The Ordinals Protocol Has Caused a Resurgence in Bitcoin Development
The Ordinals protocol has triggered a revival of interest in bitcoin (BTC) development and has led to an increase in average block size as more users join the network, research firm FSInsight said in a report Friday.
Ordinals is a new protocol that allows non-fungible-tokens (NFTs) to be stored on the Bitcoin blockchain.
NFTs could be a good source of demand for blockspace while the digital asset “travels up the adoption curve as money,” and the probability of these tokens fueling bitcoin’s next bull run cannot be ignored, the report said.
“Despite the loud critics from the more dogmatic side of the bitcoin ecosystem (some of which have gone as far as advocating for the censorship of transactions by miners), the benefits to the network have become immediately apparent,” wrote Sean Farrell, head of crypto strategy at FSInsight.
One reasonable criticism of bitcoin’s security model is the lack of miner revenue attributable to fees, the note said. Currently, most of the security budget paid to miners to secure the network comes from the block subsidy. The blockchain needs to figure out a way to “create a sustainable demand for blockspace or hope that non-economic miners commit to securing the network,” the note added.
“The excitement surrounding NFTs on Bitcoin has brought new experimentation to the network, increasing average blocks sizes overnight, which translates to higher fees per block,” the report said.
FSInsight notes that there are concerns that the inscription of non-fungible data on the blockchain could cause bloat, but says that these concerns seem generally unfounded.
Read more: How Bitcoin NFTs Might Accidentally Fix Bitcoin’s Security Budget