Ordinals Protocol Boosts Entire Crypto Asset Ecosystem[Column]| coindesk JAPAN

Here are two reasons why Bitcoin (BTC) has soared to its highest level since mid-August last month and outperformed all major assets in the crypto and equity markets over the past month.

Two reasons highlight Bitcoin’s unique strengths as the oldest, most established, and most decentralized protocol, and the surprising new opportunities to capitalize on those strengths.

• The first is the appearance of “Ordinals Protocol”. NFT creation on the Bitcoin blockchain is now possible, demonstrating new high-value use cases on the oldest blockchain.

  A report from research firm FSInsight says that the resumption of development and growth in trading volume on the Bitcoin blockchain, led by Ordinals, will drive up the Bitcoin price.

• Second, a series of crackdowns by U.S. regulators have led to a hard line drawn by SEC (U.S. Securities and Exchange Commission) Chairman Gensler that many, but not all, major crypto assets other than Bitcoin are securities. The risk of conflicting with has been highlighted.

  Bitcoin seems to be the only exception, which makes it look relatively attractive compared to Ethereum (ETH) and Solana (SOL).

Many Bitcoin maximalists may be celebrating this moment with evidence proving that their beloved Bitcoin is the one and only blockchain. Except, of course, for those who think that adding NFTs to Bitcoin is a disgrace to the original purpose of Satoshi Nakamoto’s vision of a “new monetary system.”

But I have always found it unproductive to look at the crypto industry through a maximalist, zero-sum game perspective. While this may seem like a time for bitcoin maximalists to celebrate their victories, it could also be seen as creating a much more integrated and constructive future for all cryptocurrencies.

layer 0

I have a feeling that a situation will arise in which bitcoin functions as an “anchor” that supports everything. Its role is to be the ultimate “Layer 0” kind of record of the truth.

Ethereum and other smart contract platforms, on the other hand, can each specialize in different types of transactions and data processing that are not suitable for bitcoin’s limited capabilities and offer high functionality. It will require better interoperability across chains, and many people are already working on it.

A base layer blockchain with its own crypto assets, most Layer 1 blockchains, including Ethereum, employ a Proof of Stake (PoS) consensus mechanism.

With the SEC suspending the staking service provided by Kraken, a major crypto asset exchange, in the United States, most American individual investors, other than those with extremely advanced skills and knowledge, It will be difficult to participate in staking on such blockchains, and staking on Ethereum and others is likely to become the source of institutional investors.

This is not an ideal situation.

In particular, by concentrating staking on large companies, there is a risk that censorship and regulation will effectively dominate. But in an integrated and interoperable cross-chain world, Bitcoin can serve as a countermeasure against such threats.

Bitcoin’s user and miner communities are geographically dispersed, making it difficult for governments to shut down Bitcoin. With Satoshi Nakamoto’s departure from the project, Bitcoin stands apart from other protocols whose founders are largely identified as there is no head of development for the authorities to subpoena.

Bitcoin is decentralized enough that U.S. regulators have admitted that Bitcoin is not a security. In the current environment of heightened regulatory tension, this is a distinct advantage.

Community of Innovators

This is also why the Ordinals Protocol is so important. The Bitcoin blockchain now has a purpose beyond peer-to-peer payments. Bitcoin’s mainstream appeal has always been undermined by restrictions on its interaction with the banking system and price volatility.

Incorporating the most important crypto-related innovation since its birth, NFTs, the Bitcoin blockchain has become associated with the digital content creators who underpin the Internet economy. This will create new creative innovations for Bitcoin.

It will encourage others in the crypto community to develop better bridges and integration solutions between Bitcoin and other alternative protocols.

Work on Cosmos, Polkadot, Polygon and other bridges and interoperability protocols to move assets across chains and reduce reliance on a single Layer 1 blockchain. Efforts to develop mechanisms for

Blockchain services company Bloq’s NFT Capsule team has already announced a Bitcoin NFT collection, ‘Ordinary Oranges’, accessible from Ethereum’s mainnet, with the option to ‘burn’ the NFTs back to the Bitcoin blockchain. .

The appeal of such a mechanism is that users will enjoy the proven security of the Bitcoin blockchain, while greater programmability of Dapps (decentralized applications) and Layer 2 protocols running on the Ethereum Virtual Machine (EVM). , and also leverage the high liquidity of Ethereum blockchain-based NFT marketplaces such as OpenSea.

These developments will lead to a more integrated crypto asset ecosystem, with different protocols serving different functions, all underpinned by Bitcoin, a proof-of-work (PoW) blockchain that U.S. regulators cannot stop. I’m thinking of going.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
| Image: Rachel Sun/CoinDesk
｜Original: Bitcoin Ordinals Can Lift the Entire Crypto Ecosystem