Ordinals might be cool, but are they Really Good for Bitcoin?

The article was published in Bitcoin Magazine and Bitcoin Magazine UA in Ukrainian language

Article consists of 4 parts:

Part I. What is the concept behind ordinals? Part II. What’s good* about them? Part III. What’s bad* about them? Part IV. How to fix the bad* stuff?
*‘good’ and ‘bad’ in the current context are not absolute terms, the meanings will be described in more details further down the article.

Part I. I’m not poetic or rich, I just love art and money, and I collect them both.

From reading up on ordinals resources (handbook, ordinal theory overview, BIP) one can see a pretty straightforward idea behind the concept. The idea has classical numismatic roots: if I have a rare coin (and satoshi is indeed a rare coin, as the supply is limited), then I want to store it for as long as possible, either for fun, for my personal collector’s pleasure and beauty of the coin, or for the purpose of passing it to next generations so that they could sell it at a much more expensive price as I possibly ever could. If we add the concept of inscriptions to it, we fall even deeper down the fascinating numismatic rabbit hole, as coins that were minted in an extremely rare supply eventually indeed had a huge increase in value and served a great philosophical purpose.
As an example, we can see the history of the ***golden double eagle coin*** minted in 1933 in the US, which is currently worth $18.9 million, making it the most valuable one in the world. At first, the concept of minting such a coin, introduced by an old-good chap Theodor Roosevelt, was extremely seductive to August Saint-Gaudens, and in the spirit of ‘I have long wished to do what little I could to improve the shameful condition of our money,” as he wrote in 1905. “But now that I have the opportunity I approach it with fear and trembling.”, August got down to business. Little did he know that the child of his noble intention will be killed by a person carrying the same name as the one who planted the seed of inspiration into his hands and mind. In 1933 President Franklin Delano Roosevelt (NB! Yes, that’s a different Roosevelt) took the country off the golden standard, making the whole 445’000 supply illegal to own and ordering to gather the coins and melting them down. In the double eagle piece everything was perfect from the standpoint of modern bitcoin-values: it was made of pure gold, it had unique inscriptions, the supply was extremely limited, and after becoming illegal it only heated up the eagerness to own it. The coin even had a boating accident of its own sort, as around 20 pieces disappeared before the total supply got destroyed.

Part II. Gold is dead! Long live Bitcoin!

In the above mentioned context ordinals and inscriptions make a lot of sense and follow a pretty old tradition. People have always collected something that was either beautiful, expensive, or hard to get (stones, shells, gold pieces, minerals, animals, spices, clothes etc). So what is exactly good about ordinals?
  1. 1.
    For the person who loves Bitcoin as a collectible or can’t afford to own a big fraction of it, it becomes a thing of a huge value. Ordinals allow him to stamp the personal uniqueness and value of ownership till Internet-provider giants tear them apart (and maybe even a little bit after that).
  2. 2.
    For collectors (numismatists especially) ordinals bring a digital way to own, store and send the coins they deem valuable.
  3. 3.
    Ordinals go hand-in-hand with one of Bitcoin’s traits, which is being a store of value. Moreover, if you have a unique satoshi, you will HODL on to it for your dear life. So basically, if we describe the owner of an ordinally-iscripted satoshi, he would look somewhat around these lines - owning his sat and happy:

Part III. I’ll show you my sat if you show me yours.

