How Ordinals Fractured the Bitcoin Community (and Why It Was Necessary)

The new Ordinals protocol just made everyone’s answer to the question “What is Bitcoin?” a lot more complicated. Software engineer Casey Rodarmor launched the protocol on the Bitcoin mainnet on January 21. It allows digital artifacts like images, text, programs, and even video games to be inscribed directly on the Bitcoin blockchain. In other words, Ordinals means NFTs on Bitcoin.

This upgrade has caused a rift in the Bitcoin community. Some purists are calling Ordinals an attack on Bitcoin, while others are using it to troll over-serious Bitcoin enthusiasts known as Maxis, loading as much superfluous data into each block as possible. Despite the urgency of this NFT debate, inscribing data on Bitcoin blocks is nothing new. Long before Ordinals, a few old-school Bitcoiners floated the idea of incorporating a domain name system into Bitcoin. The project, dubbed BitDNS, was quickly shot down by Satoshi. “Piling every proof-of-work quorum system in the world into one dataset doesn’t scale,” Satoshi wrote in 2010, sealing its fate.

The Ordinals drama, petty though it may seem, has rekindled a necessary and ancient (in crypto terms) question: Should Bitcoin be used for non-financial purposes? To understand the answer, we must first understand why this debate is raging in the first place.

Why the uproar over Ordinals?

Adding NFTs to the Bitcoin mainnet challenges our perception of the first and most-ubiquitous cryptocurrency — and the divided response across the crypto community provides a clue as to why. To understand the uproar (warranted or not) around Ordinals, we must understand the prism of meanings people ascribe to Bitcoin.

To the Libertarian-leaning Maxis, Bitcoin is an identity. On the one hand, it’s a means of protecting savings and fighting inflation. But on the other hand, it’s a political statement. It’s a means to instantly transfer money to anyone, cheaply and without permission. To them, Bitcoin is a middle finger to the federal reserve, the government, and every bank in the world. In 2022, when GoFundMe withheld millions of dollars donated to Canadian truckers protesting COVID vaccine mandates, the Bitcoin community circumvented government and financial regulations by sending hundreds of thousands of dollars of Bitcoin directly into truckers’ wallets.

In some ways, these anti-government, anti-inflation, anti-damn near-everything Bitcoin purists identify themselves as much by who they are as who they aren’t. And they sure as hell aren’t those NFT-flaunting memelords on the other side. To paint with a brush so broad it couldn’t fit in a semi-truck trailer: the Bitcoin community is made up of right-leaning freedom lovers, and the NFT community is composed of left-leaning creators.

To the average NFT enthusiast, Bitcoin is just another cryptocurrency, and the mainnet is just another digital playground. But placing NFTs on Bitcoin challenges the average Bitcoiner’s identity. Asking a Maxi what they think about adding NFTs to Bitcoin is like asking a monk if you can defecate in his holy water. What do you think he’d say? We might say it’s just water—Bitcoin is a chain like any other—and another elixir can be made holy with the same alchemical incantations. But holy water ain’t just water to the monk, and Bitcoin ain’t just another chain to the Maxis.

Yet, in their blind, religious insistence on the purity of Bitcoin, the Maxis may miss what NFTs and other data on the Bitcoin mainnet could mean for the future of their beloved chain.

Why Ordinals are good for Bitcoin

One question being asked across the crypto community is: “Why do NFTs need to be on Bitcoin?” The lazy response is that it creates more use cases for Bitcoin. But that answer doesn’t drive to the heart of what’s at stake with Ordinals, Bitcoin, and cryptocurrency on a cultural level. Maybe Bitcoin, as a thing separate from its users and enthusiasts, isn’t meant to have more use cases. And use cases for use cases’ sake is one of the primary criticisms of crypto at large.

As we hurtle into the second quarter of this blistering century, and as more companies grunt and sweat under the weary enterprise of onboarding the next billion people into Web3, some of their efforts will be successful. More people will use blockchain technology, whether they realize it or not. And there will be those of us in the background—perhaps in quiet, tavern-like corners of the internet—looking at the celebrated advances around us, wondering why this or that item (digital and otherwise) must be on chain.

