📖
Web3 Encyclopedia
  • Welcome aboard!
  • Source
  • 😀Evolution from Web 1.0 to Web 3.0
    • Web 1.0 Web 2.0 Web 3.0
    • Key Features
    • Current Limitations
    • Future of Web 3.0
    • Learn: What Is Web3?
    • Learn: Will Every Brand Have a Web3 Strategy?
    • Learn: Big Ideas in 2023
    • Learn: The Web3 Paradox: Why Scaling Usage Alone Won't Lead to Mass Adoption?
    • Learn: Is Web3 A Marketing Buzz or Tech Revolution?
    • Learn: What is the relationship between blockchain and Web3?
    • Learn:Empowering Women in Web 3.0: The Role and Contributions of Women in Blockchain, DeFi, and dApp
    • Learn: Web 3.0 and the Future of E-Commerce
    • Learn: 12 ways ecosystem projects can attract more developers
    • Learn: How Web3 is Impacting Education?
    • Learn: Web3 And The Future Of Digital Advertising
    • Learn: Web3’s impact on personalization, trust and engagement
    • Learn: Web3-Powered Identity Management -- Unlocking the Benefits of Decentralization
    • Learn: Why Web2 companies fail in Web3 while others made it?
    • Learn: To Identify or Not in a Web3 World?
    • 🤫[Insider Series] McKinsey x Web3
    • TL;DR 👀
  • 💲Blockchain Fundamentals
    • Why is Blockchain So Popular?
    • Introduction to Blockchain
    • Blockchain Misconceptions
    • Blockchain vs Bitcoin, Database, Cloud
    • Consensus Mechanism
    • Public and Private Keys
    • Hash Functions and Cryptography
    • Sharding
    • Types of Blockchains: PoW, PoS and Private
    • Understanding Cryptocurrency
    • Coins vs Tokens
    • Blockchain Trilemma
    • Legality
    • Learn : Google’s Cloud Based Blockchain Node Service
    • Learn: How Blockchain, Digital assets, and Web3 Unlock Financial Inclusion Globally
    • Learn: Will Chinese-Made Crypto Soar Higher?
    • Learn: What Does MiCA Mean for Crypto in Europe?
    • Learn: Unraveling the Intricacies of Blockchain Forensics and Asset Tracking
    • Learn: Promising blockchain use cases in healthcare industry
    • Learn: The Role of Blockchain in Authenticating and Provenance Art
    • Learn: Blockchain-Based Digital Identity: Benefits, Risks, and Implementation Challenges
    • Learn: The Future of Energy Supply Chains
    • Learn: Revolutionizing smart contracts and cryptocurrency
    • Learn: Nigeria goes blockchain
    • Learn: A Game Changer for Online Gaming?
    • Learn: Is blockchain technology ready for high-storage applications?
    • Learn: Will Blockchain Technology Mark a Turning Point in Fraud Prevention?
    • Learn: Why ZK-rollups need data availability?
    • Learn: How will generative AI disrupt blockchain?
    • Learn: A New Blockchain for Generative AI?
    • TL;DR 👀
  • 🏟️Web3 Utilities
    • Decentralized Applications (dApps)
    • Cross-chain Bridges
    • DAO
    • Artificial Intelligence
    • Learn: Is Community-building Essential for Web3 Startups?
    • Learn: ‘Decentralization Theater’
    • Learn: Crypto and AI- A yay or nay combination?
    • Learn: Dissecting the DAO
    • Learn: What is motivating Lido DAO to rise?
    • Learn: How to Turn Your Community Into a DAO?
    • Learn: The Key to Decentralized Decision Making
    • Learn: How Web 3.0 can disrupt the supply chain industry?
    • TL;DR 👀
  • 🪙Bitcoin
    • What is Bitcoin
    • Bitcoin's Blockchain Technology
    • UTXO Model and Transaction Fees
    • Bitcoin Mining and Mempool
    • Learn: What is bitcoin mining?
    • What are Hard Forks and Soft Forks
    • What is SegWit and the Lightning Network
    • Bitcoin Ecosystem
    • Can Bitcoin be Destroyed? Game Theory and Network Attacks
    • Learn: Crypto token supplies explained
    • Learn: What is crypto tax-loss harvesting, and how does it work?
    • Learn: Can Crypto Go Green? How to Invest in Eco-Friendly Cryptocurrencies
    • Learn: Why Did FTX Collapse? Here’s What to Know.
    • Learn: How Sam Bankman-Fried swindled $8 billion in customer money?
    • Learn: How much is Bitcoin worth today?
    • Learn: The Costs of Running a Bitcoin Node In Nigeria
    • Learn: Has 2022 Left Any Crypto Positives?
    • Learn: How Crypto Exchanges Can Be Free of Risk?
    • Learn: Greed, Lies and FTX: Is Crypto a Force for Good or Evil?
    • Learn: Is Crypto a Cultural Movement?
    • Learn: What are the consequences of crypto’s ongoing regulatory process?
    • Learn: Beyond the Crash and Embracing NFTs?
    • Learn: Understanding crypto bag holders and their mindset
    • Learn: Inscriptions: Just A Fad, Or A Real Threat To Bitcoin Becoming Decentralized Money?
    • Learn: How Bitcoin Ordinals Can Change the Future Of Mining?
