Behind the “inscription” game stands the Bitcoin ecosystem that is waiting to be fed

“It’s not necessary to remove all the inscriptions to benefit Bitcoin.” In the early morning of December 7, when Luke Dashjr replied to netizens, it seemed that he had left some room for the inscription to survive.

On December 6, the core developer of Bitcoin Core bombarded the recently popular Bitcoin inscriptions on X, believing that the inscriptions that code and record data for the smallest unit of Bitcoin “Sat (Sat)” “are using the Bitcoin Core loopholes to send spam to the blockchain network” are a “scam” that will affect the adoption of Bitcoin and thereby indirectly damage the value of BTC.

Bitcoin Core is a software system for the Bitcoin network. In a follow-up response from netizens, Luke said that bugs will be fixed before next year’s V27 version, which means that the inscription will no longer exist in the Bitcoin network.

Luke’s remarks and responses immediately caused an uproar. First, the price of ORDI, the most popular token in the inscribed market, fluctuated greatly. At one point, it fell from around $60 to $40.

However, the debate over whether or not Bitcoin Core should and whether it has the power to remove the inscriptions has not only raised rivalries between Bitcoin miners and core developers, but has even raised concerns about the Bitcoin hard fork. Memories of the “2017 fork incident” have attacked many elderly people in the currency industry.

You need to know that due to SATS coding and the BRC-20 method of issuing cryptographic assets on the Bitcoin network, the Ordinals agreement has created a trillion-dollar market from the beginning of the year to date. Tens of millions of inscriptions are in circulation, held by hundreds of thousands of people, and has also brought huge handling fee revenue to the miner community due to Bitcoin network congestion.

Naturally, the participants in the inscription and some miners came together to oppose Luke’s representative Bitcoin Core for rashly fixing the “so-called loopholes.”

The controversy settled somewhat with Luke’s speech in the early morning of December 7, and more solutions to accept the inscriptions quickly popped out. The Bitcoin inscription has once again come out of the industry with this “big game drama”. Behind it, there is a Bitcoin ecosystem that is waiting to be fed and is hungry for diversity.

“Spam information” theory cites the inscription Life and Death Crisis

On the morning of December 6, during the period when ORDI prices rose and fell, Luke Dashjr’s bombardment began.

“Inscriptions (Inscriptions) is using a vulnerability in Bitcoin Core, the Bitcoin Core client, to spam the blockchain. Since 2013, Bitcoin Core has allowed users to set additional data size limits (‘-datacarriersize’) when forwarding or mining transactions. The inscription circumvents this limitation by masquerading its data as program code.”

Bitcoin Core’s core developer Luke’s speech on X quickly attracted the attention of the Web3 world. He said that although the bug was fixed in the recent Knots v25.1, it wasn’t thorough, and he hoped to finally fix the bug before next year’s v27 release.

In response, a user asked him: if this “bug” is fixed, will the Ordinals and BRC-20 tokens no longer exist? Luke answered “Yes,” and added, “The inscription should not exist; it was a ‘scam’ from the beginning.”

The “inscriptions” that should not exist in Luke’s mouth have in fact appeared for almost a year. Now they have brought a trillion-dollar inscribed token hype market. Tens of millions of inscriptions with chronological numbers and metadata for entering text/picture/audio/video information have been recorded on the Sat (Satoshi), the smallest separable unit of Bitcoin, and packed into the Bitcoin blockchain network.

There are only a few million users who own these inscribed tokens; there are hundreds of thousands. Not to mention, the inscriptions have also brought huge profits to Bitcoin miners who pack them.

Why is such a thing being opposed by Bitcoin Core developers today?

In fact, in May of this year, the appearance of Bitcoin network congestion and soaring processing fees caused by the inscription drew the attention of the developer community.

On May 7, on the Bitcoin developer mailing list, a topic was “Should we, as developers, reject non-standard taproot transactions from all nodes?” The email sparked discussion.

Taproot is part of the Bitcoin network upgrade and was implemented on November 14, 2021. The goal is to change the way Bitcoin scripts operate to improve privacy, scalability, and security, and even improve the Bitcoin network’s ability to process smart contracts.

Emails from developers about BRC-20 in May of this year

Sender Ali Sherief believes that a sub-project such as BRC-20 is “worthless,” as its creators say, and that it also threatens the normal use of the Bitcoin network as a “peer-to-peer digital currency payment system,” causing network congestion and rising transaction fees.

