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What Are Bitcoin Inscriptions?
“The Times, January 3, 2009: Chancellor on brink of second bailout for banks.”
This is a message recorded by Bitcoin’s founder, Satoshi Nakamoto, in the genesis block of the Bitcoin network. That day was January 9, 2019 [sic]. This inscription witnessed the birth of Bitcoin and also recorded a satire on the financial crisis.
Satoshi Nakamoto was not the only one who hoped to bring more information into the Bitcoin network. To date, more than 33 million inscriptions have been created.
So, what are Bitcoin inscriptions?
From a technical perspective, each bitcoin is divided into 100,000,000 units called satoshis (SATS). Each bitcoin acts as a small storage space, and an inscription is the placement of additional information within this space. For example, content can be inscribed onto a satoshi using the Ordinals protocol. The inscribed information may include text, images, videos, audio, and other media.
To facilitate understanding, consider the following analogy:Bitcoin inscriptions are akin to engraving text onto a “digital stone tablet” of Bitcoin,similar to writing or drawing on paper banknotes. However, all of this is accomplished in the digital world through blockchain technology, ensuring that once written, the content cannot be altered or deleted.
Depending on the type of content embedded, Bitcoin inscriptions can be categorized into two main types: text-based inscriptions and image-based inscriptions.
Text-based inscriptions are primarily used to create tokens, such as those under the BRC-20 token standard. The BRC-20 token standard is a protocol for creating tokens on Bitcoin, similar to the ERC-20 token standard on Ethereum. The BRC-20 token standard allows users to create their own tokens and trade them in ordinal markets. Currently, hundreds of BRC-20 tokens have been created, some of which have significant market capitalization and liquidity, such as Ordi, Pepe, and Meme.
Image-based inscriptions are primarily used to create non-fungible tokens (NFTs), i.e., collectible digital artworks or collectibles. These NFTs can represent various themes and styles, such as animals, cartoons, and abstract art. Some NFTs are original works, while others are copies or imitations of NFTs on other blockchains. Although the number of image-based inscriptions is lower than that of text-based inscriptions, they are more popular in the market. Currently, the most expensive Bitcoin inscription is an image named “Genesis,” which reportedly reached a market price of USD 10 million.
Within the first 200 days since the first Bitcoin inscription, 1.14 million image-based inscriptions were created, exceeding the total number of NFTs minted on the Ethereum, Solana, and Polygon networks during their respective first 200 days. A report by Galaxy Research and Mining predicts that the market capitalization of the Ordinals market will reach USD 5 billion by 2025.
Commercial services surrounding the concept of Bitcoin inscriptions have gradually emerged. For instance, browser extension wallets designed to custody inscriptions enable users to connect to trading platforms, send and receive bitcoins or inscriptions, and view Ordinals collections, providing a user experience comparable to Ethereum’s MetaMask. In addition, some companies have launched Inscription-as-a-Service products, such as Ordinalsbot and Unisat. Binance Pool, the mining division of Binance, the world’s largest cryptocurrency exchange platform, also launched its Inscription-as-a-Service on August 31, 2023.
Are Bitcoin Inscriptions Merely Hype?
Readers who understand the principles of Bitcoin inscriptions will likely immediately raise the following question:“Brother, you’re playing with inscriptions, but what practical use do they have?”(Friends familiar with the song “Second-Hand Roses” may automatically sing along.)
Proponents advocating the investment value of inscriptions argue:“Bitcoin is digital gold, and inscriptions are gold jewelry.”
Upon hearing this analogy, I was somewhat startled. The last time someone attempted such a forced association with Bitcoin, it was Litecoin.
Some argue that Bitcoin inscriptions represent a valuable innovation. They not only demonstrate the potential and flexibility of the Bitcoin blockchain but also add new functionalities and use cases to Bitcoin, enabling the creation of rare and unique digital artworks on the Bitcoin blockchain network that represent certain historical moments or convey specific meanings.
To persuade skeptics, they specifically cite an example. On May 11, 2020, Bitcoin underwent its third halving event, reducing the block reward from 12.5 bitcoins to 6.25 bitcoins. This was a significant milestone in Bitcoin’s history, signaling increasing scarcity of Bitcoin supply and rising prices. Therefore, the first block mined after the third halving (block number 630,000) is considered highly commemorative. The Bitcoin inscription contained in this block is regarded as a precious digital heritage. Reportedly, this inscription was auctioned to an anonymous buyer for USD 21 million (approximately RMB 135 million).
There are many similar examples. Some individuals even specifically seek out inscriptions with special numerical or character combinations, believing they can express wishes or blessings. For instance, some have spent considerable time and money attempting to mine a block containing auspicious numbers such as “88888888.”
I strongly suspect that buyers with an affection for such sequential numbers are Chinese; indeed, it seems inscriptions tap into a genetic memory.
However, readers who understand the principles of Bitcoin inscriptions outlined earlier should clearly recognize thatBitcoin inscriptions themselves hold no intrinsic practical value; they are merely technically random generated numbers used to ensure the security and stability of the Bitcoin network.
The hype surrounding Bitcoin inscriptions is not the first in the blockchain industry, nor will it be the last. More importantly, is this kind of minor cosmetic adjustment and micro-innovation within the Bitcoin ecosystem truly aligned with the original intent behind Bitcoin’s creation?
Do not become so entangled in blockchain complexities that you forget why Bitcoin was created.
As a decentralized digital currency, Bitcoin aims to establish a trustless, open, fair, transparent, secure, private, and freemonetary system，that enables people to exchange value without interference from intermediaries.
The value of Bitcoin lies not in its form but in its function. Its spirit is to resist centralized and monopolistic monetary systems. Treating Bitcoin inscriptions as collectibles or artworks constitutes a misunderstanding and distortion of Bitcoin’s essence.
I do not consider such intricate embellishments—akin to embroidering patterns on a snail’s horn—to be progress in the blockchain industry.This is a betrayal of Bitcoin’s founding philosophy. Apart from reaffirming that the blockchain industry is prone to hype, it offers no greater value.
Uninformed retail investors, without fully understanding what inscriptions are, see others making substantial profits from Bitcoin inscriptions and jump on the bandwagon. The result is often buying at peak prices and being exploited by large players. How is this different from the Ethereum ICO frenzy of 2017? The hype surrounding Bitcoin inscriptions is precisely a reenactment of that scenario.
We cannot control the fervor of speculative retail investors; meddling in their affairs is futile. Thus, we can only offer distant well-wishes: beware of the strong winds on the rooftop [a metaphor for financial ruin]. However, friends who truly understand Bitcoin’s original intent and comprehend the social value of blockchain technology should remain steadfast, stay true to the original aspiration, and keep the mission firmly in mind.
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