Innovation in Bitcoin’s technology may significantly expand its use case
Bitcoin's ("BTC") utility has recently been expanded with an innovation that could accelerate its adoption. BTC's price has since massively outperformed other major crypto assets (see chart vs ETH). Perhaps not a coincidence.
Bitcoin’s (“BTC”) utility has recently been expanded with an innovation that could accelerate its adoption. BTC’s price has since massively outperformed other major crypto assets (see chart vs ETH). Perhaps not a coincidence.
The #blockchain is a decentralized and distributed digital ledger that uses cryptographic techniques to record all transactions securely and immutably. Its scarcity was designed to provide a defense against the debasement of fiat currency, and it has been successful in achieving this goal, with hundreds million people around the world using #BTC for this purpose.
A new methodology called “Ordinals” was introduced last month that enables arbitrary data to be inscribed to any transaction on the blockchain. This allows data such as text, audio, video, and software to be permanently etched on the blockchain and controlled or transferred only by the owner of a private key, just like BTCs are transferred across wallets. Already, 150,000 Ordinal Inscriptions have been committed to the blockchain in just one month, with their number growing exponentially. While they are currently primarily digital images/NFTs, the potential use cases for Ordinals are far broader and could significantly accelerate BTC’s adoption. Any use case that requires immutable and secure record-keeping, such as property deeds, company shares, identity and more, could potentially be included, turning BTC into a kind of ultimate “layer 0” record of truth. As per BTC’s monetary use case, it is also growing with the adoption of layer 2 protocols such as Lighting Network that are built on top of BTC and can perform tens of thousands of transactions per second at virtually no cost.
BTC’s blockchain is the oldest, most established, and most decentralized protocol, as well as the most secure because of its consensus mechanism “proof of work,” which requires a large amount of computing power. The use case for #Ordinals will increase adoption and, therefore, create more economic incentive for participating in the consensus mechanism, hence making the platform even more secure. Furthermore recent regulatory developments have raised concerns about the viability of platforms that use “proof of stake”, the alternative type of consensus mechanism which is employed by ETH and other blockchains. This type of consensus mechanism is subject to regulation, giving BTC an advantage. The SEC and other regulatory agencies have already established that BTC is not a security and is outside their purview.
The adoption of Ordinals could lead to increased demand for BTC and significantly boost its price. It is key to emphasize the volatile nature of the crypto market is likely to continue, and investors should proceed with extreme caution.
Disclosure: Not investment advice. Do your own research. Hold all assets mentioned. Twitter @pietroventani for more timely comments and updates