Ali asked whether action should be taken to fix the bug in BIP 342, which defines the Tapoot script, or forcefully review and remove all non-standard taproot transactions at the node level.

In this email, Michael Folkson, the organizer of the London Bitcoin Development Meetup Group, replied that Bitcoin should stay the way it is because “consensus rules are in place, and the rest is left to the market,” Michael pointed out, “You probably don’t like this use case, but assuming you start playing a game of whack-a-mole, how can you stop a group of people from announcing your use case within a year?”

And Luke Dashjr, the inscription bombarding BRC-20 this time, stated under this subject email at the time, “Action should have been taken a few months ago,” he said, “From day one, spam filtering has been a standard part of Bitcoin’s core.”

In fact, in February of this year, Luke created a patch filter called “Ordisrespector,” which detects and rejects Ordinals inscription deals that he sees as spam. However, judging from the results of the inscriptions now flooding the market, this patch did not work.

Also, as Ali mentioned in the subject email, if this non-standard taproot issue is resolved, it will inevitably affect the interests of the miner community in the Bitcoin community. This time, in Luke’s public “crackdown” on the inscription, it was the opinion leaders of the miner community who came forward first.

“Bitcoin isn’t Ethereum; developers don’t care.” Shenyu, co-founder of Yuike, the third largest Bitcoin mining pool operator, took the lead in making a statement after Luke’s speech.

The rivalry between developers and miners has quickly raised new concerns: will the Bitcoin network ever again have a hard fork due to a different consensus.

Last time, the consensus dispute between the two parties over the Bitcoin block size began in 2015 and continued for 2 years, and finally ended in August 2017, a miner-dominated hard fork, creating the Bitcoin Chash chain, which adheres to large blocks, and at one point diverted quite a few Bitcoin miners.

Miners will more or less maintain the inscription market for reasons of interest. Other inscription supporters believe that if Bitcoin Core adopted Luke’s approach to remove the inscription from the Bitcoin network, this directly violates Bitcoin’s “censorship resistance” and “decentralization,” and is also tantamount to denying the last consensus-based Taproot upgrade.

The debate over the life and death of inscriptions continued all day long. On December 7, some users were still asking, “As long as one miner doesn’t choose to quit, can that miner still process inscription transactions on the blockchain?” Luke, who sparked this “war,” said, “We don’t have to remove all the inscriptions to benefit Bitcoin.”

At last, this kind of expression calmed the controversy for the time being. So, is there a better way for inscriptions to exist on the Bitcoin network? This requires sorting out starting with the appearance of the inscriptions.

Bitcoin network congestion due to a surge in inscriptions

The “inscription” concept originated from the Ordinals agreement created by developer Casey Rodarmor, which was born at the beginning of this year. In March, another developer, Domo, also created a BRC-20 Inscription (Bitcoin Inscription) gameplay based on this agreement.

Simply put, Ordinals is a protocol that can inscribe data on the smallest unit “Sats (Satoshi)” that can be divided by Bitcoin (Note: 1 BTC equals 100 million satoshi, so 1 Sat = 0.00000001 BTC). The developer did an experiment where he tracked every 1 Sat of Bitcoin and then coded them in chronological order.

According to the Bitcoin network’s technical rules, these well-coded Sats are also allowed to write some data with limited capacity.

As a result, there was an agreement, and there was a Twitter called @domodata的网友坐不住了, which created the BRC-20 inscription, which is actually entering metadata into Sats. This process is called Inscribe (inscribe). However, small bytes of text, images, audio, video, etc. can be written into Sats in the form of data, and what is written in is called a “BRC-20 inscription.”

As a result, the chronologically numbered Sats with different inscriptions became unique. This is very much in line with the concept of an irreplaceable token “NFT,” and is even more NFT than NFT on the Ethereum network, because the content in Sats is actually engraved on the Bitcoin chain. In contrast, NFTs generated on blockchain networks such as Ethereum are more like certificates with unique numbers, and content such as images, videos, etc. certified by NFT certificates are often not stored or recorded on the chain.

Numbered and engraved, the two experiments yielded a set of “combo punches”. Although @domodata在BRC -20’s white paper made it clear that “this is just an interesting experimental standard” and “strongly opposes making any financial decisions based on this design,” players flocked to it and began spending their time using the Ordinals protocol and BRC-20 methods.

