Everything old is new again

adminMay 21, 2024

This article was published in Bitcoin Magazine. “The inscription problem”. click here To get an annual Bitcoin Magazine subscription.

Let me start by acknowledging that Ordinals is great! Sequence theory is a very clever way to tokenize individual satoshis, and Casey Rodarmor deserves high praise and recognition for gamifying the blockchain and making Bitcoin fun again. For the first time in Bitcoin history, we have an NFT on the heaviest proof-of-work chain that is indelibly preserved forever!

Okay, now that we’ve got that out of the way, let’s look at some “inconvenient” history. Ordinals wasn’t the first. Tokens have existed as a meta layer on top of the Bitcoin blockchain for at least 10 years. Most of them were flashing in the pan like colored coins. Like RGB it hasn’t been released yet. Or, like Counterparty, it’s always under the radar.

You may not have heard of Counterparty, which launched in 2014 with a fair “proof of burn” that sent 2,130 bitcoins to an unrecoverable burn address (a surprisingly large number of Bitcoiners have never heard of it yet), but you’ve probably heard of Rare Pepe. It will. is Bitcoin’s early pioneering “tokenized art” collection of 1,774 funny and melancholy pieces centered around Pepe the Frog. RAREPEPE (Series 1, Card 1), commonly referred to as the “Nakamoto Card,” sold for over $500,000 during the peak of NFT mania. Another card, HOMERPEPE (Series 2, Card 32), was probably the first significant NFT sale recorded in 2018 for $38,000 and again in early 2021 for $320,000.

Oh, did I mention I’m the original Rare Pepe artist? I submitted a piece titled CHAMPAGNETNT (Series 25, Card 38), mocking the ICO boom and eventual bust at the time. The great thing about the Rare Pepe collection is that it acts as a time capsule explaining what happened in Bitcoin (and cryptocurrencies) between 2016 and 2018. But all of this was before 2021, before NFTs hit the jackpot, so there wasn’t really much speculation or expectations of profits. It was just friends (mostly friends) playing on Telegram and creating cool works of art to share with their friends. I gave away half my card supply without even thinking about what it might be worth “someday.”

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Let’s skip ahead a few years. In early 2023, Ordinals is making waves with a shiny new product. What makes Ordinals novel? It is a clever FIFO (first-in-first-out) accounting method that reorganizes Satoshi waves into individual, traceable particles. This is an abstract concept because Satoshi does not actually exist as an individual, irreplaceable unit. But if everyone agrees on the FIFO accounting method, we can collectively believe that it exists, and therefore it does exist! The observer effect in order theory causes the wave function to collapse. And once they exist, we might pretend that owning a particular star amounts to ownership of a particular inscription on the blockchain, just as registering a star equates ownership to a distant sun. Ordinal Theory is a lens through which we can view blockchain in an exciting new way. It’s like magic!

So when I first learned about Ordinal Theory, I was completely amazed. I’ve always thought, “Well, you can’t manifest something new into existence simply by asserting that it exists using some arbitrary method of computation that is completely external to the system itself.” But obviously you can! The artificial walls in my mind that I had built around “crazy ideas that would never work” suddenly disappeared and I saw a clear path ahead of me. I can make it too! This is how Bitcoin Stamp was born. Well, not exactly. There are only a few dozen ideas, but putting them into practice is actually putting them into practice. I’ve had the privilege of working with great coders and engineers (Kevin, Arwyn, Regan, B0B Smith, etc.) who have been integral in launching and evolving the Bitcoin Stamps protocol. We were also fortunate enough to quickly bootstrap Bitcoin Stamps by leveraging the 10-year-old Counterparty protocol, which has been maintained for years by stalwarts like JDog and Joe Looney.

So what exactly is a Bitcoin stamp? Well, it is a secure, tradable piece of art that lasts forever.

By default, image files such as JPEG or GIF are converted to long Base64 strings. Base64 is a way to encode binary data into printable text. This string is appended to the Uniform Resource Identifier (URI) “stamp”. This is the description field for the counterparty transaction. Explorer and Wallet convert these long Base64 strings back into viewable images.

Here is the Base64 encoded string of the first Bitcoin stamp (#0):

Stamp:iVBORw0KGgoAAAANSUhEUgAAAAUAAAAFCAYAAACNbyblAAAAHelEQVQI12P4//8/w38GIAXDIBKE0DHxgljNBAAO9TXL0Y4OHwAAAABJRU5ErkJggg==

The biggest selling point of Bitcoin Stamp is that it preserves the data created on the blockchain. How is this data persistence achieved? The way the counterparty typically works is that it encodes the data into the OP_RETURN of the transaction. OP_RETURN is limited to 80 bytes, which is quite restrictive from a “storage” perspective. However, OP_RETURN is suitable for existing NFTs that use HTTPS pointers to resources on third-party servers such as AWS. In general, telling people that a piece of art isn’t actually on a “chain” is like telling them that Santa Claus doesn’t exist. Alas, it’s true. Over the years, the vast majority of NFTs are simply pointers to off-chain art, making them highly vulnerable to bit corruption. If your AWS bill stops paying, your artwork will be lost forever.

