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Multi-strategy venture building alongside founders
Nothing ResearchThe Last Few Nights before the Merge
The idea of the Merge has been circulating within the crypto community for a while now. Some of us are quite familiar with the concept, while others are not so much. So in this article, we would love to share our latest understanding & inference based on the recent PoS ETH update and Vitalik's live stream during the ETH Shanghai developer summit on May 20, 2022. What’s the Merge? The Merge means the end of proof-of-work (PoW) for Ethereum, and the full transition to proof-of-stake (PoS)....
Nothing ResearchThe Hardest Lesson We Learned from the Crypto Market (June 2022)
No Alternative Solution.The haze of inflation is haunting every single mainstream country around the world. The Ukrainian war, the pandemic, and the disruption of the global supply chain... It is undeniable that under the trend of globalization during the past two decades, no country can stay away from crisis to thrive and be happy by itself. The tremendous amount of oil and gas from Russia, the high-quality and affordable industrial products from China, and grains produced by Ukraine as the ...
Nothing ResearchThe Tug of War over Bitcoin Spot ETF Application
Diving into the saga of the Bitcoin (BTC) spot ETF. Past Events - Recent Developments - What the Future Holds Past: 1. Grayscale has made numerous attempts to convert its GBTC into a real spot ETF, but the SEC has consistently declined. - Due to GBTC's non-redeemable nature, its price has always seen a deviation from BTC. Currently, the deviation stands at -13%, marking a 2-year high. - The peak divergence was +40% (during the bull market zenith) and had slumped to -45% at its worst (dur...
Multi-strategy venture building alongside founders
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Let's dive into 10 interesting insights:
1. If the Bitcoin Knots client, as per Luke’s statements, stops supporting transactions with $Ordi inscriptions after the upgrade, what happens to these inscriptions?
Answer: Well, they won't be processed (or added to the blockchain) when miners using Bitcoin Knots client to produce a block.
2. So, what are the chances of the Bitcoin Knots client producing a block?
Answer: It's currently quite slim. As of December 2023, there are over 17,000 Bitcoin Core clients but less than 100 Knots clients, although this number has occasionally peaked at around 500.
3. Wait, what’s a client?
Answer: In the world of PoW blockchains, a client is essential software that manages ledger storage, mining, and wallet functionalities. As blockchains are permissionless, anyone can develop a client as long as it aligns with the blockchain's consensus rules. Hence, you find various clients like Bitcoin Core and Knots.
4. What if Bitcoin Core bans inscription transactions?
Answer: Even if Bitcoin Core were to ban inscription transactions, not all hope is lost. A significant number of users are still on older versions of the Core client. For instance, among the 17,000+ Core clients, 9,000 use versions 24-25, and 5,000 use 21-23. As long as older versions are in use, inscriptions can still function.
Thus, with a bit of patience, when it's the turn of an older Core version to produce a block, inscriptions can still be processed. While a transaction might currently take 10 minutes to get on the blockchain, it could extend to 30 minutes in the future.
Btw, miners typically upgrade to the latest version over time, so if everyone switches to newer versions, the usability of inscriptions could significantly decrease.
5. If Ordi communities decide to fork the Bitcoin chain, will it be successful?
Answer: Forking the Bitcoin chain technically is straightforward – you could just copy and paste old version Bitcoin Core’s code.
But getting consensus for such a fork is a whole other ball game. It's nearly impossible to get everyone on board – from miners and exchanges to holders and even regulatory bodies like the SEC.
6. If I'm determined to fork, does the forked Bitcoin chain make sense?
Answer: Yes, but it's limited. Bitcoin’s claim to fame is its high-security level backed by substantial computing power. A new, less secure chain, even if it can issue digital artifacts, begs the question – why not just use an EVM chain instead?
7. Is Ordi exploiting a vulnerability in Bitcoin?:
Answer: Technically, yes, but it’s more accurate to describe it as working around limitations. The term "exploiting" is a bit harsh and it's usually reserved for hackers. Although Ordi isn't overtly exploiting Bitcoin, it indeed causes waste of block space usage.
8. Really? What is the process of inscription, and how does it bypass the restrictions?
Answer: Inscriptions involve selecting 1 satoshi (0.00000001BTC) and inscribing it by using Bitcoin’s Taproot technology to add a text script to this satoshi.
