The Breakdown - NFT’s Biggest Company Is Coming to Bitcoin Ordinals

Episode Date: March 1, 2023

In today’s episode, aside from fist-shaking at SEC Chairman Gary Gensler, NLW discusses an announcement from Bored Ape Yacht Club creator, Yuga Labs, that it is creating a generative art collection for Bitcoin with Ordinal inscriptions. As part of an emerging Bitcoin Builder moment, he argues, the move makes sense. Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Join the discussion: https://discord.gg/VrKRrfKCz8   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW   - “The Breakdown” is written, produced and narrated by Nathaniel Whittemore aka NLW, with editing by Michele Musso and research by Scott Hill. Jared Schwartz is our executive producer and our theme music is “Countdown” by Neon Beach. Music behind our sponsor today is “Foothill Blvd” by Sam Barsh. Image credit: Noam Galai/ Getty Images, modified by CoinDesk.  Join the discussion at discord.gg/VrKRrfKCz8.  

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is produced and distributed by CoinDess. What's going on, guys? It is Tuesday, February 28th, the last day of this short month. And today, we are talking about how the best known NFT creator is coming to Bitcoin Ordinals. Before we dive into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash

breakdown pod. All right, guys, well, I got to be honest. I am very, very sick of constant regulatory stories. There's no doubt it's the most significant thing happening in crypto right now, and even today, there are so many things that we could discuss on that front. Robin Hood revealed via their 10K annual report that the SEC had subpoenaed them shortly after FTX filed for bankruptcy, and they say that they're currently cooperating with all investigations. That Illinois version of the Bit License that I mentioned a couple weeks ago that some lawyers called the most ill-conceived piece of crypto legislation they'd ever seen is moving forward, with one of the sponsors saying, quote,

it's not just a trial balloon that's being floated. I think there's momentum to be able to coalesce behind something that will protect the residents of Illinois. Then we've got new proposed rules from a UK banking regulator about how financial institutions in that country can and can't interact with digital assets. Then there are Voyager assets moving around, which is raising some pretty serious questions in the community. And more intrigue around Binance, with Forbes suggesting that as much as $1.8 billion worth of their stable coin collateral was moved to hedge funds last year around the time of the

FTX collapse. Oh yeah, and then there's Coinbase suspending BUSD, and there's honestly even more. There's also the new financial action task force action plan on crypto and forthcoming global rules from the G20. In fact, ever since the collapse of FTX, it's felt like it's just been regulatory debates into revelations of bad behavior, into more regulatory debates, into more revelations, and so on and so forth. And so today, we're not doing it.

We're going to discuss something else. We will obviously come back to all of this important stuff. But for today, we're digging back into the world of ordinals, where a major NFT player has just made a big move into the space. Before we get there, however, I want to contextualize Ordinals just a little bit differently than I've seen in some other places. If you watch the Twitter discussion, you could be forgiven for thinking that Ordinals were just some new front in a Bitcoin culture war, with ostensibly Luddite Maxis on the one side

and would-be usurper shit-cointers on the other. There is a smidge of that. For the folks who have been banging on about Bitcoin culture fights from one side or another for the last few months, this obviously is a new front in that fight. However, I actually think that ordnals are part of a much more significant Bitcoin moment emerging, and I use the word moment rather than narrative, which long-time listeners know is probably my favorite word, very intentionally. The moment that's emerging is a Bitcoin Builders moment, in which more and more developers

and entrepreneurs are deciding to build in and around the Bitcoin ecosystem specifically. The emergence of layer 2s like Lightning is a key part of that building. Terra is another protocol that has people thinking much bigger. There are also ecosystems like stacks which are offering different ways to build on Bitcoin. Now, not every Bitcoin builder is bought in on all of these various approaches to building on Bitcoin. Some, in fact, might even disagree heartily with how others are building on Bitcoin. But that doesn't change the fact that they're building. And building on anything tends to create positive feedback loops that lead to more building.

