Understanding BTC NFT and Future Potential in One Article

06/03/2023·1years ago

After the Spring Festival, the biggest hot topic in the Web3 industry is not the strong rise of L2 newcomer Arbitrum, nor the fierce competition between the two new flagship public chains Aptos and Sui. Instead, it comes from the Web3 living fossil BTC. Since the launch of the Ordinals protocol on December 14th last year, as of March 6th, more than 300,000 NFTs have been minted, and the first 10K collection Bitcoin Punks minted for free using Ordinals was sold out in less than a day. This was almost unimaginable before, as BTC has always been synonymous with sluggishness and high cost.

People have not paid much attention to BTC other than its price trend. It has been joked that "the biggest value of the old car made of pure gold is to be exhibited in a museum."

But now, there is no doubt that BTC has ushered in a second spring. According to Dune, Bitcoin NFTs peaked in February this year:

https://dune.com/dgtl_assets/bitcoin-ordinals-analysis

Perhaps many people are still confused about the concepts of "prosperity of the Bitcoin ecosystem" and "Bitcoin issuing NFTs". Next, we will explain them one by one:

What is BTC NFT

In one sentence: BTC NFT is an NFT product released based on the BTC ecosystem. It seems that there is no difference from ETH NFT and Polygon NFT.

But in fact, the issuance of NFTs on the BTC chain is defined based on the smallest unit of the BTC network, Sats. First, we need to understand what Sats are: the name of the 8th decimal place of Bitcoin, with a ratio of 1:100 million to BTC, named in honor of Satoshi Nakamoto's great invention. So how does the BTC network use Sats to issue NFTs? Here we have to mention a protocol: Ordinals.

https://ordinals.com/

Ordinals is an NFT protocol based on the BTC network, aiming to assign a unique identity to each satoshi (sat). By using the Ord software, this protocol adds data to these sats and allows software users to track them based on an ordinal numbers system. In other words, the Ordinals protocol represents the smallest unit of Bitcoin, sats, in the form of NFTs, and gives sats sufficient transaction value and collection value. When the smallest unit becomes a new speculative target, to some extent, it also counts as a capacity expansion for Bitcoin.

Since the birth of the Ordinals protocol, users can engrave information on the Bitcoin chain, including text/pictures/audio/video, creating NFTs on the Bitcoin chain.

It's like engraving your name and picture on a 1 cent coin, so this 1 cent becomes a Non-Fungible Token. For example, this Sats with the ID dd082adcb3aab2882185e3a2f927bbff53cf6ffe8ab472d57740ea9f95c0acdai0 has the following characteristics: the time it was mined, the percentile, the name, the block it was mined in, and rarity, etc. At the same time, this Satoshi has also been engraved with a visual jpeg. Based on these characteristics, you can easily find it. This Sats is also called Inscription 338381, which means it is the 338381st inscription.

How is it different from smart contracts?

From the above, we understand the origin of BTC NFTs. So how is it different from the conventional ETH NFTs on the market? First, we need to clarify the definition of smart contract NFTs.

Definition of Smart Contract NFT:

  • Smart Contract NFT: How to achieve uniqueness & indivisibility: The Token ID composed of integers is mapped to a URL containing NFT metadata (name, description, image address), and then the contract serves as the collection boundary, so that a specific NFT can be retrieved layer by layer through contract address→TokenID→metadata.

  • Collection: NFT Collection issuance and transfer using 721 or 1155 protocol contracts.

  • Metadata: Usually stored in IFPS or centralized servers, the smart contract of the collection has metadata attributes, setting metadata to point to a URL storage address.

  • Transactions: Transfer NFT authorization to the trading contract through the Marketplace trading contract.

  • In other words, an NFT should have at least four elements: uniqueness, indivisibility, transferability, and descriptiveness. Let's see how BTC NFTs achieve this.

BTC NFT:

  • Uniqueness: Ordinals ordinal theory: Ordinals are numbered from 0 according to the order in which sats are mined, with the first sat in the first block having a sequence number of 0, the sequence number of the second sat being 1, and the sequence number of the last sat being 4999999999, so that each sat has an ID property.

  • Indivisibility: As mentioned above, Sats is the smallest unit of BTC and cannot be further divided.

  • Transferability: Transfer the sats in the transaction input to the output sats in first-in-first-out order to achieve directed transfer. However, in the current transaction process, due to the lack of smart contracts, a centralized platform is needed to act as an arbitrator.

  • Descriptiveness: Stored on the BTC chain, so there are size limitations. Since the inscription is on the chain, it cannot reference off-chain content, so it cannot be modified. Unlike Ethereum NFTs, which index off-chain content through IPFS or AWS, inscriptions cannot support on-chain royalties due to the lack of smart contracts and other issues.

How to obtain BTC NFTs?

  • Hardware requirements

  • Computer with a solid-state drive of 1TB or more. Generally, most people will use their personal computer to install a full node for Bitcoin, in addition to their own space, at least 600GB of space is needed to store Bitcoin blocks.

  • Normal network environment, synchronization takes a relatively long time, about 10 hours, and users in China may need to use VPN or take longer.

  • Process

  • Download BitCoin Core and synchronize the full node, 500GB+ space;

  • Download Ordinal and create an Ordinal wallet;

  • Use the ord protocol command to inscribe Satoshi;

  • Transfer BTC to the wallet.

  • Set up a minting robot: to facilitate minting and receiving orders.

  • Mint NFTs: you can easily upload pictures/audio/video to let the robot mint NFTs for us. The larger the file size, the more gas fees are required for minting, and thus the more expensive it is.