    • Learn: What is a supernet?
    • Learn: Bitcoin Miners Celebrate 10 Years Since First ASIC, What Changed Since Then?
    • Learn: Bill Vs. CBDC – Why This US Congressman Wants To Block The Fed From Issuing A Digital Dollar?
    • Learn: Why Bitcoin Will Blow People’s Minds In 2025?
    • Learn: How the Howey Test Sheds Light on Cryptocurrency's Regulatory Gray Area
    • Learn: Cryptocurrency vs AI: A Complex Debate
    • Learn: Where the U.S. Government Went Wrong in Regulating Crypto?
    • Learn: The Nostr Privacy Paradox
    • Learn: Do algorithmic stablecoins have a future as centralized coins are under scrutiny?
    • Learn: Is Bitcoin Set To Revolutionize The Financial World With Its Superior Purchasing Power?
    • Learn: What is Shibarium, and what does it mean for Shiba Inu?
    • Learn: What is a crypto dusting attack?
    • Learn: Is the Adoption of Central Bank Digital Currencies (CBDCs) the Future?
    • Learn: How Artificial Intelligence Could Revolutionize Crypto?
    • Learn: What’s next for EU’s crypto industry as European Parliament passes MiCA?
    • Learn: Why the EU Has MiCA and the U.S. Has Securities Law Confusion?
    • Learn: Six New Projects Looking to Mitigate Bitcoin Mining’s Energy Footprint
    • Learn: Who on Crypto Twitter chose not to pay for a blue checkmark?
    • Learn: What is the wash-sale rule in Crypto?
    • Learn: What is Pepecoin and can it flip memecoins Dogecoin and Shiba Inu?
    • Learn: Can you recover stolen Bitcoin from crypto scams?
    • Learn: What the ‘anti-mining bill’ means for the crypto industry in Texas?
    • Learn: Does the US have a crypto ‘tax loophole’ problem?
    • Learn: How users can stay protected?
    • Learn: How Crypto Revolutionize Cheaper and Faster Transactions?
    • Learn: Can NFTs and CFDs be BFFs?
    • Learn: A PR expert’s tips for memecoin projects
    • Learn: Why politicians aren't convinced about the Digital Euro?
    • Learn: How A 90-Year Old TA Theory Predicted The Sudden Bitcoin Boom?
    • Learn: Social Trading Platforms and CFDs: A New Paradigm in Investment
    • Learn: How could the Chinese economic crisis impact Bitcoin and crypto?
    • Learn: How do they compare: Bitcoin IRA vs. traditional IRA?
    • Learn: Why Tokenized Assets Are Safer During a Banking Crisis?
    • TL;DR 👀
  • 🛢️Ethereum
    • Bitcoin vs Ethereum
    • What can Ethereum do?
    • What is Ether (ETH)?
    • What's Unique About ETH?
    • What are Smart Contracts?
    • Energy Consumption?
    • Ethereum Virtual Machine (EVM)
    • Pros & Cons of Smart Contracts
    • Decentralized Applications (dApps)
    • Ethereum Token Standards (ERC-20, ERC-721 and ERC-1155)
    • Evolution of Ethereum
    • How to Get Your First Ethereum
    • Learn: Next Ethereum Upgrade — Shanghai Upgrade
    • Learn: Tipping Scale for Crypto Adoption: Usability vs. Accessibility
    • Learn: Major Publicly Traded U.S. Bitcoin Miner Files For Chapter 11 – Impact On The Market?
    • Learn: 5 altcoin projects that made a real difference in 2022
    • Learn: How Tether Can Be a More Stable Stablecoin?
    • Learn: Are the Ethereum Killers Still Deadly?
    • Learn: What Ethereum Tech Trends Are Weathering the Bear Market?
    • Learn: How Ethereum’s token burns are making it a deflationary cryptocurrency?
    • Learn: A few things to know about Ethereum's Shanghai Upgrade
    • Learn: The Role of Enterprise Ethereum
    • Learn: Understanding Layer 2 Scaling Solutions for the Ethereum Network
    • Learn: The Battle of Giants: Bitcoin vs Ethereum
    • Learn: Cryptography, Smart Contracts and Distributed Networks
    • Learn: The Memecoin Grift and How It Threatens Ethereum Culture
    • Learn: What Is Ethereum’s ‘Data Availability' Problem, and Why Does It Matter?
    • TL;DR 👀
  • 👛Wallet
    • What is a Blockchain Wallet?
    • Hardware / Software Wallet
    • How to Get Your First Cryptocurrency
    • Setting up Metamask Wallet
    • Learn: How to connect the Avalanche network to MetaMask?
    • Learn: How to pass on your crypto when you die?
    • Learn: What are hierarchical deterministic (HD) crypto wallets?
    • Learn: Pros and Cons of Digital Wallets
    • Learn : How Web 3.0 Wallets Are Redefining Digital Asset Security?
    • Learn: Open source: Buzzword or real security for crypto wallets?
    • TL;DR 👀
  • 🌕New & Rising Protocols
    • Binance
    • NEAR
    • Solana
    • Fantom
    • Polygon
    • Cardano
    • Polkadot
    • Cosmos
    • Harmony
    • Cronos
    • Optimism
    • Terra
    • Who Will Win the L1 Wars?
    • Learn: New Layer 1 Blockchains Are Expanding the DeFi Ecosystem But No Eth Killers Yet