But there are things which ordinals are lacking, from both social and technical perspectives. In real life, collectibles, as money, love silence. If you have a 22.00 carat black diamond in your apartment, you can show it off to some of your peers every now and then, but you probably don’t want a thug cartel from the neighbourhood to know about it. This brings us to the need of having privacy while operating and owning rare and expensive assets. As Bitcoin is pseudonymous, so are ordinals, because they inherit the properties of the timechain, are totally dependent on it and do not introduce any additional ways to make your ownership over an asset private.
Ordinals affect Bitcoin and add complexity and technical difficulties to many participants, from miners to regular users. Bitcoin is not that much scalable and it was not meant to serve as a file storage system that would cost users all their fiat savings to make one transaction. If I pay for my coffee I don’t want its cost to have a Ethereum-sized fee and be mined within a week because someone decided to inscribe some sats with ‘My heart will go on’ mp3 file for Valentine’s Day. As a miner, I don’t want to see JPEG garbage on my node and I don’t want to validate it, thus I can delay acceptance of it for as long as possible.
However noble the roots of ordinals are, talking into account the current Bitcoin development landscape, we, again, find ourselves in an good-old debate of 2017 over blocksize and polluting (or spamming) the timechain questions. So many ̶f̶o̶r̶k̶s̶ spears have been broken over this, that it is painfully hilarious to find ourselves boiling in this narrative again. I guess, when it comes to collectibles, the ̶g̶r̶o̶u̶n̶d̶h̶o̶g̶ block size day can indeed last almost forever for Bitcoin.
Also, inscription with a JPEG or mp3 doesn’t actually make a satoshi that much unique or bring a lot of additional value to it, like marker doodles of a toddler do not make your apartment walls those of a Louvre.
We could continue further on the flaws that the approach of ordinals and inscriptions has, but Bitcoin Twitter has been doing a great job for us over the past weeks, so we’ll humbly move to the last chapter of this article.

Part IV. How to make collectibles Really Good for Bitcoin?

As described in the beginning of the article, the human need of creating, owning and exchanging collectibles and art are more than valid, but ordinals and many other existing solutions that offer to cover those needs add more problems than they claim to solve. So let’s play a game and imagine a perfect collectible, think about the traits it should have and try to find a proper 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, which has the rights to change the art, add inscriptions to it, sell it, rent it out etc. Ownership rights should be transferred from one owner to another, with no ability to sell the collectible twice (aka prevent double spend) and with the ability to verify the uniqueness of the asset, fully peer-to-peer, without appealing to any third party.
  1. 2.
    Asset ownership must be private by default with an option to reveal the art and the author to the broad public. Why?
  • First of all, we all know that artists have very tender souls and not all of them can accept criticism lightly, which can bring many unpleasant and massive consequences.
  • Second of all, as described earlier, if I created a painting using rare and expensive materials, or if I own a rare piece of art, stone or metal, I don’t want the whole world to know about it as it might introduce many attack vectors, both digital and physical, for me as an owner.
  • Lastly, if a collectible gains value with time, it’s better to keep in away from the public eye and reveal or sell it when the time is right and the value would be the biggest.
  1. 3.
    Collectible should not live in Bitcoin timechain. It should not create any additional load, changes or debates on the main chain level, neither for users, nor for miners or node runners. It should not affect the blocksize or inject huge amounts of irrelevant data into the blocks. Bitcoin, at best, must remain nothing more but a settlement layer for various operations that are being performed over an asset. All the data, all the knowledge on the asset existence should be kept client-side.
Sounds like a nice fairy tale, doesn’t it? Well, while some choose to dream about perfect solutions, we prefer making our dreams come true. We have built a protocol that meets all the above mentioned criteria, and that solution is called RGB.
What is RGB? It is a smart-contract and rights ownership system, that helps collectors and artists to create valuable assets, sell & buy them, - in a private and scalable manner, with zero timechain footprint, on Bitcoin, with no added token.
RGB takes off the load from the Bitcoin timechain by putting all the data on the asset to the client-side using the concepts of client-side validation and single-use seals introduced by Peter Todd back in the day. The same ideas enable peer-to-peer verification of a collectible, without relying on any third party or miners. It brings privacy to holders and creators by applying zero-knowledge cryptographic primitives such as bulletproofs, thus ensuring no one will be able to hijack the transaction or genesis of an asset. Consequently, RGB does not affect Bitcoin fee rate thus preserving its market cost and avoiding all possible debates around it.
To summarise, ****we can say that not all JPEGs are art or collectibles, and not all collectibles are bad or harmful - it’s often a matter of how to operate them. And in this regard RGB is indeed Really Good for Bitcoin.
Version of the article published in Bitcoin Magazine Ukraine in Ukrainian language