Ordinals: a sophisticated social attack that is undermining the monetary properties of Bitcoin.

Some thoughts on Ordinals and their risks by Unhosted Marcellus

Inés Ríos Carnero | November 27, 2023

We share a reflection by Unhosted Marcellus on Ordinals and their possible risks. In his X count (@oomahq):

All non-monetary uses of the Bitcoin network displace the monetary use case for which it was designed. In today’s thread I argue  that Ordinals are not a stupid fad but a sophisticated social attack that is undermining the monetary properties of Bitcoin.

The key insight to understand the problem came from the Austrian bitcoiner camp, and it’s that Bitcoin users (let’s call them transactors) and inscribers are not “playing the same game”. Let’s zoom in on a couple of TXs to put this in concrete terms:

This is a recent normal Bitcoin transaction making a payment and change. Bitcoin transactors want to pay a reasonable fee because the service they cared about is the one for which the system was designed: the transfer of value. In this case he payed 2% of a total value of $700.

Here’s an inscription from the same block. We can tell at a glance this user does not care about transfering value. He’s paying the miner directly for another kind of service, in this case inscribing data on the blockchain. Notice also he had to move much less funds.

Which one of these use cases will tend to win in the “free market for blockspace”? Transactors must either be willing to pay >90% of the value they move or move orders of magnitude more value than the inscriptors.

The passive approach Bitcoin took to tackle this problem is giving mindshare to the pysop that Bitcoin is helped by extraneous use cases to sustain the security budged. Well-meaning folks like @Robin_Linus are weaponized into attacking the system. The “security budget” pysop is neutralized like this: if you believe Bitcoin to be the best form of money ever invented that should cover for enough fee revenue in itself. Conversely, non-monetary uses of Bitcoin undermine its monetary properties.

This is a social attack that will need a social response. I don’t think Bitcoin is doomed, but the community needs to understand and be able to articulate the problem so that we can start converging on solutions.