Bitcoin congestion: Are ordinals breaking BTC?

Bitcoin has been experiencing major congestion issues. In the last few days, transaction fees have skyrocketed, creating a bottleneck on the network. Apparently the reason is a spike in activity around ordinals, a protocol that allows the creation of NFTs and fungible tokens on the bitcoin blockchain. Some say ordinals can bring mass adoption to bitcoin. Others see them as a silly phenomenon, if not outright dangerous for the network. So does bitcoin risk becoming unusable because of ordinals? And how could this new phenomenon impact the long term development of the main cryptocurrency? We tried to find out in our latest interview with Samson Mao, CEO of Gen3. I'm Giovanni. On this show, we challenge the ideas that shape the world of crypto. In each episode, we assess a crypto narrative, a macroeconomic outlook, or a potentially disruptive technology. Only the most solid ideas will make it to the other side. We saw that the bitcoin just went through a short but unexpected crisis. We saw that transaction fees skyrocketed in the last few days and there were hundreds of thousands of unconfirmed transactions that couldn't go through because of a sort of congestion in the network. The reason for that congestion seemed to be this new trend, which is ordinals and BRC20 tokens. So a lot of people in the last couple of days were making loud statements saying that, oh, bitcoin is broken, we killed bitcoin, Bitcoin is not working. So what is going on here?

The people that claim that they broke bitcoin or they killed bitcoin are not bitcoiners. And I think it's important that everyone understands that, like these are people that are hostile to the network and they have their own motivations and they're trying to accumulate followers that might like altcoins and you know, Ethereum and other things like that. So they're catering to a specific audience when they make these outlandish statements that they broke bitcoin. Right. They're just trying to be edgy and get followers. But you know, bitcoin is functioning perfectly. Bitcoin is like blocks are being produced every 10 minutes roughly, and transactions are still going through. There is a backlog of transactions, but this is how the protocol was designed, that there is a market for block space and you have to bid and replace your transactions and bid it up if necessary to get into the next block. Now, if you're not in a hurry, you can lowball the fees and wait for the congestion to clear up. But it's basically just like choosing to take a toll paid toll freeway instead of taking a backcountry road. You can pay a premium price and get there sooner or you can not and you'll get there when you get there. But this is essentially bitcoin's design and it's always been this way. And in the past we've seen large spikes of congestion, large spikes, and this was during the block size wars. And this one actually pales in comparison to some of those spikes in previous years. So I don't think it's really something that we need to worry about. It is definitely tied to things like the ordinals and the BRC 20 things and whatnot. But it's, it's going to pass because these guys are basically paying massive amounts of fees that go directly to bitcoin miners and there's no way this can be sustained. I mean, they need to buy bitcoin and basically give it away to the miners. And it's a question mark on how long they can do that for. Maybe it's a few more days, maybe it's a week. But definitely it's not a sustainable model to throw money away.

Okay. Yeah. Because I wanted to know your opinion about this new trend happening in bitcoin with ordinals and BRC20 tokens. In the last week, the number of ordinals inscriptions has pretty much doubled. I kind of get the feeling that you are not very favorable towards this new sort of usage, this use case of bitcoin. I get it from of course, your statements on Twitter and so on. So could you explain what is your main argument against ordinance and BRC20 tokens?

Well, these things are largely hype driven. Right. Like when ordinals first came out of the gate, what did they do? They mined a massive block. I think it's like four or something, megabytes. Right. And this is to get publicity. So it's not something that is designed to be sustainable or even practical in any way. And the transactions they're making are horribly bloated in the case of BRC 20s. So these are just short term money grabs, similar to most things on competing chains like Ethereum and Solana. Right. They exist to get some gullible people to pay attention to them by doing some crazy antics and potentially clogging up the chain. Also to get more attention to induce fomo. But like, like most projects that are in the blockchain space, they fade away in relevance once the, the issuers of the tokens have made their Money. And I think ordinals never really made a lot of sense to me. It's just an arbitrary way to number sets. And somehow you're just saying like this is a unique set, but this is just your own arbitrary numbering system that dictates that.

This technology, as far as I understand, is exclusively based on bitcoin technology. So it doesn't really involve any altcoins or other blockchain networks. So how could you define this technology as comparable to shitcoins?

Well, I wouldn't say it's really based on bitcoin. These are just external protocols, if you want to call them that, that just put data into bitcoin. But by your argument then Counterparty, which is a very old protocol, is bitcoin based because it is also inscribing basically the same thing into colored coins and making NFTs and things like that on bitcoin. But at the end of the day, I don't think this is new technology or very interesting. Like Counterparty has existed for a very long time. They've just found a way to make it new again and convince people to buy their, their little pictures of, I don't know, whatever, frogs and wizards and things like that. So it's not very interesting. And I think it's not even, I mean it's arguable if it's art, but to me it's not really art. Like any algorithmically generated thing or some, you know, ugly scribbles. They don't really seem like art. The problem I think with most bitcoiners have with it is that they're kind of just gouging people and trying to sell things for like 10 BTC or 1 BTC. And you know, that's just, I think it just leads down to things like wash trading.

