by Mar 14 (Reuters) – Imagine being able to digitally write 3D images of objects like multi-colored spheres onto a tiny fragment of Bitcoin. Then imagine selling them for $16.5 million.
Just when you thought crypto couldn’t get any weirder, Bitcoin inadvertently spawns a new breed of NFTs.
The new entrants emerged in 2023 following upgrades to the bitcoin network that allowed each satoshi — the smallest denomination of bitcoin, or one-hundred-millionth — to store a few megabytes of data, from text and images to audio and video.
Data storage was an unintended consequence of the upgrades. Now, crypto enthusiasts have embedded a total of 385,000 “inscriptions” known as ordinal numbers on Bitcoin since January, including more than 200,000 image files and over 150,000 text files, according to Glassnode Market Intelligence.
“I think this is really the start of a sea change in what you can do with bitcoin,” said Alex Miller, CEO of bitcoin developer network Hiro.
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The colored spheres are part of TwelveFold, a collection of 300 images of 3D objects rendered in a square grid by NFT developers Yuga Labs, best known for their Bored Ape Yacht Club. It calls the set “a visual allegory” for data on the blockchain.
They became a lucrative allegory this month when the company auctioned 288 of them for $16.5 million, according to data from research firm Delphi Digital.
Other top-selling ordinal numbers — named for the software protocol that facilitates labeling — are JPEGs of rocks and shadowy crowned figures, which sold for $213,845 and $273,010, respectively, according to Galaxy Digital Research.
Although the Bitcoin NFTs market has only existed since January, Galaxy estimates that it could be worth $4.5 billion by 2025, basing its optimistic forecast on factors such as the growth of the more established Ethereum NFT market and the fact that bitcoin is by far the most popular cryptocurrency.
But beware: In the highly unpredictable market for non-fungible tokens, it seems that little can be predicted with any degree of accuracy.
Total NFT sales — not counting ordinals — were about $1 billion last month, according to CryptoSlam data, a rebound from November’s $324 million but still a fraction of the roughly $5 billion reported in the past month last January and $2.7 billion in May.
Nonetheless, Bitcoin NFTs have been steaming up in a short space of time. Satoshis inscribed with NFTs are involved in about 7% of the total number of Bitcoin blockchain transactions, according to Glassnode data.
‘KIND OF EASY’
One of the biggest challenges for this new class of NFTs is the lack of user-friendly marketplaces, with early trades taking place over-the-counter on online shared spreadsheets, according to market participants.
That lack of infrastructure is a definite barrier to entry, Delphi Digital said.
Not everyone is excited about this surge in activity, especially some Bitcoin purists who believe the cryptocurrency should be used solely for payments.
The average fee for a Bitcoin transaction, measured over a 7-day period, has risen to $1,981, its highest since November, as trading in ordinals surged from below $1 in early February, according to Blockchain.com data.
“We want transactions to stay as cheap as possible so people can do business and send money around the world,” said Cory Klippsten, CEO of bitcoin-focused financial services firm Swan Bitcoin, who sees problems in “lowering the price through this non -monetary use case that’s kinda frivolous”.
Some critics say ordinals also clog the network; The 7-day average time to confirm bitcoin transactions rose to over 186 minutes in late February, the highest since November’s bitcoin sell-off, according to Blockchain.com.
That has since fallen to over 124 minutes, although that’s still significantly longer than the range of 12.8 to 35 minutes of transaction time in January and February.
“Ordinals have brought more attention to the network,” said Brendon Sedo, a developer on the Core DAO blockchain. “But NFTs on Bitcoin detract from the core purpose of the network, which is to serve as a permissionless network, available 24/7 globally and uncensorable.”
Reporting by Lisa Pauline Mattackal and Medha Singh in Bengaluru; Editing by Pravin Char
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