People see others building in a specific way or on a specific protocol, and that reframes how they think about their own effort, which might make them more likely to do their own building, and then they become a builder whose building has the same type of nudge to other builders, and so on and so forth. Now, what's interesting is that this hasn't yet really converged into a Bitcoin narrative per se, in the sense that you haven't seen big podcasts or Bitcoin writers or influencers say, hey, the narrative that's going to drive Bitcoin through the next cycle

is the emergence of a whole new category of entrepreneurs who are adding functionality to a Bitcoin application layer. That process of narrative formation, however, has now started in earnest, and I expect to see a lot more of it. And that narrative formation process is absolutely being shaped by and shaping the emergence of ordinals. Ordinals are a form of Bitcoin native NFT, where people use the witness portion of a transaction to encode visual or multimedia data to specific Satoshis. Now, if that felt like a big jumble of words you're not really sure the meaning of, go listen to my episode from February 2 called A Primer on the Debate around Ordinol Inscriptions. aka Bitcoin NFTs.

In the nearly month since I put out that show, Ordinals have exploded. More than 200,000 Ordinals have now been inscribed to the Bitcoin blockchain. What's more, there's actually been money moving around them. Ordinol Punks, one of the leading inscription collections, recently had a token sell for $9.5 Bitcoin or around $214,000.

There's no real marketplace for Ordinals yet. Most of the deals are being done via spreadsheets, OTC group chats, and private messages. Yet, in spite of all the things that have happened in the last month or so, in many ways, yesterday's news from Yuga Labs was one of the biggest moments yet. Last night, around 6 p.m., Yuga Labs, the team behind the Borde Ape Yacht Club, who also now stewarded the Cryptopunks, announced that they were getting in on the Ordinals game. One of the company's founders, Greg Solano, published a piece on their news blog about the collection,

which they're calling 12fold. Greg writes, Today we announced an original and experimental 300-piece generative art collection inscribed onto Satoshes that will live on the Bitcoin blockchain, 12-fold. Satoshes are the smallest individually identifiable units of a Bitcoin. An inscribed Satoshi can be located by tracking when that Satoshi was minted in time via the Ordinal Theory Protocol. Inspired by this, our collection explores the relationship between time, mathematics, and variability. When measuring time, the calculation base used is not uniform and varies from base 60, 60 seconds in a minute, 60 minutes at an hour, to base 12, 12 months in a year, and so on. 12-fold is a base 12-art system localized around a 12-by-12 grid, a visual allegory.

for the cartography of data on the Bitcoin blockchain. The collection includes highly rendered 3D elements as well as hand-drawn features, which serve as an homage to the ordinal inscriptions currently done by hand. All of these choices are a departure from what's expected from Yuga, but, you know, f***ing doing expected things. Now, in this post, Greg also discussed something

that many have talked about, that this moment in Ordinnell's history feels like a really wild, early NFT moment, and it's not clear where it's going to lead. He writes, Stepping into the Ordinals Discord a month ago felt like getting a glimpse of the 2017-era Ethereum NFT ecosystem. It's the type of energy and excitement we love at Yuga.

The infrastructure and tooling around inscriptions or NFTs on Bitcoin is rapidly progressing, but it is still incredibly nascent. Much of the foundational principles that we look for are here, provenance, self-custody, ownership, but the tooling and structure we've become accustomed to with Ethereum NFTs isn't present. We expect this technology and the ecosystem around it to evolve and become more sophisticated over time, However, we don't expect it to evolve in the same way other blockchain NFT ecosystems have. We're excited about ordinal inscriptions and what the future holds for digital artifacts on Bitcoin. Join CoinDesk's Consensus 20203, the most important conversation in crypto and Web3,

happening April 26 through 28th in Austin, Texas. Consensus is the industry's only event bringing together all sides of crypto, Web3, and the Metaverse. Immerse yourself in all that blockchain technology has to offer creators, builders, founders, brand leaders, entrepreneurs, and more. Use code breakdown to get 15% off your paths. Visit consensus.coadest.com or check the link in the show notes. And boy, howdy, did this announcement trigger a flurry of reactions. Some thought that this didn't super fit into the Yuga ecosystem, which has admittedly been kind of trying to ladder up everything into a coherent pre-metaversy whole. Board Elon Musk writes, nothing against Bitcoin Ordinals there,

But this strikes me as pretty off-brand in random. Everything thus far in the Yuga ecosystem feels like it has the potential to become interconnected, but I don't get that sense from this. Imagine if Yuga is the Nintendo of Web 3. Now think about how weird it would be for Nintendo to get into fine art. Still, Board had ideas for how to make it work. Suggesting that they, quote, use the $10 million that probably comes from this auction

and funnel every dollar into artists who commit to creating inside the Yuga universe, and particularly other side. Dedicate 300 plots of land, with each one out. acting as a living gallery. Use any future royalties to further support new artists coming in and create work that can't possibly exist in the quote-unquote real world. This is where talking about and using Bitcoin Ordinals would make more sense, in my opinion. Art tends to have more permanence than gaming, which is constantly updated. Using one of the most immutable technologies would align technology and storytelling, making this announcement feel less like a trend-focused

move. Now, others assumed less good faith than Bordelan did. Brandon Frankel responded to the Yuga thread saying, what rhymes with flashflab? Indeed, this idea that this was all just Yuga looking for a cash grab of non-dilutive capital was pretty prevalent in the community, even when people weren't always mad about it. The Wizard of Soho writes, Yuga, we need to raise $10 million without giving up equity. Let's sell these plebs some art on Bitcoin. That's hot right now. They will eat it up. Plebs, OmG, ordinals, Yuga dropping another men, take our monies, art, ordinals. Now, when Bitcoin pirate wrote, probably double that easy. That said, while your point isn't exactly wrong, the goal here? Aren't all NFTs, tokens, et cetera, just a mark of free markets? Which you so love?

If people are willing to pay, then so be it. Are you implying that these will lose value in the shorter long term? The Wizard of Soho responds, loll, my point is that it's genius. I've always been a huge bull of Yuga and even more now. Now, others made a point that this whole narrative of a cash grab sort of didn't make any sense when Yuga is literally an NFT company selling NFTs for its business. Someone pointed out that it isn't more of a cash grab than a toy company that sells more toys. Now, what about the Bitcoin culture war meme? There were some homages to it, certainly.

Juzi Bits, a crypto developer at Polymedia writes, NFTs on Bitcoin will thrive if only because they annoy Maxis. Udi Werthheimer writes, multi-billion dollar company announces Bitcoin Ordinal Project. Bitcoin Magazine, zero tweets, sailor, zero tweets, Maxi podcasters, zero tweets. What a bunch of clowns, LMAO, I cannot. I have asked some of them why they're being so mentally ill.

They all told me the same thing. They're each waiting for some of their maxi to take the heat first so the rest can talk about it. What a diseased community, I swear. Now, Udi's not wrong in the sense that there wasn't a lot of chatter about it, but I'm not as sure as him that them not tweeting about a thing they don't like is a sign of their community deficiencies. I think what it is is probably a telling signal of how much enthusiasm there actually is for ordnals within the broader Bitcoin community.

In other words, the silence is the tweet. Meanwhile, other Bitcoiners were very comfortable talking about how significant they believe this moment to be. Nick Carter writes, biggest NFT company by far embraces Ordinals and Bitcoin, probably nothing. Most Ordinals projects were derived or just copy-paste of other projects on other chains. Starting to see some new Bitcoin-specific original artwork emerging now. Alex Thorne, the head of firmware research at Galaxy Digital says, there's a very good chance these will end up with the highest floor price in all of the NFT world. 300-only generative art looks pretty cool, to be honest.

