Following the logic of the crypto market cycles, after the awakening of Bitcoin and, consequently, altcoins, there comes the time of NFTs. As the first two stages seem to have already started, crypto analysts turn their eyes to the NFT metrics and indeed, the last three weeks show an impressive surge in NFT trade volume.
According to The Block, since the beginning of November, NFT trade volume has nearly tripled compared to the volume registered in October.
However, a closer look at the chains where this volume occurred shows a very interesting trend. Indeed, most of the transactions took place on Bitcoin. This means that the NFTs in question are using the Ordinals protocol, which, despite its controversial and experimental nature, is gaining traction.
The Ordinals phenomenon is reshaping the NFT market and injecting new life into Bitcoin activities, but is it sustainable ?
The Ordinals’ impact on Bitcoin
The Ordinals are pieces of arbitrary data inscribed into the “witness” part of a Bitcoin transaction, attributing special qualities to satoshis, Bitcoin’s smallest units. The Ordinals transform satoshis (also knows as sats) into digital artifacts, either fungible, like utility tokens, or non-fungible, i.e. NFTs. This has become a new token standard called BRC-20, as an analogy to Ethereum’s ERC-20.
The Ordinals are controversial, with one part of the Bitcoin community praising them for bringing more activity to the Bitcoin network, and another part dismissing them as a superfluous trend that is taking away the focus on Bitcoin as money.
What’s undeniable is that the Ordinals impact the whole Bitcoin ecosystem. This is most obvious in transaction fees that spike each time the network is solicited more than usual.
In fact, Bitcoin fees have risen so high recently, that they have even flipped Ethereum fees, known as the industry’s highest. Last week, the average Bitcoin fees exceeded $18, which is 9 times higher than the yearly average of around $2. The previous big spike in transaction fees corresponded to the initial Ordinals hype in May (source: bitinfocharts).
The Ordinals projects
The Ordinals protocol was released in April and the community jumped on the opportunity with astonishing zeal. Barely weeks after the word of the new inscription method got out, there were already wallets allowing to mint and transfer ordinals, as well as marketplaces allowing to trade them.
The number of projects using the Ordinals protocol continues increasing, however, they are yet to demonstrate true use cases.
So far, the most notable NFT ordinals mimic the existing collection initially minted on Ethereum. An array of Bitcoin Punks, Bitcoin Frogs, and Bitcoin Rocks are being enthusiastically traded on the new marketplaces like ordinals.market or Ordinals Wallet. In fact, this excitement reminds of the one surrounding the Ethereum-based collections at the heights of the bull market. A Bitcoin Rock, for example, has been recently sold for 3.5 BTC, or $130,000.
So far, the non-fungible Ordinals projects aim for the collectibles business model, where the collection’s value is created by its community. While not inherently flawed, however, this model is very hard to pull off, and there is a feeling in the larger crypto community that the Ordinals NFTs need to gain more utility.
The fungible Ordinals might fare a little better. The most popular ordinals coin $ORDI was conceived as a token facilitating payments on the Ordinals Wallet marketplace. With a market cap of $447 million, $ORDI now represents 70% of the nascent BRC-20 sector.
After the first buzz in May, the month of November saw the Ordinal’s hype reviving.
ORDI's listing on Binance on November 7 fueled a significant wave of buying activity, contributing to a 50% price jump on the day. This event, coupled with Taproot Wizards' (a collectible collection) $7.5 million seed round announcement on November 17, further underscores the growing excitement.
The Future of Ordinals
The Ordinals landscape is evolving, with the emergence of wallets like Hiro and Xverse, or user-friendly applications like Gamma and the Ordinals Bot. These platforms democratize the minting process, allowing users to upload content for inscription and create their Bitcoin ordinals through a simplified payment process.
However, the biggest challenge for this emerging trend is the utility. The Ordinals project must prove themselves useful beyond the memecoins and insider jokes. They must respond to real-life needs, otherwise they will be relegated to history as yet another crypto experiment.
Written by D.Center