If Sats has different notes and different content, then such Sats are irreplaceable NFTs; if they have the same comments and the same content, then they are replaceable tokens, which is equivalent to using the Ordinals protocol and BRC-20 to issue homogenized cryptographic assets on the Bitcoin blockchain. The inappropriate analogy Sats uses is “numbered banknotes.”

Picture-like BRC-20 inscriptions

“Bitcoin inscriptions - content recorded on the most secure blockchain network in the world”, that sense of romance and preciousness soon came out.

Once this kind of “diamond ring” marketing rhetoric appears, it is difficult to avoid a distribution market with users and traffic support. Soon, the token ORDI commemorating the Ordinals protocol, wallets dedicated to storing and receiving various BRC-20 inscriptions, and decentralized exchanges all arrived, and an ecosystem surrounding the Bitcoin inscription became active.

BRC-20 Inscription Market Data

According to statistics, as of December 7, 56,300 BRC-20 inscriptions have been generated on the Bitcoin network, with a total of 306,400 holders and a total market value of 1.11 trillion US dollars.

Bitcoin, which recently surged to around 43,000 US dollars, has a total market value of 858.8 billion US dollars, and the total market value of the entire crypto asset market is 1.65 trillion US dollars, which shows that the inscriptions hype up the strength of the market. Domestically, the well-known second-hand trading platform Ianyu has published related sales information such as the “Inscription Call” service and the “Inscriptions Zero Foundation Getting Started Guide”.

BRC-20 information appeared on Idle Fish

However, the Bitcoin inscription also had a real negative impact.

You need to know that the inscribed data will be packed into the Bitcoin network in the form of blocks, and the 1M capacity of each block is fixed. The original capacity and speed of this network are worrying. The new inscribed data has increased the block data of the Bitcoin network, and the block generation speed has slowed down, commonly known as “congestion,” which has invisibly affected Bitcoin’s transaction rate, and transaction fees have also soared.

In May and November of this year, fees on the entire Bitcoin network were abnormal twice. In particular, on May 9, the entire network fee once reached 3.909 BTC, with a current value of 11,111 million US dollars.

May 9 Bitcoin network fee data

Bitcoin traders are not happy to see network congestion and higher fees, but the miners responsible for generating blocks on the Bitcoin network and maintaining network security to earn fees must be happy. After all, not only have they experienced a sharp decline in revenue in the crypto bear market over the past 2 years, but they will also face the rule of halving Bitcoin block rewards that will arrive in April and May next year.

According to data from Blockchain.com, the BRC-20 inscription is once again popular 11 In January, the Bitcoin Day mining reward for November 12 was directly raised to $44 million. This is the first time since 2023, and the last time it appeared was in April 2022.

Also, according to data from Dune on November 24, the total Bitcoin processing fee created by the Ordinals agreement reached 3061 BTC (about US$114 million), and the total number of inscriptions minted reached 43.532,200.

The total number of Ordinals inscriptions has soared

Seeing this, you can also see why miners, represented by the god fish, support the inscription.

However, the main reason Luke dislikes the inscription is that this information and data takes up the capacity of the Bitcoin block, leading to poor network transactions and higher costs. Thus, the function of Bitcoin as a payment network is weakened, which is not conducive to its widespread adoption.

This means that if the inscriptions take up Bitcoin’s block capacity is solved, can the inscriptions continue to live? Some solutions are emerging.

Is there an opportunity for Bitcoin Layer 2?

Actually, after Luke bombarded the inscriptions and caused spam on the chain, someone proposed to him to create an “inscription chain” similar to Ethereum’s Layer 2. “This chain only needs to submit hash values to the Bitcoin network on a regular basis to run, right?”

“Yes,” Luke agreed after giving an affirmative response, “That works; it doesn’t even require a block size limit at all; every node can set its own limit (or no limit).”

Luke agreed with the Layer 2 solution to the inscriptions

In fact, this Layer-2 solution has been around in the Bitcoin ecosystem for a long time. The “Taproot Asset Agreement,” where the inscription can be relocated, mentioned in the inscription debate schedule by Seo Ming-xing, the founder of OKX, is one of them.