    • Learn: Is an Increased Focus on Layer-2 Scaling and ZK Technology Justified?
    • Learn: What Are the Stakes in the SEC vs. Ripple Case?
    • Learn: What is The Graph, and how does it work?
    • TL;DR 👀
  • 📈Decentralized Finance (DeFi)
    • CEX vs DEX
    • CeFi vs DeFi
    • Algorithmic Stablecoins
    • Airdrop
    • Liquidity Pool
    • Impermanent Loss
    • Swapping
    • Wrapped Token
    • Arbitrage Opportunities
    • Staking
    • Yield Farming
    • Total Value Locked (TVL)
    • Gas Fees
    • Lending & Borrowing
    • Useful Tools
    • Activity: Uniswap & Pancake Swap
    • Learn: Automated Market Makers (AMMs) in DeFi
    • Learn: Crypto Moving towards ESG: What Is Regenerative Finance (ReFi)
    • Learn: What Is dYdX? Understanding the Decentralized Crypto Exchange
    • Learn: It's A Wrap - DeFi in 2022
    • Learn: Why DeFi should expect more hacks this year?
    • Learn: The Security Challenges of DeFi
    • Learn: The Promising Future of Decentralized Social Media on Web 3.0
    • Learn: Can CBDCs, Tokenized Deposits, Stablecoins and DeFi Coexist?
    • Learn: The Increasing Popularity of DeFi and Its Potential to Disrupt Traditional Finance
    • Learn: The future of DeFi is ReFi
    • Learn: DeFi aggregation
    • TL;DR 👀
  • 🙈Non-Fungible Token (NFT)
    • What are NFTs?
    • Case Study
    • Storage
    • Who are the Players?
    • NFT Marketplace
    • NFT Useful Resources
    • Activity: Mint Your Own NFT
    • Learn: How You Can Prevent Hackers From Stealing Your NFTs?
    • Learn: What Is an NFT Floor Price?
    • Learn: Should Bored Ape buyers be legally entitled to refunds?
    • Learn: China’s view of NFTs different from rest of the world’s
    • Learn: NFTs IRL: How Digital Collectibles Are Forging Offline Experiences
    • Learn: How NFT Brands Can Cut Through The Noise
    • Learn: How Web3 disrupts the music sector?
    • Learn: Unlockable content in NFTs
    • Learn: Why Meta Matters in NFTs?
    • Learn: Should NFT Marketplaces Become Centralized?
    • Learn: Hermès vs. MetaBirkins: The NFT Case That Could Have Major Trademark and Artistic Consequence
    • Learn: What are phygital NFTs, and how do they work?
    • Learn: What is NFT ticketing and how does it work?
    • Learn: Why Solana NFT marketplace is seeing less active users?
    • Learn: NFTs and Intellectual Property
    • Learn: How AI Is Changing Artistic Creation and Challenging IP Laws?
    • Learn: The Future of NFTs: Exploring Dynamic NFTs and Their Versatile Use Cases
    • Learn: NFTs in the event and ticketing industry
    • Learn: What is NFT rarity, and how to calculate it?
    • Learn: What happens to your NFTs when you die?
    • Learn: Dogecoin-Like Spike in Milady NFTs After Elon Musk’s Tweet, But Will It Last?
    • Learn: What are NFT royalties, and how do they work?
    • Learn: How developers aim to store crypto inside NFTs?
    • Learn: Generative Art NFTs: What Are They & Why Are They So Popular?
    • TL;DR 👀
  • 💗Metaverse
    • What is the Metaverse?
    • Metaverse Economy
    • Metaverse Companies
    • GameFi
    • Learn: Are We in the Metaverse Yet?
    • Learn: Can the Metaverse exist without blockchain?
    • Learn: Can the Metaverse Facilitate Sustainable Growth of Defi Systems?
    • Learn: What is the role of biometrics in the metaverse?
    • Learn: Can metaverse be the future court?
    • Learn: Metaverse Fashion Is on the Rise, but for Whom?
    • Learn: Sustainability in the Metaverse: Challenges and Opportunities
    • Learn: How To Build A Responsible Metaverse?
    • Learn: What is a VTuber, and how do you become one?
    • Learn: How proof-of-identity provides human experiences?
    • Learn: The “Metaverse” Next Frontier for Business: Impact And Challenges
    • Learn: The 5 Biggest Misconceptions About The Metaverse
    • Learn: Why culture and ownership are critical to the metaverse?
    • TL;DR 👀
  • 👾Career in Web3 (coming soon)
    • Developers
    • Moderators
    • Community Managers
    • UI/ UX Designers
    • Digital Fashion Designers
  • 🌱Sustainability (Coming Soon)
    • Industry Effort
    • Co-author
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On this page
  • The Quick Explainer
  • What's an inscription?
  • What's the bull case for Ordinals and Inscriptions?
  • Concern Raised With Inscriptions
  • Revisiting Old Debates In Bitcoin: Purpose, Scaling And More
  • Taproot is not to blame
  • Cultural Issues
  • Can this trend realistically be stopped?
  • Ossification? Not Yet
  • Bottom Line
  1. Bitcoin

