Digital Collectibles

Nifty News: BTC miners cash $5M on Ordinals, Reddit NFTs get botting backlash and more

Bitcoin transaction fees from Ordinals inscriptions have exploded by 240% over the last month.

Bitcoin (BTC) miners have pocketed over $5 million from creating nonfungible tokens (NFT) inscriptions using the Ordinals protocol.

Transaction fees for Ordinals transactions exploded 240% from $1.5 million on March 10 to 5.2 million by April 12, according to Dune Analytics data.

The rise came on the back of a relatively slow period between Feb. 16 and March 10, from $1 million to $1.5 million. Before that, fees hit the $1 million mark within the first four weeks of the Ordinals protocol launching on Jan 21.

Transaction fees paid for Ordinals inscriptions hit the $5 million mark on April 11. Source: Dune Analytics

Nearly 1.1 million Ordinals have been inscribed on the Bitcoin network, mostly comprising JPEG images and text but also consisting of PDFs, video and audio formats.

Roughly 100 to 500 inscriptions are processed in each Bitcoin block, which usually contains between 2,000 and 3,000 transactions. Block 783,758 on April 3 saw a record 3,785 inscriptions, representing nearly 87% of the entire block.

Reddit’s Gen 3 NFTs plagued by botting claims

Online community platform Reddit launched its third batch (Gen 3) of NFTs on April 12 — a “Futures Realities Collection” of collectible avatars created by over 100 artists.

Reddit explained in its announcement that the artists behind each limited edition Avatar will receive royalties upon each sale, and no cryptocurrency was needed to purchase them.

However, the release didn’t come without issues. Many Reddit users claimed they missed out on the sale because spam bots swooped in almost instantly.

Many also believe the bots were the reason behind Reddit’s NFT shop crashing shortly after launch.

“They didn’t incorporate any type of spam or bot prevention, like a simple captcha. Of course the site got overloaded,” one user wrote, with another remarking there was “no way you guys didn’t even think of stopping bots during this drop.“

Twitter user “Pastel Alpha” tweeted they managed to get “a good amount” of the NFTs “even though the site completely died” and thanked its “bot partners” for helping with its haul.

Reddit previously released a batch of Halloween-themed avatars in October 2022, which was followed by super bowl avatars in February.

Adidas releases first in series of dynamic NFTs

Shoe brand Adidas has released the first leg of its latest dynamic NFT collection, “ALTs by Adidas,” the latest move by the company in its quest to expand its NFT ecosystem.

The dynamic NFTs will evolve based on the decisions and engagement of the owner, according to an announcement on April 11, which described the collection as the “first step” toward owning an “ALTS by Adidas” identity.

The floor price of each Adidas NFT is 0.666 Ether (ETH) ($1,275) and has raked in 351 ETH ($672,000) in trading volume so far. There are now 8,989 owners, 56% of them unique.

Related: NFT warranties can help mass adoption of the technology, says Web3 exec

There are 16,000 items in total, and the creators take a 10% cut of each sale.

The ALTS by adidas NFTs are selling for a minimum of around 0.66 ETH. Source: OpenSea

Collectors must buy and burn phases 1 and 2 of Adidas’ “Into the Metaverse” tokens to receive the ALTS by Adidas NFT.

Be nonfungible, my friend: Bruce Lee enters Web3

An NFT collection commemorating the late kung-fu fighter and movie star Bruce “Little Dragon” Lee has been released by the Bruce Lee Estate in partnership with Shibuya, an NFT-driven video platform.

Plans for the release were revealed on April 11 when Lee’s Twitter account, managed by his family, shared an old video clip of Lee, transforming him into an animated version of himself.

The NFTs sold at a starting price of 0.008 ETH ($15), with 13,907 minted in the first 24 hours, totaling over $205,000, according to its smart contract address on Etherscan.

The NFTs were drawn by artist Emily “pplpleasr” Yang and were designed by Shannon Lee — Bruce Lee’s daughter.

Cover album of “House of Lee: Genesis” NFT. Source: Manifold

Despite it being an “open edition” collection, collectors can only mint a maximum of 100 of the NFTs.

Other Nifty News

NFT marketplace OpenSea launched “OpenSea Pro” last week, a new, specialized NFT marketplace aggregator aimed at serving the needs of professional NFT traders. The service was made possible by OpenSea’s acquisition of fellow NFT aggregator Gem in April 2022.

An NFT trader “fat-fingered” a bid for a free NFT, buying it at 100 Ether ($191,000). The token was part of NFT marketplace OpenSea’s Gemesis NFT collection to commemorate the launch of OpenSea Pro on April 4. Some believe the trader meant to bid the token for $100 instead.

NFT Creator, Emily Xie: Creating ‘organic’ generative art from robotic algorithms

Meta pulling the plug on NFTs across Instagram and Facebook

The short-lived NFT features were first launched in May, but Meta’s financial technology lead said it is “winding down” the tools to focus elsewhere.

Big Tech firm Meta is scrapping its nonfungible token features across its social media platforms, Facebook and Instagram, around 10 months after they first launched.

