Ordinal – The ‘NOT NFT’ NFT!

A new protocol service has been issued which allows digital assets to be minted to the Bitcoin Blockchain. It is called ‘Ordinal’

It declares itself NOT an NFT, and yet, it probably embodies more about what an NFT should be, than any token protocol we have had yet!

To talk about what Ordinal is, and isn’t we will probably first need to recap on what actually an NFT is.

1. NFTs are a type of token that give ownership title or ‘deed’ to a digital asset through minting on a blockchain. They are not the asset itself. For example: They are not a Cryptopunk or a Bored Ape.
2. As a token, to be considered an NFT, it has to be minted according to a specific protocol. That protocol needs to explicitly show that it has been designed to tokenize digital NFAs (Non Fungible Assets).

Tokens minted according to a protocol which describes itself as simply a ‘Token Standard’, ‘Multipurpose Token Standard’ or ‘Fungibility Agnostic Standard’ are NOT NFTs.

The processes involved in authoring a new NFT protocol for the creation of NFTs is as follows:

1. Declaration of intent.

The author(s)/designer(s) set out an abstract which demonstrates clear intention of creating a protocol best suited to tokenizing digital NFAs (Non Fungible Assets).

2. Execution and Testing

The author(s)/designer(s) design the protocol in compliance with the abstract’s expectations with sequential design iterations and testing to establish it improves on both performance and vulnerabilities of existing protocols in the same ecosystem.

3. Documentation

The author(s)/designer(s) produce end-to-end documentation recording 1-2 above, and publish it for public view. The protocol documentation explicitly announces itself as an ‘NFT’ protocol. It should also document any reference implementation.

An aside on Satoshis

Every once in a while, I will get some bright spark trying to claim that because a Satoshi is an indivisible atomic unit, then the currency must be an NFA.  There are 100 million satoshis (sats) in one bitcoin, meaning each satoshi is worth 0.00000001 BTC.

This is just a distraction to derail any sense of clarity around when the blockchain token of a digital asset is an NFT, and when it’s not.

Firstly, the fungibility isn’t about being infinitely sub-divisible. It is about how practical sub divisibility is in value exchange. Does subdividing preserve value?

For a tangible example, as a mass commodities trader in water,  there may be a prevailing price of 0.245721 litres water to the dollar. If somebody wants to digitally purchase $150.57 worth of water, they can. The transaction will go through exchanging a holding that has an obscure decimal. It will not all be whole litres.

This is fungibility demonstrated. The fact that the smallest unit in water is a molecule with one oxygen atom and two hydrogen atoms is irrelevant. The functional unit of exchange is the litre.

A tangible example of a ’Non-Fungible’ asset would be an antique ‘Ming’ dynasty vase. Though it may be worth $100m, if you owe someone $1m, you cannot smash it on the floor, find a piece roughly 100^th the size and pay them. Once broken all the pieces are worthless.

However, all of these justifications are a further distraction as the overriding issue is that the tokens entitlement to be considered an NFT is ONLY about the protocol in use. Does that protocol meet a standard intended as ‘NFT’ in line with the 3 point processes –

1. Declaration of intent. 2. Execution and Testing and 3. Documentation.

And finally on to Ordinal.

Ordinal describes its tokenization protocol (if it can even be considered so) as creating ‘Digital Artefacts’ through inscribing on a Satoshi.

It also claims to be the most ‘NFT’ non NFT. Yes, this may seem confusing, but if we unpack it, we can understand why they say something like that in the Ordinal documentation.

Here, Ordinal are eluding to what happens on the Ethereum ecosystem without directly saying so.

After all, their job is to talk about what Ordinal is, not talk about Polygon, The Binance ecosystem, and other Eth L2’s, scaling systems or EVMs.

One of the things about scaling solutions and EVMs is that they are commercially owned structures, and they don’t release all, and sometimes don’t release any of their protocol and architecture details.

There is a limited amount to be achieved by writing from the perspective of not having a full deck of cards. So I am selective of when I decide to talk in detail about the architecture of corporate actors.

The higher-level description is that tokenization becomes a split key, with a major part of the key being held in the scaling system off chain, while only a small bit, called ‘meta data’ makes it to the eth core.

When this happens, it undermines the security and privacy credentials in the concept of blockchain tokenization – NFT or not.

This discounts their contribution to ‘Web 3’ as there is no route for the user to have an end-to-end decentralized UX.

The only way to really establish if an ‘0x’ token is an NFT or not, is to look at the asset listing on a market like OpenSea, Rarible or Hashgreed etc.

If it says ERC/EIP 721, it is an NFT. If it says ERC/EIP 20, or 1155, it’s not. Because of gas fee cost and performance, majority of the assets visible to the public, have tokens that are not NFTs at all.

Again, just to reiterate, if the asset is visually represented by a piece of digital art, this has no bearing on whether the token is an NFT or not.

Quite the contrary, internal utility assets in different parts of the eth ecosystem are more likely to be NFTs than digital art collectibles, because they are not pushed out to a shop front, so scaling may be less important, and other factors of the ‘Blockchain Trilemma’ may be more relevant.

Because an Ordinal token is an inscription on a Satoshi at the Bitcoin Core, then notionally, it possesses properties that reflect the ‘vision’ of what an NFT should be, while L2, EVMs and Scaling systems off Ethereum have been rapidly marching away from that with reckless abandonment.

Expect to see the ‘Digital Artefact’ model to expand.. Three days ago, Github user ynohtna92 forked from Bitcoin Ordinals to mint the first-ever Litecoin Ordinal.

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All reference sites accessed between 18-24/02/2023

cryptoslate.com/someone-forked-bitcoin-ordinals-nfts-onto-litecoin-network

docs.ordinals.com/

superrare.com/winteagle

eips.ethereum.org/EIPS/eip-1155

eips.ethereum.org/EIPS/eip-721

ethereum.org/en/developers/docs/standards/tokens/erc-20/