(Because of the "dust attack" limit, you actually need at least 546 satoshis, not just 1 satoshi. However, it's common practice to introduce it using 1 satoshi, which is the most traditional method.)
For example, the note might say: the protocol is Ord, the format is UTF-8, and the content is “hello world.”
If we must draw an analogy, it’s like: Bank account transfers are originally for transferring money. Now, every time I transfer one cent to you, we insist on chatting through the notes with the transfer.
It's hard to say this is exploiting a vulnerability, but it's probably misuse.
Normally, Bitcoin does not support creating NFTs, but by using this “transfer + note” method, it's indirectly achieved. Also, through Taproot technology, the note's original limit is bypassed, expanding it from 512b to 100kb or even higher.
8.5 A side note: It's important to differentiate between notes and smart contracts. Smart contracts are akin to signing a legally binding agreement, whereas notes are simply…notes. They don't carry the same legal weight.
This distinction is one of the key differences between Ethereum-based NFTs and BRC inscriptions. For instance, a transfer via a NFT smart contract is a definitive transaction that can't be disputed. On the other hand, a transfer with an inscription note, such as assigning Todd’s inscription to Alex, is just a written statement in the note. The Ordi protocol then treat this note as valid for a transfer, giving it a semblance of an official transaction, but it's not equivalent to a smart contract.
9. Inscriptions are not NFTs, right?
Answer: Indeed, they are not. There are differences between them.
Inscriptions differ from NFTs. While a lot of NFT data is usually stored off the blockchain, inscriptions must be fully on the BTC chain.
This has its pros and cons.
The advantage is that miner income increases, and this might be an important revenue source for miners after several halvings.
The downside is that it enlarges the Bitcoin ledger (since it bypasses restrictions to add a lot more content), which is not beneficial for the storage of full nodes. The larger the ledger, the fewer the full nodes, making the blockchain more like an alliance chain.
9.5 Is the size of the chain ledger really that important? Ethereum has grappled with its large ledger size, even considering cutting some historical data and state to manage it. Bitcoin has traditionally managed well with its smaller block sizes, keeping the chain ledger relatively compact and thus supporting a more decentralized network.
10.What is the future of inscriptions?
Answer: Perhaps a self-imposed limitation on transaction size could be a good approach. Taproot is a new technology in Bitcoin Core, intended to enable Bitcoin to implement some basic script functions.
Ordi can use Taproot to bypass the maximum note limit. But stuffing too much into Bitcoin in a bypassed manner is not ideal, as it expands from a 512 bytes to several hundred kbs, a hundredfold increase.
A balanced approach could help avoid a 'tragedy of the commons,' potentially making digital artifacts more acceptable to the Bitcoin community.
Author:
@0xTodd | Nothing Research Partner
Nancy Lin | Nothing Research Analyst
Email:
Let's dive into 10 interesting insights:
1. If the Bitcoin Knots client, as per Luke’s statements, stops supporting transactions with $Ordi inscriptions after the upgrade, what happens to these inscriptions?
Answer: Well, they won't be processed (or added to the blockchain) when miners using Bitcoin Knots client to produce a block.
2. So, what are the chances of the Bitcoin Knots client producing a block?
Answer: It's currently quite slim. As of December 2023, there are over 17,000 Bitcoin Core clients but less than 100 Knots clients, although this number has occasionally peaked at around 500.
3. Wait, what’s a client?
Answer: In the world of PoW blockchains, a client is essential software that manages ledger storage, mining, and wallet functionalities. As blockchains are permissionless, anyone can develop a client as long as it aligns with the blockchain's consensus rules. Hence, you find various clients like Bitcoin Core and Knots.
4. What if Bitcoin Core bans inscription transactions?
Answer: Even if Bitcoin Core were to ban inscription transactions, not all hope is lost. A significant number of users are still on older versions of the Core client. For instance, among the 17,000+ Core clients, 9,000 use versions 24-25, and 5,000 use 21-23. As long as older versions are in use, inscriptions can still function.
Thus, with a bit of patience, when it's the turn of an older Core version to produce a block, inscriptions can still be processed. While a transaction might currently take 10 minutes to get on the blockchain, it could extend to 30 minutes in the future.