The Taproot Assets protocol was proposed by Lighting Labs, the developer of the Bitcoin payment network “Lightning Network,” and aims to provide developers with “scalable Bitcoin multi-asset network tools”, support the issuance of stablecoins and other assets on the Bitcoin network, and complete transactions through the Lightning Network.

Ryan Gentry, director of development at Lightning Labs, explained that the Taproot Assets protocol only requires issuers to make a single Bitcoin transaction to mint an unlimited number of valid taproot assets, and all metadata describing these assets is stored off-chain.

This approach just solves the use of assets such as inscriptions on Bitcoin’s block capacity, yet issuing and trading these assets can still profit miners. The only problem is that the metadata for graphics, video, and audio will be stored off-chain, and it is impossible to continue to “engrave” it on the Bitcoin chain. This is just like using Ethereum smart contracts to issue NFTs or other homogenized tokens.

In order to still be able to leave inscribed tokens in the Bitcoin network, the developers of the BRC-20 Atomials protocol proposed a “restriction law”, that is, introducing the FURTHER FACTOR (SF), redefining the number of intellect per unit of the ARC-20 inscription, and setting the default proof coefficient to 1:1, limiting any accuracy to a feasible range, so that token transfers of less than 546 units can be processed.

This approach is actually a way to bypass Bitcoin’s dust attack defense system. To prevent dust attacks, the Bitcoin network limits Bitcoin transactions in a single UTXO to no less than 546 Sats. This means that the minimum transfer limit for ARC-20 inscribed tokens is 546. Below this standard, transactions will probably not be packaged.

The Atomicals protocol approach did not solve the block occupancy problem Luke was concerned about, while the Layer 2 approach seemed more in line with the core developer’s idea of removing non-standard activities that were not conducive to the simple operation of Bitcoin from the network.

However, there are actually many Layer 2 solutions similar to Taproot Assets that expand the Bitcoin ecosystem off-chain, including Rootstock, Stacks, Liquid Network, etc., and the inscribed hype demand has once again pushed these expansion technologies to the forefront.

Regardless of whether the inscription is valuable or not, what is behind its popularity is the Bitcoin ecosystem, which has yet to be repaired. Although the Lightning Network has been adopted in small BTC payments, no other use cases have emerged for the Bitcoin main network, and the Taproot upgrade has brought about this possibility, but due to limited performance, scenarios such as DeFi and GameFi that have emerged in the Ethereum ecosystem that require high concurrency cannot be built on the Bitcoin network.

And this is related to the positioning of Bitcoin. As developers Ali and Luke insist, in their eyes, Bitcoin should follow Satoshi Nakamoto’s definition of a “peer-to-peer electronic payment system” and pursue security, decentralization, and privacy protection. It is the persistence of these characteristics that has made the Bitcoin network the largest and most secure blockchain network in the world.

However, the robustness of this network needs to be maintained by thousands of miners. Only if the profits of this group are guaranteed can they willingly become migrant workers, that is, the value of Bitcoin can cover or even exceed the cost of maintaining the network. In other words, the price of Bitcoin is greater than the cost of mining.

Currently, the price of Bitcoin has exceeded 43,000 US dollars, which has doubled from the low point during the year. According to a mining cost estimation model created by Cambridge University through global Bitcoin electricity consumption and the number of new releases per day, the average cost of 1 BTC is currently 42,700 US dollars, which is not very cost-effective.

However, Bitcoin’s current market capitalization is soaring. Apart from being affected by another reduction in Bitcoin block rewards next year, the greater stimulus comes from the market’s expectations that the Bitcoin spot ETF will be approved in the US. This means that the blockchain asset Bitcoin is becoming the target of mainstream financial markets.

Seen from this point of view, this wave of increases in the value of Bitcoin was not brought about by the inscribed market; past fluctuations were even more so. And the reason the inscription is burning is also because it is engraved on Bitcoin.

But what about after a Bitcoin spot ETF? As Bitcoin with a limited supply (21 million) is mined less and less, how will its story unfold? Can the story surrounding it have more plot points? These are the community nerves that really pierce the inscription market.

As Hong Shuning, a former blockchain expert at the People’s Bank of China, said, Ordinals is a high-rise building built on a beach. Its foundation is very unstable, and it itself is unlikely to develop into a very strong and complete ecosystem. “After more than half a year of development, we have now entered the biggest bubble period, but the biggest benefit this bubble period has brought us is that it has revived people’s confidence in the Bitcoin ecosystem.”

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