Perhaps with the Ordinals argument, we’re seeing an early iteration of a conversion we’ll repeatedly have in the near future. Why do NFTs need to be on Bitcoin? The response, from some, is: “Because they can be!” And isn’t that everything that Bitcoin is about? Because once you start regulating what data can or can’t be minted on-chain, you’re inevitably left with the question of who gets to decide. Maybe the Ordinals debate has flashed us forward to a future where being on-chain is taken for granted, and we no longer ask why an item is on-chain at all. But instead, we ask, “Why’s that item on this chain?”

Yet beyond the philosophical implications that Ordinals have on Bitcoin and crypto writ large, they bring some real potential benefits. The upgrades that made Ordinals possible were the 2017 SegWit upgrade, which created a separate field within each transaction called a “witness,” allowing people to provide more data like scripts and even smart contracts. Then the Taproot update in 2021 furthered Bitcoin’s smart contract capabilities, which led us to Ordinals in 2023.

Because Bitcoin’s transaction fees are determined by the amount of data in each transaction, and Ordinals adds more data to each block, Bitcoin’s transaction fees spiked significantly after the Ordinals launch. In no small part because groups like Taproot Wizards decided to troll the network with ever-larger blocks, including the largest block in Bitcoin history, with 4MB of data. 

Ordinals supporters might argue that the ability for miners to make more money from larger blocks will increase demand for block space and fees. This, in turn, could lead to wider markets and stronger demand for block space, providing a much-needed boost to the overall ecosystem. Miners, for example, could prioritize transactions with higher fees, leading to increased revenue for them. This, in turn, could make the network more secure as miners are incentivized to maintain it.

You could also argue that the same spirit that drives trolls to “exploit” the Ordinals protocol and clog the Bitcoin network with unnecessarily large blocks of data is exactly the same spirit that compelled Bitcoin Maxis to illegally send money to protesting truckers. Bitcoin is all about permissionless action: doing something just because you can and not letting anyone stop you. At least, that’s what it has become.

What Ordinals mean for Bitcoin’s future

In Satoshi’s whitepaper, he doesn’t mention the words permission or permissionless once. Instead, one of the first things he mentions is trust. Satoshi wanted to fix the inherent problems with trusting third-party financial institutions to facilitate electronic payments. One of the problems Satoshi pointed out was the cost of mediation, which “increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions.”

In 2008, Satoshi seemed intent on making micro-transactions across the world without third-party trust or intervention a common occurrence. In 2023, increased transaction fees, increased block sizes, and the need for moderation of lewd images within days of the Ordinals launch all seem to go against this original ideal for Bitcoin. 

Do NFTs on the Bitcoin network enable Satoshi’s original mission? Likely not. But maybe that’s not the question we should be asking. Just as fundamentalists in all religions can cling overzealously to the literal words of their founding documents, perhaps many of us––Maxi or not—have stuck too closely to the words in the Bitcoin whitepaper and lost sight of the original ideals.

The question isn’t whether or not we have the right to use Bitcoin for things beyond Satoshi’s original vision; the question isn’t about “JPEGs on the mainnet.” It’s beyond that. We have to ask ourselves whether or not we have an obligation to reimagine what Bitcoin is and what it could be. In the same way NFTs on Ethereum will transform from JPEG monkeys to digital housing deeds or medical records, use cases for Bitcoin will also change.

The short-sighted among us say, “Just because you can mint NFTs on Bitcoin doesn’t mean you should.” And they’re right. Just because you can mint NFTs on Bitcoin means you must. Maybe NFTs on Bitcoin isn’t the end-all use case, and perhaps Satoshi would be appalled at the recent behavior on his pristine, holy chain. But it’s also possible that NFTs mean wider adoption of Bitcoin. And wider adoption might mean more people exchanging small amounts of currency without trust in a third party, just as Satoshi envisioned. Because sometimes, you have to stray from an original vision in order to achieve it, and sometimes the practical use cases only stem from the impractical ones.

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