Learn: Inscriptions: Just A Fad, Or A Real Threat To Bitcoin Becoming Decentralized Money?

The surge of inscriptions raises old debates about Bitcoin’s “true” purpose and its ability to become the money of the internet.

PreviousLearn: Understanding crypto bag holders and their mindsetNextLearn: How Bitcoin Ordinals Can Change the Future Of Mining?

Last updated 2 years ago

So, we’ve recently seen and . What’s going on with all this Ordinals and inscriptions madness?

The Quick Explainer

Ordinals are a made up way of tracking sats (a fraction of a bitcoin) across transactions. Now, I stress it is a made up way of tracking sats, as it does not meaningfully impact bitcoin’s fungibility. As , it’s a convention of numbering sats in the order they’re mined into existence, and tracking them across transactions in a first in, first out (FIFO) method. So, as Bitcoin transactions are made up of inputs and outputs, the first satoshi in the first input is considered to be transferred to the first output of a transaction. There are conventions around which Ordinals are uncommon, rare, epic, etc.

What's an inscription?

An inscription is another made-up convention where sats can be inscribed with arbitrary content, a kind of Bitcoin-native digital artifact or NFT. Using the convention, they can be sent around and stored in a Bitcoin unspent transaction output (UTXO). Now, because they are coded in such a way that they are written into transaction witnesses, they never enter the UTXO set. The UTXO set is seen as having heightened consideration for the network because every node (even pruned nodes) must maintain this UTXO set. So, I guess it could have been worse…

What's the bull case for Ordinals and Inscriptions?

To steel man the case a little: The pro Ordinals and inscriptions case could broadly be understood as:

You could also agree with some of the , and see this as a way of arguing that “Bitcoin does it better” e.g., Bitcoin inscriptions are immutable, always on chain, simpler and more secure than shitcoin NFTs.

Concern Raised With Inscriptions

The main concerns here are:

  • Reduced accessibility to transact on Bitcoin because of inscription/NFT degens creating a transaction backlog and paying a lower fee per real byte because of the witness discount

  • Reduced ability for users to run a full Bitcoin node because of the increased storage and bandwidth requirements

  • The possibility of illegal material being recorded into Bitcoin’s blockchain that might discourage some users from running a Bitcoin node

Of course, there are counter arguments also:

  • Bitcoin was eventually going to develop a fee/blockspace market anyway and this may help with long-term viability of the network. Inscriptions may just form a “low value backlog” of transactions.