Btw, miners typically upgrade to the latest version over time, so if everyone switches to newer versions, the usability of inscriptions could significantly decrease.
5. If Ordi communities decide to fork the Bitcoin chain, will it be successful?
Answer: Forking the Bitcoin chain technically is straightforward – you could just copy and paste old version Bitcoin Core’s code.
But getting consensus for such a fork is a whole other ball game. It's nearly impossible to get everyone on board – from miners and exchanges to holders and even regulatory bodies like the SEC.
6. If I'm determined to fork, does the forked Bitcoin chain make sense?
Answer: Yes, but it's limited. Bitcoin’s claim to fame is its high-security level backed by substantial computing power. A new, less secure chain, even if it can issue digital artifacts, begs the question – why not just use an EVM chain instead?
7. Is Ordi exploiting a vulnerability in Bitcoin?:
Answer: Technically, yes, but it’s more accurate to describe it as working around limitations. The term "exploiting" is a bit harsh and it's usually reserved for hackers. Although Ordi isn't overtly exploiting Bitcoin, it indeed causes waste of block space usage.
8. Really? What is the process of inscription, and how does it bypass the restrictions?
Answer: Inscriptions involve selecting 1 satoshi (0.00000001BTC) and inscribing it by using Bitcoin’s Taproot technology to add a text script to this satoshi.
(Because of the "dust attack" limit, you actually need at least 546 satoshis, not just 1 satoshi. However, it's common practice to introduce it using 1 satoshi, which is the most traditional method.)
For example, the note might say: the protocol is Ord, the format is UTF-8, and the content is “hello world.”
If we must draw an analogy, it’s like: Bank account transfers are originally for transferring money. Now, every time I transfer one cent to you, we insist on chatting through the notes with the transfer.
It's hard to say this is exploiting a vulnerability, but it's probably misuse.
Normally, Bitcoin does not support creating NFTs, but by using this “transfer + note” method, it's indirectly achieved. Also, through Taproot technology, the note's original limit is bypassed, expanding it from 512b to 100kb or even higher.
8.5 A side note: It's important to differentiate between notes and smart contracts. Smart contracts are akin to signing a legally binding agreement, whereas notes are simply…notes. They don't carry the same legal weight.
This distinction is one of the key differences between Ethereum-based NFTs and BRC inscriptions. For instance, a transfer via a NFT smart contract is a definitive transaction that can't be disputed. On the other hand, a transfer with an inscription note, such as assigning Todd’s inscription to Alex, is just a written statement in the note. The Ordi protocol then treat this note as valid for a transfer, giving it a semblance of an official transaction, but it's not equivalent to a smart contract.
9. Inscriptions are not NFTs, right?
Answer: Indeed, they are not. There are differences between them.
Inscriptions differ from NFTs. While a lot of NFT data is usually stored off the blockchain, inscriptions must be fully on the BTC chain.
This has its pros and cons.
The advantage is that miner income increases, and this might be an important revenue source for miners after several halvings.
The downside is that it enlarges the Bitcoin ledger (since it bypasses restrictions to add a lot more content), which is not beneficial for the storage of full nodes. The larger the ledger, the fewer the full nodes, making the blockchain more like an alliance chain.
9.5 Is the size of the chain ledger really that important? Ethereum has grappled with its large ledger size, even considering cutting some historical data and state to manage it. Bitcoin has traditionally managed well with its smaller block sizes, keeping the chain ledger relatively compact and thus supporting a more decentralized network.
10.What is the future of inscriptions?
Answer: Perhaps a self-imposed limitation on transaction size could be a good approach. Taproot is a new technology in Bitcoin Core, intended to enable Bitcoin to implement some basic script functions.
Ordi can use Taproot to bypass the maximum note limit. But stuffing too much into Bitcoin in a bypassed manner is not ideal, as it expands from a 512 bytes to several hundred kbs, a hundredfold increase.
A balanced approach could help avoid a 'tragedy of the commons,' potentially making digital artifacts more acceptable to the Bitcoin community.
Author:
@0xTodd | Nothing Research Partner
Nancy Lin | Nothing Research Analyst
Email:
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