Author: Lawyer Liu Honglin, founder and director of Shanghai Mankun Law Firm

What is Bitcoin Inscription?

"On January 3, 2009, the British Chancellor of the Exchequer was about to implement a second round of bank bailout," a passage recorded by Bitcoin's founder, Satoshi Nakamoto, in the genesis block of the Bitcoin network. That day was January 9, 2019. This inscription witnessed the birth of Bitcoin and also recorded a satire of the financial crisis.

More than just Satoshi Nakamoto hopes to bring more information into the Bitcoin network. As of now, over 33 million inscriptions have been created.

So what is Bitcoin Inscription?

From a technical perspective, each Bitcoin is divided into 100,000,000 units called satoshis (SATS). Each Bitcoin is like a small storage space, and inscriptions are additional information stored in this space. For example, by using the Ordinals protocol to write content into a satoshi for inscription, the information written can be text, images, videos, and audio, among others.

To give an example that may be easier to understand, Bitcoin Inscription is like carving words on the "digital stone tablet" of Bitcoin, similar to writing or drawing on paper money. However, all of this is done in the digital world through blockchain technology, ensuring that once something is written, it cannot be changed or deleted.

Depending on the content placed, Bitcoin Inscription can be divided into two main categories: text-based inscriptions and image-based inscriptions.

Text-based inscriptions are mainly used to create tokens, such as the BRC-20 Token standard. The BRC-20 Token standard is a protocol for creating tokens on Bitcoin, similar to the ERC-20 Token standard on Ethereum. The BRC-20 Token standard allows users to create their own tokens and trade them on the ordinal market. Currently, there are hundreds of BRC-20 Tokens created, some of which have high market value and liquidity, such as Ordi, Pepe, and Meme, among others.

Image-based inscriptions are mainly used to create NFTs, collectible digital artworks or collectibles. These NFTs can represent various themes and styles, such as animals, cartoons, abstracts, and more. Some NFTs are original, while others are copies or imitations of NFTs on other blockchains. Although the number of image-based inscriptions is less than text-based inscriptions, they are more popular in the market. Currently, the most expensive Bitcoin Inscription is an image called "Genesis," which reportedly had a market price as high as $10 million.

Within the first 200 days since the first Bitcoin inscription, 1.14 million image-based inscriptions have been created, surpassing the total number of NFTs minted in the first 200 days on Ethereum, Solana, and Polygon networks. A report by Galaxy Research and Mining predicts that the market value of the Ordinals market will reach $5 billion by 2025.

Around the concept of Bitcoin Inscription, there have gradually emerged some commercial services. For example, there are browser extension wallets for storing inscriptions, allowing users to connect to trading platforms, send and receive Bitcoin or inscriptions, and view Ordinals collections, providing a user experience similar to Ethereum's Metamask. In addition, there are companies offering products for inscription services, such as Ordinalsbot and Unisat. The mining department of the world's largest cryptocurrency exchange, Binance Mining Pool, also launched inscription services on August 31, 2023.

Is Bitcoin Inscription a Speculation?

For those who understand the principle of Bitcoin Inscription, one immediate question may arise: "Why bother with inscriptions? What's the use of inscriptions?" (Friends of second-hand roses, please join in automatically.)

Advocates of inscription investment claim: "Bitcoin is digital gold, and inscriptions are gold jewelry."

When I heard this analogy, I was somewhat taken aback. The last time I heard someone so forcefully associate something with Bitcoin was with Litecoin.

Some people believe that Bitcoin Inscription is a valuable innovation. It not only demonstrates the potential and flexibility of the Bitcoin blockchain but also adds new functionality and use cases to Bitcoin. It can create rare and unique digital artworks on the Bitcoin blockchain, representing a certain historical moment or meaning.

To make sure I didn't remain unconvinced, they even provided an example. On May 11, 2020, Bitcoin underwent its third halving event, reducing the block reward from 12.5 bitcoins to 6.25 bitcoins. This was an important milestone in Bitcoin's history, indicating that the supply of Bitcoin was becoming scarcer and the price was rising. Therefore, the first block (numbered 630,000) that appeared after the third halving was considered to have very high commemorative significance. The Bitcoin inscription contained in this block was seen as a precious digital heritage and reportedly auctioned for $21 million (approximately 135 million RMB) to an anonymous buyer.

There are many similar examples. Some people even specifically seek inscriptions with special numbers or character combinations, believing that they can express wishes or blessings. For example, some have spent a lot of time and money to mine a block containing auspicious numbers like "88888888."

I seriously doubt that those who are sentimental about consecutive numbers are Chinese buyers. Indeed, inscriptions are imprinted in the genes.

However, friends who understand the principle of Bitcoin Inscription should be clear that Bitcoin Inscriptions themselves do not have any practical value. They are just randomly generated numbers from a technical perspective, used to ensure the security and stability of the Bitcoin network.

The speculation surrounding Bitcoin Inscription is not the first in the blockchain industry, nor will it be the last. More importantly, is this kind of micro-sculpting and micro-innovation around the Bitcoin ecosystem really the original intention of Bitcoin's birth?

Remembering the Original Aspiration and Mission

Don't get too caught up in blockchain and forget why Bitcoin was created in the first place.

As a decentralized digital currency, the goal of Bitcoin is to achieve a trustless, open, fair, transparent, secure, private, and free monetary system, allowing people to exchange value without the intervention of intermediaries.

The value of Bitcoin lies not in its form, but in its function. Its spirit is to resist centralized and monopolistic monetary systems. Treating Bitcoin Inscription as a collectible or artwork is a misunderstanding and misinterpretation of the essence of Bitcoin.

For the effort of embroidering on the horns of a snail, I do not believe it represents progress in the blockchain industry. This is a betrayal of the founding principles of Bitcoin, and apart from reaffirming that the blockchain industry is only about speculation, it has no greater value.

We cannot control the enthusiasm of the retail investors. We can only offer distant blessings and remind them to keep warm in the strong winds on the rooftop. However, for friends who truly understand the original intention of Bitcoin and the social value of blockchain technology, it is important to stay focused, remember the original aspiration, and remain true to the mission.

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