However, there is another way to encode larger amounts of data using standard counterparty transactions. This is multi-signature encoding. By default, when transaction data exceeds 80 bytes, Counterparty splits and encodes that data into pure multisig key strings using a 1-of-3 quorum, which stores the data in a stealthy manner using two of the three keys. . The actual redemption key that allows the output to be used in multisig is the burner. Artists do not actually have control over their private keys. We call this technique KeyBurn because it ensures that data stored within a UTXO set cannot be removed through spending.

Bitcoin Stamps are very SIGOPS (signature operations) heavy due to the way the data is stored. Because a typical transaction does not contain too many SIGOPS, some mining pools have cut costs over the years and stopped counting them when including transactions in candidate blocks. Everyone knows the block size limit, but did you know that there is also an 80,000-SIGOPS per block limit? I didn’t! I discovered this when the news first broke that F2Pool had exceeded its SIGOPS limit with all the Stamp transactions associated with very useful mining costs, creating invalid blocks that were rejected by the network. Expensive mistake! Then, not long after, I did it again. Excluding transaction fees, you’ve lost 6.25 BTC twice.

source: https://twitter.com/0xB10C/status/1643871608401014785

How is this different from an ordinal inscription? Well, I would say that Rodarmor has come up with the most responsible solution to record data on-chain by placing it in a SegWit witness data structure. This is a data structure designed with selectivity in mind. Don’t you want it? it’s okay. Once the node verifies the signature, the data can be easily deleted. In fact, anything before the block marked “assumed valid” doesn’t need to be downloaded at all! The inscription is designed to honor the Nordrunner’s wishes, and what did Rodarmor gain by acting so graciously?

frenzy! How dare you save a JPEG on my node!

Bitcoin Stamps takes a much less formal approach. Data encoded with bare multisignature is not only kept in blocks, but also in UTXOs set to unused output. This data is much more difficult to “clean up” because by default every node maintains a complete copy of the UTXO set. So while inscriptions are stored in blockchain-adjacent data structures called “witnesses”, which by design make them easy to clean up, Bitcoin stamps are stored in actual blocks of standard blockchain data structures and in a set of UTXOs that every user keeps in memory. word.

The analysis method is as follows:

Ordinal inscription: After SegWit, it is only stored on full storage nodes. Pre-SegWit nodes will never even know your beautiful JPEG exists. sad.

Bitcoin Stamp: Storage Location every word. period. Pre-SegWit node. Post-SegWit node. Full archive node. Cleaned up the SPV node. They all receive Bitcoin stamps. Every node is important.

I would like to make this analogy. Ordinal inscriptions are like drawing with chalk on the sidewalk on a sunny day. Bitcoin stamps are like graffiti on the sidewalk. Very rude and anti-social. It is also very difficult to remove.

Now you might be wondering: This seems too good to be true, Mike, what’s the problem?

But there is a problem. The cost of persistent storage on a blockchain is not cheap. Bitcoin Stamp does not utilize witness data, so witness discounts are not available. As a rule of thumb, the cost of a Bitcoin stamp is at least four times the cost of an engraving in Ordinals. But hey, you get what you pay for. amirite? And before you accuse me of fear-mongering, there has been a very real discussion among various core contributors about changing Bitcoin Core’s IBD (initial block download) default so that newly spun nodes cannot see JPEGs in the first place. It happened.

As I write this, Luke Dashjr’s OCEAN mining pool is just starting to gain a lot of fanfare and appears to be intentionally not passing data after OP_FALSE as a means of censoring Ordinal inscriptions.

Source: https://twitter.com/oomahq/status/1729689197974319549

There are some theoretical ways to remove Bitcoin stamps from a set of UTXOs, such as UTreeXO, but these are much more invasive than deleting witness data and have their own trade-offs for full node operators. Ordinals make pruning easy, while Bitcoin Stamps make pruning very difficult.

Bitcoin stamps are much more expensive to mint than Ordinals, but we found that the constraints allowed us to create good works of art. In the words of Leonardo da Vinci: ““Art lives in constraints and dies in freedom.” The artist community that has sprung up around Bitcoin Stamps tends to gravitate toward pixel and SVG art because, for lack of a better term, they compress much more efficiently than raster art.

Due to size/cost constraints, a more recent innovation is through recursion, where a JSON file is generated pointing to previously issued stamp “properties”. Repurposing these “features” can reduce the cost of large collections by orders of magnitude by eliminating redundant data across the collection. Audio stamps, which generate only the notes of a song (similar to the old MIDI format), and AI stamps, which generate only the generation seed prompts, are additional innovative ways to address constraints and deliver new results.

Do you want fungible degen tokens? Yes, I got that too in SRC-20 form.

Want to get involved with Bitcoin Stamps as an artist, developer, or collector?

We have a thriving Telegram community full of people happy to answer your questions. Check it out here: t.me/BitcoinStamps

Here are links to the ever-growing Bitcoin Stamps ecosystem: