because it is a cheaper blockchain with super-low transaction fees. Ethereum version of USDT is already lower in terms of holders and total supply, while it is still larger in terms of 24H trading volume, thanks to the rich DEX infrastructure of Ethereum
So we see that Ethereum has great ecosystem of many projects, where one can make a prototype and use others’ prototypes as well. But a tested technology then moves to a better suitable blockchain.
I believe that NFTs will have a similar faith. We have to admit that the ERC721 NFTs were just a proof of concept, a tech demo. The underlying technology is good, but not suitable for all the different use cases:
3. Game items
4. Event tickets
For each of the use cases, there are very specific requirements. For example, for game items (and we are building a great NFT gaming marketplace and we can build your own) we need the blockchain to have zero gas fees (they should be paid by the game developer). Otherwise, the game economics do not make sense. I am an advocate for Immutable X, the most suitable NFT gaming blockchain.
Event tickets need to have low transaction fees, but not necessarily free, as they can be paid together with purchase of a ticket. More important here would be some form of KYC for easier withdrawal of the earned crypto into fiat. Also, the end users would need conventional pricing in USD. So, for event tickets I would choose Binance Smart Chain (as it has KYC built-in) and USDT for payments.
Long story short, in my opinion, NFTs will separate into multiple use cases, with each taking its own unique way of evolution.
Why Bitcoin Ordinals are great for art?
To answer this question, we need to understand the most essential problem of storing art as NFT – durability of the storage medium itself.
With traditional arts, it is also a huge problem. One might remember the art storage facility from Tenet, a movie by Christopher Nolan. It had to be proof not only to break-ins, but also keep an ideal humidity level, fight fires even at the cost of employees’ lives (carbon dioxide was used as an extinguisher, and as long as an employee does not have an oxygen mask, they will be dead in minutes) and even has to fight aging of the painting itself.
For digital arts, ERC721 NFTs on Ethereum chose a way to store images that is probably the worst possible. Each NFT has only a URL of the file, but not the file itself. Once a server that stores your file goes offline, your art loses its… art. Even if you use the infrastructure of Amazon Web Services, where is the guarantee that you will not forget to pay your bills and the server will not get removed?
Now it is just a record that you own something that does not exist anymore. Like a title for a car that was thrown in an ocean
Another possibility is that the image would be replaced with another image. The NFT still has the same URL, but now the art stored at this URL is different. Is it always bad? Definitely not, as it is a great idea for in-game NFT items. They can change their look due to wear&tear. But it is not great for arts, arts have to be immutable.
We need a storage that will last at least longer than our lifetime. Wait… The problem is, the Internet itself is younger than many of us. What would be the ideal storage for art? Durable, decentralized, with many independent actors?
The Bitcoin blockchain is the most expensive and durable storage up to date. It was made to be such a storage, and it is. It is backed $440B in capital, and this number is likely to grow 5-10x in the next 10 years. Nobody could find a better storage for arts to last if not centuries, then decades for sure.
The idea of Bitcoin Ordinals is to store the data of the digital art directly on the Bitcoin blockchain. Binary data stored on the Bitcoin blockchain is called an inscription.
I myself am super excited about Bitcoin Ordinals. I think that it is a brilliant idea to store art on the most durable storage ever.