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Are Ordinals Really Good for Bitcoin?

Are Ordinals Really Good for Bitcoin?, Crypto Trading News

Bitcoin Ordinals have shown a strong desire for collectibles on Bitcoin, but are they really the best solution going forward?

This is an opinion editorial by Olga Ukolova, Director of the Board of Directors for LNP/BP Standards Association.

This is what awaits you in this article

First part: I love art and money and I collect both

Reading through the ordinals resources (the handbook, the ordinal theory overview, the BIP documentation) one can see that the idea behind the concept is a fairly simple one. An idea with classic numismatic roots: if I have a rarity coin (and a Satoshi is indeed a rarity coinsince supply is limited) then I want to keep it for as long as possible, either for fun, for my personal collector’s pleasure and appreciation for the beauty of the coinor to pass it on to future generations to sell for a higher price than I ever could.

Add the concept of inscriptions to this idea and we fall even deeper down an intriguing numismatic rabbit hole, as coins minted in an extremely rare supply often end up experiencing tremendous increases in value and can serve a major philosophical purpose.

As an example, let’s see the history of the golden double-headed eagle coin that was minted in the United States in 1933 and is currently worth $18.9 million, making it one of the most valuable collectibles in the world. Initially, the concept of minting such a coin was proposed by US President Theodore Roosevelt and was an extremely alluring opportunity for the designer Augustus Saint-Gaudens, who wrote of the project in 1905: “I have long desired to spend as little as possible do to improve the shameful condition of our money, but now that I have an opportunity to approach it with fear and trembling.”

Saint-Gaudens set to work, but little did he suspect that the child of his noble intention would be killed by a person bearing the same name as the one who had planted the seed of inspiration in his hands and mind. In 1933, President Franklin Delano Roosevelt took the country off the gold standard, made possession of the 445,000 gold coins illegal, and ordered them collected and melted down.

Everything was perfect for the double-headed eagle piece from the perspective of modern bitcoin values: it was pure gold, it had unique inscriptions, the supply was extremely limited and, especially after it became illegal, there was coveting to own it. The coin even had its own boating accident when about 20 pieces disappeared before the entire supply was destroyed.

Part Two: Gold is Dead! Long live Bitcoin!

Ordinal numbers and inscriptions make a lot of sense in the above context and follow a fairly old tradition. Humans have always collected things that were either beautiful, expensive, or hard to come by (rocks, shells, pieces of gold, minerals, animals, spices, clothes, etc.). So what exactly is “good” about ordinal numbers?

  1. For the person who loves bitcoin as a collectible or cannot afford to own a large chunk of it, it becomes a thing of tremendous value. Ordinal numbers allow them to infuse their sats with a certain personal uniqueness and property value, at least until ISP giants tear them apart.
  2. For collectors (particularly numismatists), ordinals offer a digital way to own, store, and ship the coins they believe are valuable.
  3. Ordinal numbers go hand-in-hand with one of Bitcoin’s most important qualities, which is that it is a store of value. Furthermore, if you have a unique Satoshi, you will HODL on it for the rest of your life.

Part Three: I’ll show you my sat if you show me yours

But there are things that Ordinals lack, both from a social and technical perspective. In real life, collectibles love quiet as money. If you have a 22-karat black diamond in your apartment, you can show it off to some of your co-workers every once in a while, but you probably don’t want a neighborhood thug cartel finding out about it.

This brings us to the need for privacy while operating and owning rare and expensive assets. Since bitcoin is pseudonymous, so are ordinals because they inherit the properties of the time chain, are fully dependent on it, and introduce no additional ways to make your ownership of an asset private.

Ordinal numbers affect Bitcoin, adding complexity and technical difficulties for many participants, from miners to regular users. Bitcoin is not very scalable and should not serve as a file storage system that would cost users all of their fiat savings to complete a transaction. When paying for my coffee, I don’t want its cost to have one Ethereum-big fee and taken down after a week because someone decided to label some sats with a “My Heart Will Go On” mp3 for Valentine’s Day. As a miner, I might not want to see jpeg garbage on my node and not validate it, so I can delay acceptance for as long as possible.

Noble as the roots of ordinals are, considering the current bitcoin development landscape, we find ourselves back in the good old 2017 debate about block size and pollution (or spam) of the time chain. So many spears have been broken because of it that it’s painfully hilarious to cook us up again in this tale. I think when it comes to collectibles, the block size debate for bitcoin can actually go on forever.

Also, captioning it with a JPEG or MP3 doesn’t really make a Satoshi that much more unique or add much value to it, any more than a toddler’s scribbling of markers doesn’t make your apartment walls those of the Louvre.

We could go on with the flaws that the ordinal and inscription approach has, but Bitcoin Twitter has done a great job for us over the last few weeks, so we humbly move on to the final chapter of this article.

Part Four: How do you make collectibles really good for bitcoin?

As discussed at the beginning of the article, the human need to create, own, and exchange collectibles and art is more than valid, but ordinals and many other existing solutions that address these needs can create more problems than they purport to solve . So let’s play a game and imagine a perfect collectible. Think about the properties it should have and try to find a suitable solution to meet the requirements.

A perfect collectible is an object that has the following parameters:

  1. It has an owner. The first owner of a collectible is always its creator, who has the right to modify the work of art, add inscriptions, sell it, rent it, etc. Ownership rights should be transferred from one owner to another with no possibility of sale the collectible twice (aka prevent double spending) and with the ability to fully peer-to-peer verify the uniqueness of the asset without addressing a third party.
  2. Content ownership must be private by default, with the option to make the art and author available to the general public. Why? First of all, we all know that artists have very tender souls and cannot take all criticism lightly, which can entail many unpleasant and massive consequences. Secondly, as already described, if I have created a painting with rare and expensive materials or if I own a rare work of art, stone or metal, I do not want the whole world to know about it, as this could introduce many attack vectors, both digital and also physically, for me as the owner. Finally, if a collectible increases in value over time, it is better to keep it out of the public eye and reveal or sell it when the time is right and its value would be greatest.
  3. Collectibles should not live on the bitcoin time chain. They should not create additional burden, changes or debates at the main chain level, neither for users nor for miners or node-runners. It shouldn’t affect the block size or inject large amounts of irrelevant data into the blocks. At best, Bitcoin must remain nothing more than an accounting layer for various operations performed over an asset. All data, all knowledge about the existence of the asset should be kept on the customer side.

Sounds like a beautiful fairy tale, doesn’t it? Well, while some dream of perfect solutions, we prefer to make our dreams come true. And we have developed a protocol that meets all of the above criteria, and that solution is called RGB.

What is RGB? It is a smart contract and rights ownership system that helps collectors and artists create valuable assets, sell and buy them in a private and scalable way, with no timechain footprint, on bitcoin, with no additional token.

RGB offloads the bitcoin time chain by placing all of the asset’s data on the client side, using the concepts of client-side validation and one-way seals pioneered by Peter Todd at the time. The same ideas allow peer-to-peer verification of a collectible without having to rely on third parties or miners. It brings privacy Holders and creators by applying zero-knowledge cryptographic primitives such as bulletproofs, ensuring that nobody can hijack the transaction or genesis of an asset. Consequently, RGB has no impact on the Bitcoin fee rate, thereby preserving its market cost and avoiding all possible debates around it.

In summary, not all JPEGs are art or collectibles, and not all collectibles are bad or harmful – it’s often about that How to operate them.

And in that regard, RGB is actually “really good for bitcoin.”

This is a guest post by Olga Ukolova. The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Source: Crypto News Deutsch

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