Stephane Kasriel, Meta’s head of commerce and financial technologies, tweeted the news on March 13, saying Meta is “winding down” its NFT support to “focus on other ways to support creators, people, and businesses.”

Kasriel added the firm is still prioritizing ways for users to “connect with their fans and monetize” and will focus on tools such as building payment rails on its platform and through its messaging apps, along with monetizing Reels, the short-form videos that feature on Facebook and Instagram.

In particular, Kasriel mentioned a focus on Meta Pay, the firm’s payment platform, which in the future could support cryptocurrency according to trademark filings from May.

NFTs on the platforms were relatively short-lived, as testing began in May with select creators on Instagram before expanding to Facebook in June.

The NFT features expanded again in August as Instagram made NFT tools available to over 100 countries. In November last year, Metlaunched an “end-to-end toolkit” for minting and trading NFTs within Instagram.

The announcement received scathing criticism from the crypto community, with NFT artist Dave Krugman tweeting it was “a short-sighted move” and that Meta “quit before [it] even started.”

“The trust earned over the past year is now squandered,” Krugman added.

Related: Meta working on text-based decentralized social network codenamed P92

Podcaster Marc Colcer said the move “seems short-sighted for a company that’s supposed to be thinking long term” and asked for transparency on Meta’s decision to scrap NFT support.

Allen Hena, the co-founder of Web3 firm Earth Labs, was more severe with his feedback, saying that Meta scrapped the idea as it “realized that using public crypto networks means you can’t exploit creators.”

Meta’s scrapping of its NFT tools aligns with other cost-cutting measures across the company as it directs focus to its expensive metaverse ambitions.

Last year alone, its metaverse-building division Reality Labs recorded its largest-ever yearly losses at $13.7 billion. Meta also undertook in November the first mass layoff in the company’s history, cutting 13% of its workforce, some 11,000 staff.

What are Bitcoin ordinals?

Bitcoin ordinals have been the most hyped-up Web3 trend of 2023 so far. How do ordinals compare to traditional NFTs, and what are the opportunities?

Ordinals vs. traditional NFTs

Ordinals are different from traditional NFTs from a technical design perspective. There are several features that make the pricing for ordinals a different exercise. 

Bitcoin ordinals, as mentioned before, help identify sats uniquely and have content or art stored on-chain. Ethereum’s ERC-721 standard, which is used to create NFTs, typically holds the metadata or a pointer to the art, which is generally held off-chain. Some Ethereum NFTs are experimenting with on-chain storage, but they are more of an exception.

The other key difference with Bitcoin ordinals is the way rarity is derived and how pricing around the NFTs would work. With traditional Ethereum-based NFTs, the attributes of the art typically define the rarity of the NFT and, subsequently, its price. With NFTs like Ethereum Name Service (ENS) for instance, limited supply drives the value.

However, with Bitcoin ordinals, pricing would be defined by key moments that a Bitcoin block would represent. The first 1,000 or 10,000 ordinals inscribed might still be treasured by collectors. Don’t be surprised if the genesis Bitcoin ordinal is sold for a few million dollars in a couple of years. Yet some sats would be considered more precious than others.

A simple framework suggested by the founders of Bitcoin ordinals is that key events would decide the rarity of a sat and the ordinal inscribed into that. The first sat of every new block would be rarer than the other sats in the block. The first sat of an adjustment period that occurs approximately every two weeks would be even rarer. As the next halving is slated for 2024, the first sat of each halving epoch would add another level of rarity. 

Finally, the first sat of the adjustment period, which happens once every six halvings (approximately once in 24 years), would be another level of rarity. Per the founders of this amazing innovation, this could differentiate Bitcoin ordinals from NFTs and make their rarity truly random and not controlled by the founding teams of nonfungible token collections or by their artists.

This could also help understand why the activity around Bitcoin ordinals has already peaked in the short term. It would be interesting to see how activity ramps up closer to the Bitcoin halving in 2024. 

How have ordinals been perceived by the broader Bitcoin ecosystem?

Bitcoin ordinals are a great innovation that can highlight various applications unique to the chain, thereby driving developers to participate and create the tools needed by users.

Bitcoin ordinals have certainly seen a hype that potentially peaked sometime in February 2023, based on transaction data. However, the hype around the application tier on the Bitcoin blockchain is just getting started. 

For instance, Stacks (STX) has seen a rise in price since the ordinals episode warmed up. It is clearly the early days for the Bitcoin ecosystem, but if developers are attracted to the chain, then the network effects between developers and users could come in time for the next crypto cycle.

Related: Bitcoin DeFi ecosystem explained

However, there are downsides to the way ordinals have been designed. As the inscribed content is all on-chain with ordinals unlike with most Ethereum-based NFTs, the size of the blockchain would increase. As new applications emerge and network utilization and transactions increase, so will the cost of transactions. 

The other potential impact of Bitcoin ordinals is whether it will affect the fungibility of sats. So far, satoshis have been exchanged with one sat being valued the same as another. With various applications of ordinals, this may not be true in the future. A sat with a Bitcoin Punk inscribed in it could be priced differently. Nonetheless, it would be interesting to see how this narrative evolves over the next few months and years.

How to buy, sell and trade ordinals

Much like the process of minting Bitcoin ordinals, the trading process hasn’t had the matured tooling. Yet there are a few tools to trade these digital artifacts.

As Bitcoin ordinals grow in popularity, most of the trades have been largely over-the-counter. Collections, such as “Planetary Ordinals” and “Bitcoin Punks,” among the first 1,000 inscriptions were transacted mostly without an NFT marketplace such as OpenSea or Blur.

However, tools like the Ordinals Wallet, Hiro and Xverse allow users to buy and sell Bitcoin ordinals. Users can buy some sats within the wallet, using on-ramp payment plugins, and perform the transactions to buy and sell ordinals.

The typical user journey involved in buying Bitcoin ordinals using Ordinals Wallet is as follows.

  1. Go to ordinalswallet.com
  2. Click on “Create Wallet”
  3. Take a backup of the recovery phrase for your wallet
  4. Set up a password for wallet access
  5. Use the address of the Ordinals Wallet to send some sats to the wallet 
  6. Go to “Collections” at the top of the page
  7. Choose the ordinals collection and the inscription that you would like to buy
  8. Buy the ordinal (using the sats in your wallet).

How to mine Bitcoin ordinals?

Mining, minting or inscribing Bitcoin ordinals are the terms that have been used to refer to this process. Unlike minting NFTs on the Ethereum blockchain, which is a relatively matured process, mining Bitcoin ordinals is a technically complex process and lacks intuitive tools.

Bitcoin ordinals, in the initial days, could only be mined by those who ran a Bitcoin node. For tech-savvy users, a Bitcoin node with the ord app, a command line wallet, would be the gateway to mining ordinals. Node operators would load their wallets with some sats to pay for the gas fees and perform an inscribing process on their ordinals.

However, no-code ordinal mining applications like the Gamma or the Ordinals Bot aim to allow users to upload the content that they want to inscribe to create their Bitcoin ordinal. The user journey takes them through a payment process using a QR code and is intuitive enough for the less technically gifted.

The tools around Bitcoin ordinals are still at a very early stage. It has only been a few months since the genesis ordinals were inscribed. As demand from ordinary users and followers increases, the ecosystem and the tooling should start maturing with more user-friendly journeys.

How do Bitcoin ordinals work?

Bitcoin ordinals are based on ordinals theory that essentially has brought life to satoshis (sats) and allows them to be treated as atomic units on the Bitcoin blockchain. Ordinals, in their simplest state, are a numbering scheme for sats.

Ordinals theory drives the mechanics behind how Bitcoin ordinals work. Ordinals theory defines satoshis (sats) as the atomic unit that can be identified and traded individually on the Bitcoin network. There are 100 million sats that make up 1 Bitcoin (BTC). Sats are numbered based on the order of mining, and this number, which uniquely identifies a sat, is an ordinal number.

Related: Bitcoin vs. Satoshi: Key differences explained

By being a unit of transaction, sats can also be inscribed with digital content that make up Bitcoin ordinals. They become immutable digital collectibles that can be transacted on the Bitcoin network using Bitcoin wallets. As per ordinal theory, sats can be attached to security tokens, accounts or stablecoins using ordinal numbers as stable identifiers.

Due to the broad set of use cases that ordinals can support, Rodarmor prefers not to equate Bitcoin ordinals with NFTs. The use case of ordinals to number a sat that’s been attached to or inscribed with a JPEG can be called a nonfungible token on the Bitcoin blockchain. Although the ordinal’s use that found market fit is that of NFTs on the Bitcoin blockchain, ordinals are much more than just nonfungible tokens.

What are Bitcoin NFTs?

Bitcoin NFTs — aka Bitcoin ordinals, aka digital artifacts — are a way to inscribe digital content on the Bitcoin blockchain. 

The Bitcoin ordinals protocol was launched in January 2023 by Casey Rodarmor. The protocol allows inscribing of digital content like art onto the Bitcoin blockchain. Unlike nonfungible tokens (NFTs) on Ethereum and other blockchains, Rodarmor wanted to create an immutable on-chain presence of a piece of art, text or video. The genesis ordinal was a pixel art of a skull that Rodarmor inscribed on Dec. 14, 2022. 

As the NFT space based on Ethereum’s ERC-721 standard skyrocketed in 2021, Rodarmor, who was a programmer and an artist, saw the opportunity to create a similar yet unique experience on the Bitcoin blockchain. His solution was Bitcoin ordinals, based on ordinal theory, which he went on to implement through 2022.

Ordinal theory concerns itself with satoshis, giving them individual identities and allowing them to be tracked, transferred and imbued with meaning. The ordinals hype really kicked off in February 2023, six weeks after the genesis ordinal was created.

The number of inscriptions doubled every week for a few weeks. However, the number could have been much higher if the infrastructure to inscribe and trade ordinals had been better planned and executed.

Daily inscriptions by type

The rise of Bitcoin ordinals has seen the Bitcoin network explode in terms of usage, fees and storage space as shown in the chart above. This may also be the first big breakthrough for the Bitcoin application tier and can help move the narrative from a pure “store of value” to something more utilitarian.