Recently Bitcoin has caught a second wind of activity after the viral success of Ordinals NFTs that make use of bitcoin block space to store their metadata. After a few weeks ordinals have appreciated massively in value and also now consume about 50% of all bitcoin blockspace.

One would think that bitcoiners worldwide would rejoice at this news; finally, a potential long-term usecase for their dearly beloved blockchain that could actually drive meaningful fee revenue to miners as the block subsidy is slowly taken away! If this seems like an appropriate response to you, then you’ve never met a true bitcoiner.

In true maxi fashion, the community decided to have a collective meltdown over this behavior:

With Luke Dash going so far as to imply that paying for blockspace on a blockchain is “lying and tricking the code”. There are a lot of reasons, both technical and cultural, that explain why the bitcoin maxis reacted like this.

Technically, these NFTs make use of an opcode called OP_RETURN. OP_RETURN burns a UTXO and allows the sender to paste arbitrary data up to a limit (40 bytes). The original intent of this opcode was to allow for financial record-keeping / receipts with unique info to be placed onchain. Bitcoin technically wasn’t designed to be an arbitrary storage layer. bitcoin core 0.9.0 release notes state:

“This change is not an endorsement of storing data in the blockchain. The OP_RETURN change creates a provably-prunable output, to avoid data storage schemes – some of which were already deployed – that were storing arbitrary data such as images as forever-unspendable TX outputs, bloating bitcoin's UTXO database.

Storing arbitrary data in the blockchain is still a bad idea; it is less costly and far more efficient to store non-currency data elsewhere.”

So the fear generally speaking is that this could cause the storage demands of the network to grow too rapidly. However, I think that this concern, which is often brought up by maxis, is actually no longer one.

This is because referencing those release notes, which were from 2014, fails to carry the context of that time into the situation. Crypto was far from mainstream and most use cases hadn’t been built yet. Many more people believed in the one-cpu-one-vote vision that Satoshi had laid out a few years before; in other words, it was still expected that most people would at least run light clients. Today, OP_RETURN or not, that is 100% not the case. Nobody runs their own nodes. At the end of 2014 the entire chain was 27k MB. Today it’s almost 500k. It doesn’t matter if someone does this or not, the chain is too big already.

Secondly, this is a pretty appropriate use of the available blockspace. Bitcoin’s primary usecase is tracking ownership of UTXO. In this case, the chain is being used to track ownership of metadata. It’s a pretty similar usecase if you think about it. I agree with the release notes that some forms of data are bad for the chain; namely abstract binary data representing whole files or something like that. But a pointer to some form of media feels fine to me ideologically. And remember; satoshi describes Bitcoin as a “peer to peer distributed timestamp server”. This is a pretty solid usecase for such a thing.

Culturally, bitcoin maxis have a problem with NFTs because they have a very strong idea of how exactly bitcoin should be used. If it’s used in any other manner it somehow violates the purity of the network and is therefore sinful. The irony of this take is that bitcoin is permissionless by design, and therefore it should be none of their business how others choose to use it.

That said, OP_RETURN does present a risk in the sense that someone could post something illegal or potentially harmful to others, only for it to be immutable and recorded forever. This is indeed concerning, but in my opinion, it is simply the consequence of a permissionless system. Wider society will certainly have to change the way it thinks at a deep level if we’re ever to tolerate decentralized networks at all.

So maxis hate this functionality of bitcoin. In fact, they always have. This debate has been simmering since OP_RETURNs inception. But the hard truth is that if bitcoin doesn’t do something, it will die. Fees are cut in half again in early 2024. After enough cycles, unless Bitcoin gigamoons and stays there, miners will have trouble covering their costs. It could take decades but it will someday happen, unless significant activity picks up on the network. That was supposed to come from payments volume, but there are no trends pointing to this ticking up anytime soon. It would be cool for bitcoin to become a global FX settlement layer, but there is no data to suggest this will happen. Thus the maxi dilemma: sacrifice your principles and save the chain, by allowing nonpayment ‘spam’, or stick to your guns and let the network fizzle?

I don’t know what will happen on the cultural front. But by now it should be abundantly clear that forking a community doesn’t work in bitcoin. So whatever the market decides will drag the maxis along with it, kicking and screaming.

Provenance is a potential usecase that holds promise for bitcoin, and could one day even save it. The idea of peer to peer cash, store of value, and global settlement layer all have somewhat fizzled. But one cannot forget how incredible bitcoin still is. It is the single most secure network in the world without intermediaries. One can have almost absolute certainty that anything stored there will remain unchanged and valid almost forever. That’s why its great to track ownership and payments.

Other blockchains are not as secure as Bitcoin. They don’t have as large an ASIC ecosystem, or they may not even use proof of work at all. Their token distributions may be unfair. They may not have sufficient valuation to properly secure their chain. In the future appchains will likely proliferate through the expansion of various modular frameworks. Smalltime devs launching appchains will want the most secure, decentralized experience possible, but may not have the ability to cultivate the billions in liquidity required to properly secure their chains.

Appchains will fall into a stack that includes interoperability protocols, frameworks and sdks, and data availability layers. Bitcoin security can and should be a part of this stack too. The idea of a timestamp server is perfect for securing other ecosystems. Unfortunately for maxis, the demand in blockchain is overwhelmingly for compute, not payments. Becoming an additional layer of security to this compute, and enabling a higher degree of censorship resistance gives Bitcoin a new usecase that could drive real value to the ecosystem. Some projects are already using this approach to security; my prediction is that eventually, at least all appchains (and perhaps some monolithic chains too) will want to integrate bitcoin security at some level.