HomeCryptoThe Debasement Of Bitcoin. A Lesson To Learn.

The Debasement Of Bitcoin. A Lesson To Learn.

When superficial changes are implemented to address underlying problems, there are often poor results.

The remembered battle of the block size in the Bitcoin community did not have a unanimous consensus, and for this reason there was a separation of systems, and it led to a Hard Fork, with the new Bitcoin Cash blockchain.

Bitcoin Core developers have always denied the possibility of increasing the block size directly, but have introduced patches like SegWit and Taproot to gain efficiency and security.

Segregated Witness or SegWit is a backwards-compatible software update to Bitcoin, which was implemented after a Soft Fork, to disable third-party malleability and scriptSig, and slightly increase Bitcoin’s average block size (from 1 MB). up to a maximum of approximately 4 MB).

Taproot is a technology also implemented through a Soft Fork, in November 2021, and which aimed to improve Bitcoin’s privacy and ability to create complex smart contracts.

This allowed data to be added to the blockchain at low cost.

The use of Taproot had a slow adoption on the network, but has peaked in February 2023. Recent data shows how the adoption of Taproot has gone from being used in only 1.3% of all Bitcoin transactions to end of January, to reach a peak of 9.75% on February 10.

This was a product of the Ordinals NFT. Taking advantage of this design, the Ordinals NFT made their entry, which use the witness function in transactions, to include additional data expressed in hexadecimal system.

NFTs (Non Fungible Tokens) are unambiguous and indivisible digital representations of assets on the blockchain, which can be bought and sold. Generally used for art, they also have application for identity or ownership on certain blockchains.

There are two things that stand out about Ordinals NFT. First, they are native tokens that are made up entirely of on-chain data, meaning the actual image of the NFT is stored on the blockchain rather than simply linked to some image stored on an external website. Second, that the NFTs are connected to individual satoshis, which is new, since in Ethereum the NFTs are generated in smart contracts and in Cardano they are native tokens of the network.

There are almost 50,000 Ordinals NFT already issued in Bitcoin as of this writing. According to data from Dune Analytics, the day on which the most Ordinals transactions were recorded was February 9, 2023. On that day, there were more than 21,000 movements related to these tokens. Most of them, 20,895, included images, but there were also 136 videos, 2 applications, and 2 audios, while the rest only included text.

Data added with Ordinals is stored in a part of the block known as a token, where transaction signatures go.

The information stored there pays a quarter in commissions of what is paid for other transaction data.

This undoubtedly causes an increase in the weight of the blockchain and an increase in energy consumption, which will surely make it slower, and as a consequence, the fees will be more expensive.

On February 1, 2023, the Luxor mining pool mined the largest block ever recorded on the Bitcoin network, block 774628 of approximately 3.96 MB.

So what bothers opponents of Bitcoin NFTs is that, in addition to making the blockchain much more onerous for Bitcoin node operators, they do so by paying extremely low fees.

Adam Back, founder of Blockstream and one of the first developers to have contact with Satoshi Nakamoto, called for creating incentives for miners to censor such transactions. Yes, to censor transactions. But then he backed down:

Luke Dashjr, a renowned developer of Bitcoin Core, is undoubtedly one of the members of that community that shows his opposition to Bitcoin Ordinals NFT , asking for a filter for them, arguing that it is spam.

But there are also those who support the initiative arguing that it will bring interest and adoption.

Dan Held, a former employee of crypto ecosystem companies like Kraken and Blockchain.com said:

Some are also of the opinion that value distortions could result, where the satoshi assigned a record with Ordinals could become much more valuable than the fees and rewards a miner can collect from a block.

In a previous article I mentioned a point of attack on the Bitcoin network, which I understand to be possible on the Proof of Work consensus protocol: Regulations Will Attack Bitcoin Decentralization.

Now a new point of degradation of the system is evident, but this time it has been generated from within, since the blockchain was not designed to support such traffic in its blocks and its validation protocol was thought of as P2P electronic money.

These problems occur when changes are implemented to address fundamental problems (scalability and security), wanting to change their essence, and there are usually bad results.

A lesson for developers in the crypto industry.

Source link



Please enter your comment!
Please enter your name here

- Advertisment -

Most Popular

Recent Comments