First major studio on inscriptions, major Yuga fan base selling only for Bitcoin. NFT community take notice. Yuga getting into inscriptions dramatically increases the likelihood that major NFT marketplaces like OpenC support inscriptions. Now, in response, when someone accused Alex of being a quote-unquote hype boy, he pointed out his previous comments to CoinDisc that he had been a long-time skeptic of Yuga, specifically in the fact that their NFTs didn't convey, in his estimation, true ownership rights. This is something that Orinnell's partisans point out is fundamental.

different when it comes to Bitcoin NFTs that are inscribed on specific Satoshi's. The ownership in that situation is absolutely indisputable. Now, others pointed out just how much this type of project could become a wellspring for teaching people about Bitcoin and how to interact with it. Eric Wall writes, Yuga Labs is launching an ordinal inscription collection on Bitcoin. The instructions on how to acquire them involves running a self-custodial Bitcoin wallet, requires an empty Bitcoin address, and all bids will be in Bitcoin.

They also provide a guide to Bitcoin UTXOs. Alex Gladstein also wrote, even before the Yuga announcement, Inscriptions have led to a big spike in the number of full node runners, many new lightning users, new PSBT usage, fees versus rewards at 2.75%. The craze has died down, but this all seems good for Bitcoin. Now, people honed in on that PSBT part. PSBT stands for partially signed Bitcoin transactions. This is a standard that was published in BIP 174 and updated in BIP 370.

In short, it's a standard that has a standard that has a standard that allows multiple people to use Bitcoin collaboratively, allowing, for example, multiple parties to sign the same transaction at different times. This is an important standard for multi-sig agreements and more. And it has gotten apparently a huge boost from ordinals. Eric Wall responded to Alex Gladstein's tweet saying, I was hesitant at first regarding ordinals, considering it bloaty. But the tweet you linked is incredible. It took less than a month than an actual client for PSBT swapping Bitcoin asset emerged. That's more progress than we achieved in 10 years of previous swap experimentation. Dennis Porto also wrote about this in the context of ordinal, saying partially

signed Bitcoin transactions mean you never need an escrow for inscriptions. Simply share the PSBT with the buyer. You can share the PSBT publicly for a public sale or privately for a private swap. It just works. Once stable coins and other tokens arrive via taro, I'm eager to see whole order books based on PSBTs. These once obscure technologies on Bitcoin are finally meeting solid market demand and it's incredible. Now around that, he also retweeted an announcement from Oram Yomtav, where Oran announced the Noster-based decentralized order book for Ordinals. Dennis wrote the blossoming of Noster and inscriptions at the same precise moment is almost too good to be true. And the point here, I think, is that ordinals are generating a motivation for a lot of theoretically useful

Bitcoin infrastructure that is now actually being built in incredibly short order. Now, there are some pretty obvious financial implications for all of this. NFT historian Leonidas This writes, the market cap of all ordinals combined compared to the market caps of Yuga's existing collections. 12fold could double the market cap of ordinals overnight. It's also particularly notable to me that instead of Yuga Labs coming after people for having versions of their bored apes or versions of their crypto punks in an unauthorized way up on Bitcoin, they instead decided to get involved with an actual collection.

And this gets me to one of the most interesting and frankly unexplored things, which is that this is actually giving evidence to something that Bitcoiners have talked about forever. which is the idea that the particular properties of Bitcoin itself will create a gravitational field that will eventually suck in all crypto innovation even if it began elsewhere. This was a huge talking point back in the day that is slowly fallen by the wayside as innovation has moved elsewhere, but now you're seeing that narrative reemerge. Munib from Stacks tweeted yesterday, Bitcoin Thesis. All of the best experiments in crypto will eventually come to BTC.

Latest data point, Yuga, Labs, Ordinals. Listen, there are still tons of questions around whether this hype and momentum is something that's longer and more sustainable, or whether it's just a distraction in a bare market, which would be totally fine if that ends up being the case. But what's for sure is that it has people excited and that it's converging with a larger Bitcoin builder trend that I don't see any signs of stopping anytime soon. For that reason alone, I think it's pretty exciting, and I'm looking forward to seeing how it evolves. For now, guys, I hope you appreciated this temporary break from being mad at Gary Gensler. Until tomorrow, be safe and take care of each other. Peace.