But still there are some bitcoiners or people that call themselves bitcoiners, for example, Dan Held, who are very positive about this trend. I just want to take one of the tweets that Dan Held put out lately. He said that bitcoin adoption has largely occurred through speculation, not payments. He wanted to say that, he wants to say basically that speculating, attracting speculators who want to buy this ordinals, these, these tokens, basically they come into bitcoin and they bring in adoption. While a lot of. While why not a lot of people coming to bitcoin because for using it as a peer to peer transaction. Because that's not so common right now for people to use bitcoin that way. So don't you agree that this trend could actually be positive for bringing adoption.

Well, not if it's clogging up the chain with spam. Right. And spam is subjective, but I would call it spam because it's not really wanted in my book. But you know, he's not wrong that there are people speculating, but people speculate on a lot of things and I don't think the speculation is a long term viable method to grow the network and grow adoption. If you look at a lot of the altcoin projects, they also have the same thing. There's a sudden spike of interest because it's new and shiny and interesting and then it tapers off and the projects die. And I think that's what's just what the ordinals and the BRC 20s are. It's just something new and shiny and it's not really going to have that staying power. I think long term, for real bitcoin adoption, it is about bitcoin being money. Bitcoin being used as a savings technology. Bitcoin being used for payments like on lightning and just people understanding what money is. That is what's going to make Bitcoin become $8 trillion asset class equivalent to gold. It's not going to be people minting JPEGs and sticking them in the chain.

Now we got the technical aspect of it quite clear. But now there is also a cultural aspect because what I get from these people that are promoting ordinals and BRC20 tokens is that they are kind of waging a cultural war within the bitcoin community where they are saying we are tired of the sort of dogma of the bitcoin maxis. We want to bring some fresh new activity into the community so that bitcoin becomes this more like market driven, free sort of space and not this sort of dogmatic sort of environment where bitcoin is supposed to be used just for.

That, for that, for that.

So what would be your response to this new cultural sort of movement?

Yeah, I hear that a lot from that camp, but I don't really understand it. Like bitcoiners just want to use bitcoin. They want to save money and you know, enjoy life and live in peace. And then you have these guys coming in and saying we need to make bitcoin fun again so that people will adopt bitcoin. But I don't know, I just think you're not well adjusted if you think putting pictures on bitcoin's chain is fun. If you want to have fun. I don't know, and have a meaningful life, start a family, have kids, take your kids to the park, play with them. You know, like, enjoy life and live your life. But this is not fun. I think the craze is going to fade and all these people trying to push these things, we'll just move on to other things because there's nothing really intrinsically binding them to Bitcoin. They could do what they want to do with anything else or any other technology, but there's only one Bitcoin and there's only one way for us to fix the future and fix the money, and that is Bitcoin.

Okay, And I just want to touch upon one last technical issue here, because another argument that the promoters of this technology put forward is that these ordinals are increasing, of course, transaction fees and revenue for miners. And in that way they are ensuring that the security of the network will continue being provided by the miners. And that's an argument for saying we are also helpful for network security, basically. What would be your argument on that?

If ordinals and these other things were sustainable? I would say yes, but they are not. And they will fade away after, you know, even months. Let's not talk about years here. But network security is just going to fix itself because people will simply pay more transaction fees to transact on Bitcoin as time goes on, just because of more adoption, more usage and more transaction. It's going to happen organically, with or without people putting pictures on the chain. Right.

As far as I understand, there is some factions who are saying that this is all like a spam. This is basically negative for the bitcoin network. And they are even thinking that perhaps some action should be taken according to sort of action from bitcoin core developers to sort of push away these NFTs, these BRC20 tokens and ordinals from the network. A sort of censorship action against this phenomenon on Bitcoin. Would you kind of be in favor of such an action if possible?

I don't think this is going to be sustainable, but I've seen some of those discussions on the bitcoin mailing list. They're talking about spam filters, basically. Luke Dasher is talking about is probably the one that's advocating for it the most. And I think if it was sustainable, maybe it'd be worth looking into or at least pruning these things out of the chain, because it does impact your ability to run a node. Right, if it's clogged up with a lot of extra data. But I don't think it's going to last very long. So I don't think by the time there's a solution worked out, it'll have fade away. Faded away Because I'd like to have.

You on our show again.

Thank you, Giovanni. It's been fun, Sam.