Imagine digitally etching a little piece of bitcoin with 3D graphics of things like multicoloured spheres. Consider selling them for $16.5 million after that.
When you thought cryptocurrency couldn’t get much stranger, bitcoin unintentionally gives birth to a brand-new breed of NFTs.
The new players appeared in 2023 as a result of enhancements to the bitcoin network that allowed each satoshi, or one hundred millionth of a bitcoin, to hold a few megabytes of data, including text, photos, audio, and video.
The enhancements’ unanticipated side effect was the data storage. According to Glassnode Market Intelligence, since January, crypto fans have added a total of 385,000 “inscriptions” known as Ordinals to bitcoin, comprising more than 200,000 image files and more than 150,000 text ones.
Alex Miller, CEO of bitcoin developer network Hiro, asserted that this marks the beginning of a major shift in the range of possibilities for using bitcoin.
The rainbow balls are a component of TwelveFold by Yuga Labs, creators of the Bored Ape Yacht Club and NFT developers. TwelveFold is a collection of 300 photos of 3D objects rendered in a square grid. The set is described as “a visual allegory” for blockchain data.
This month, the corporation sold 288 of them at auction for $16.5 million, turning them into a profitable allegory, according on research firm Delphi Digital’s findings.
JPEGs of rocks and shadowy crowned figures, which have sold for $213,845 and $273,010 respectively, are two more top-selling Ordinals, which are named after the software protocol that permits inscription.
Galaxy estimates that the market for bitcoin NFTs, which only started in January, could be worth $4.5 billion by 2025. The company bases this optimistic prediction on a number of variables, including the expansion of the more mature Ethereum NFT market and the fact that bitcoin is by far the most popular cryptocurrency.
Caveat emptor, though: It would seem that little can be accurately predicted in the highly erratic market for non-fungible tokens.
According to CryptoSlam data, total NFT sales last month were over $1 billion, excluding Ordinals. This is an increase from the $324 million in November but still a small amount compared to the $5 billion last January and $2.7 billion in May.
But, in a short period of time, bitcoin NFTs have gained momentum. According to Glassnode data, transactions involving Satoshis inscribed with NFTs account for around 7% of all transactions on the bitcoin blockchain.
According to market participants, one of the main obstacles for this new type of NFTs is the lack of user-friendly platforms, with early transactions taking place over-the-counter on shared online spreadsheets.
According to Delphi Digital, this absence of infrastructure is a definite barrier to entry.
This rise of activity hasn’t been well received by everyone, notably some bitcoin purists who think the cryptocurrency should only be used for payments.
According to data from Blockchain.com, the average fee for a bitcoin transaction, calculated over a 7-day period, has risen to $1.981, its highest level since November, as Ordinals trading increased compared to under $1 at the beginning of February.
According to Cory Klippsten, CEO of bitcoin-focused financial services company Swan Bitcoin, “we want transactions to remain as inexpensive as possible so people around the world can run businesses and send money,” and he sees issues with “having it priced out through this non-monetary use case that’s kind of frivolous”.
According to some detractors, Ordinals are also clogging up the network; according to Blockchain.com, the 7-day average of the time it takes to complete a bitcoin transaction increased to over 186 minutes in late February, its highest level since the bitcoin selloff in November. Although it has since decreased to around 124 minutes, the range of 12.8 to 35 minutes transaction time in January and February is still much greater.