It’s no secret that Ordinals are a thing, and what a week for them it has been. It was released only a few weeks ago and now there are over fifty thousand Inscriptions burned onto Satoshis, with that number steadily increasing.
Over the weekend, a few of us from Base64 threw together a proof-of-concept, totally experimental project. Ethereum NFTs on Bitcoin. Use Ordinals to store assets on the Bitcoin blockchain, and use Ethereum smart contracts to facilitate exchange and ownership. But why?
A topic of continued interest in the NFT space is the question “Who actually owns the asset of this NFT?” -- and this question has many different talking points, but we are going to focus on one.
What happens when the custodian of my asset reaches end-of-life, or experiences critical failure?
Well, this is a very interesting topic, and there are many interesting companies solving this problem. But let’s start with some background.
When NFTs first launched, their assets were typically hosted on some sort of cloud storage, such as AWS S3. Browsing through some of these historic collections today, it’s common to run into a disappointing 404 page when trying to view an asset referenced by the metadata on certain tokens. In some cases, even the metadata no longer exists, as it was also stored on AWS S3. Likely, the founders of these projects stopped paying their hosting bill, and the cloud resources were spun down.
What does that mean for the token holder now?
It means that not only is your asset kaput, but you can not even reliably proved that you owned it, as the NFT that represents your ownership of it relies on the asset being available.
Both companies provide a solution for durable asset storage in a decentralized manner.
In database systems, durability is […] property which guarantees that transactions that have committed will survive permanently. 🔗
For a one time cost, users of these networks can upload media that will be indexed and stored on operator nodes, and made available to internet requests so long as the network is operational.
Awesome, sounds like we’re there. Well, almost.
Another key factor to information durability in today’s day and age is its resistance to censorship. Unfortunately, media stored on IPFS or Arweave is not entirely censorship resistant.
Ultimately, IPFS and Arweave are commercial protocols and not public goods, so either of them are subject to extreme technical change or even operational shutdown in the event of acquisition or closure.
Information stored on IPFS and Arweave is subject to governance and potentially operator collusion.
Hellooo, on-chain storage.
By storing asset data in a smart contract, the asset remains available as long as the Ethereum network is running. It will continue to be serviceable as long as anyone needs it to.
Unfortunately, it’s actually really expensive to store complex information (like JPEGs) in an Ethereum smart contract. CyberBrokers spent around 90 ETH to store all the SVGs required for their assets on-chain. This amount is an up-front cost, and can vary drastically during times high gas prices.
Well, it’s actually cheaper to store data on a satoshi, and the Bitcoin network provides all of the same benefits we’re looking for when it comes to durable, censorship-resistant storage.
Ethereum NFTs on Bitcoin, baby.
Each token is permanently preserved onto the Bitcoin blockchain, inscribed on individual satoshis as an Ordinal. Each piece of content is encoded with the OwnerName EXIF metadata, pointing to an ERC-721 contract address on the Ethereum blockchain. Ownership is trustlessly managed by this smart contract.
This is an entirely new way to store the assets that back non-fungible tokens on Ethereum.
By inscribing the asset that backs an NFT on the Bitcoin blockchain, certain guarantees are provided around durability and censorship resistance (as compared to IPFS or Arweave). Your asset will exist, in perpetuity, on the blockchain. It is not subject to governance or subjective limitations of the network participants.
By treating Inscriptions solely as a durable storage mechanism, Once an Ordinal has been Inscribed, we release the UTXO containing the Inscribed sat to Satoshi's wallet, where it will exist forever.
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