  • Bandwidth and storage costs have come down over the years since 2017. Though, arguably, bandwidth over Tor may still be problematic for those syncing a full node in a more private fashion. It could also be argued that it’s all still within conservative design limits that the network effectively accepted in 2017.

  • Illegal material on chain was always possible because you can’t fully stop steganography on bitcoin. is when you represent information within another message, in such a manner that the presence of the information is not evident to normal human inspection.

Revisiting Old Debates In Bitcoin: Purpose, Scaling And More

What is Bitcoin for? And should arbitrary data that doesn’t relate to financial transactions be encouraged or discouraged on Bitcoin’s blockchain?

Taproot is not to blame

Some commenters were initially blaming the Taproot soft fork for inscriptions. But Taproot seems to only save about 4% on the cost of inscriptions.

It’s also worthwhile to note that this kind of thing was possible with SegWit, and beforehand with OP_RETURN and even before that, with fake signatures, as explained by Adam Back here:

Cultural Issues

Some ETH huffers and cRyPtO people are enjoying this moment because, in their eyes, they can “stick it to the maxis” and those of a more “Bitcoin fundamentalist” persuasion, i.e., the people who believe bitcoin should be a money.

I’m closer to the “fundamentalist” camp myself, seeing my mission as being about advancing bitcoin as money. And surely, after all the effort of Bitcoin developers to optimize and use blockspace more efficiently, the inscriptions on chain seem wasteful and unnecessarily decreasing Bitcoin’s accessibility for use in financial transactions.

Some argue that taking actions against Bitcoin inscriptions is “censorship” and that it’s wrong to view these transactions as “spam,” given that they pay a bitcoin transaction fee. But in the end, it comes to the purpose of the project. While yes, it’s true that Bitcoin is designed to be censorship resistant and that NFTs arguably “started on Bitcoin” in years gone by, Bitcoin is arguably meant to be more about decentralized and peer-to-peer electronic cash.

Can this trend realistically be stopped?

It’s also the wrong play to be too reactive about inscriptions and to try to take some drastic action to soft fork or make inscriptions unviable at a technical level. There are arguably bigger fish to fry, like helping improve Bitcoin adoption as money and helping encourage further decentralization in the custody of bitcoin, the mining of bitcoin, the scalability and verifiability of Bitcoin, etc.

Ossification? Not Yet

Yes, we should be conservative, but we should also consider technologies that help bitcoin be the best that it can be at being digital hard money.

Bottom Line

While I’m “against” inscriptions in a sense and would rather they be socially discouraged, I also don’t think it’s worth getting too worried about them for now. For all we know, they could be a short-lived fad.

But even if they are not a short-lived fad, what’s the most likely outcome here? Low-value inscriptions will likely be priced out by financial transactions over time as Bitcoin gets adopted by more people. It’s just that adoption happens in a “lumpy” way and it’s concentrated into periods of high use (as seen in 2013, 2017 and 2021), and then periods of relative doldrums as transaction volume subsides, and new technology and scaling techniques are applied.

This article first appeared in Bitcoinist, by Stephan Livera

Some are arguing that, “We shouldn’t have raised the block size with SegWit and the witness discount in 2017” and, to some extent, this latest Ordinals and inscriptions trend is raising similar questions as those in the of 2014.

Short of drastic action, probably not. At least, that’s what :

Some even go so far as to argue that, “Oh, this is a mistake and we must ossify the Bitcoin protocol now to stop any further mistakes.” I think this would also be an error. There are various soft fork ideas that are opt in, do not harm non users and could help scale bitcoin self custody. For example, or .

ANYPREVOUT in particular is interesting to me because someday, with global adoption, we may have that we have now. In that world, ANYPREVOUT enables an upgrade to “Eltoo” Lightning, giving us a way to share the cost of on-chain transactions in a self-custodial way. If we want Bitcoin to be used in a way that’s more self sovereign, we ideally want people to be able to afford to take self custody on chain. Without this, they may be confined into custodial platforms because the cost of self custody is too prohibitive. also has various benefits for Lightning, such as making backups easier.

🪙
a Bitcoin transaction take up nearly an entire block
default mempools (300 MB) get filled up
explained by creator Casey Rodarmor on my podcast
“Come for the fun, rich art, stay for the decentralized digital money.”
critiques of shitcoin NFTs
Steganography
OP_RETURN wars
Andrew Poelstra spelled out in a recent post on the bitcoin-dev mailing list
ANYPREVOUT
OP_VAULT
approximately 80,000 times the transactional demand
Eltoo