  • Mint Sats domain names: buying a domain name on Bitcoin once is permanently free, with no need for annual renewal.

https://docs.sats.id/sats-names/about

* Set the inscription, the inscription on Bitcoin can be a picture or a txt document. Below is an example of inscribing a sats domain name using a txt document.

* Open the built-in software 'Text Edit', enter the content required by the official sats, and save it as a txt file, then copy the file's saved path.

* In the ordinals command window, enter ./ord wallet inscribe 'file path' --fee-rate current fee rate. You can check the current priority fee rate here. Note that you must manually set the fee rate, as the default rate is 1, and not setting it will cause the transaction to be stuck and unable to be confirmed.

https://hub.cryptocell.guru/ordinalsturbo/

* Wait for block confirmation, run ./ord wallet inscriptions to view the inscription information. Or you can also see the latest information on the ordinals website.

The above process is the method for minting BTC NFTs with a full node. Although it is troublesome for users to synchronize the full node on their own computer, it can reduce the loss of fees during the minting process and is conducive to deep participation in the BTC NFT ecosystem in the future.

If users find it too troublesome to set up a full node, in fact, there are already many third-party nodes in the industry to replace minting. For example: ordinalsbot, Gamma, unisat_wallet, and so on. The advantage of these third-party tools is that they simplify the minting process for users, but it also means that more fees and service fees need to be paid. The description of these products is explained in the following text.

Interpretation of the BTC NFT Ecosystem:

Yuga Labs: NFT field's strongest IP creator Yuga Labs announced a plan: to launch the NFT series TwelveFold on the Bitcoin blockchain based on the Ordinal protocol. TwelveFold is based on a 12 x 12 grid, which is a visual fable of Bitcoin blockchain data mapping. In addition, unlike PFP series such as BAYC, the works that make up the TwelveFold series are internally produced by Yuga Labs' art team using 3D modeling, algorithm construction, and high-end rendering tools, paying tribute to the currently manually completed ordinal inscriptions.

https://yuga.com/

DeGodsNFT: The Solana ecosystem NFT project DeGods has destroyed its 535 NFTs on the Solana chain and minted them as "inscriptions" using the Ordinals protocol on a separate block on the Bitcoin chain.

https://degods.com/

Crypto Punks: Crypto Punks is the first project to issue NFTs on the Bitcoin network, and BAYC is also considering issuing NFTs on Bitcoin.

https://bitcoinpunks.com/

Gamma.io: The Gamma platform aims to bring collectors, creators, and investors together in the Bitcoin ecosystem. The platform consists of three core products: an NFT marketplace, Launchpad, and social interaction. Users can use the tools provided by the Gamma robot to mint NFTs, solving the pain points of high technical barriers, complexity, and time consumption in creating NFTs on the Bitcoin network.

https://gamma.io/

Ordinals Bot: Ordinals Bot is also a tool for minting Bitcoin NFTs on the Ordinals protocol. This tool can save users the trouble of running a Bitcoin node when minting Bitcoin NFTs. Players can upload the NFT files they need to mint, fill in the NFT address they need to receive (the address is recommended to start with bc1), and click "Submit & Pay Invoice" to display the payment address and payment QR code. After payment, it may take 10 to 60 minutes for the payment to be officially confirmed and effective due to the slow Bitcoin network.

https://ordinalsbot.com/

Stacks: Stacks is an open-source project initiated by Bitcoin builders and is a Bitcoin Layer 2 that can use smart contracts. Strictly speaking, anything that can be built on Ethereum or Solana can also be built on Stacks L2s. Currently, contracts on Stacks L2 have locked in $250 million and have already distributed 2200 BTC as rewards to users. The next version of Stacks to be released this year will add a decentralized BTC anchoring, making it easy to transfer BTC into or out of Stacks L2.

https://www.stacks.co/

getAlby: Supports Bitcoin Lightning Network payments

https://getalby.com/

Xverse: Supports BTC NFT storage

https://www.xverse.app/

Currently, there are many projects born from the concept of BTC NFT, and this article summarizes several benchmark projects. veDAO Research Institute will soon release a more detailed summary of the BTC NFT ecosystem, so stay tuned.

Conclusion

Although the BTC NFT ecosystem is very prosperous, the financing situation in the Bitcoin sector is not optimistic. As of February 22nd, according to data from The Block, the Bitcoin ecosystem has only received $500 million in the past year, which is far from the total financing amount of nearly $30 billion in the entire industry, which does not match Bitcoin's status as the blockchain overlord. In addition to financing issues, current BTC NFTs also have many criticisms:

  • First, the threshold is extremely high:

  • High memory requirements;

  • Complex operation process;

  • Expensive gas, consuming a large amount of funds, making it difficult for small players to afford.

  • Secondly, it is resisted by BTC purists:

  • As mentioned above, giving value and meaning to Sats, to some extent, is a way to expand BTC, which will make many BTC purists think that it affects the scarcity of BTC.

  • In addition, giving NFT functionality to Bitcoin is also seen by BTC purists as a violation of the spirit core advocated in the Bitcoin white paper.

But no matter what, this innovation of Ordinals' NFTs is also a novel attempt at the future development path of the ancient Bitcoin, and with the huge financial volume of the BTC ecosystem itself, as the Bitcoin ecosystem is gradually being valued, the potential accumulated within Bitcoin will be further released.

References

@Jason_chen998

@CH_909

Follow Us

veDAO is a decentralized investment platform led by DAO, committed to discovering the most valuable information in the industry, and is keen on exploring the underlying logic and cutting-edge tracks of the digital encryption field, allowing every role within the organization to fulfill their responsibilities and receive rewards.

more