This is an opinion editorial by Jaime García, a Salvadoran-Canadian Bitcoiner and co-host of Global Bitcoin Fest.
The hype around Bitcoin NFTs, made possible through inscriptions that use the Ordinal protocol, is undeniable. Trader and art dealer Steven Hay has even suggested that the government of El Salvador release an official Ordinal art collection to potentially raise money to fund its proposed Bitcoin City or otherwise accelerate Bitcoin adoption.
Unfortunately, this suggestion seems to lack an on-the-ground Salvadoran perspective and, in my view, is a blatant attack on El Salvador’s Bitcoin objectives.
El Salvador turned to Bitcoin because of the qualities that make it sovereign money, one that is not beholden to foreign powers or organizations. While a couple of the leading value propositions for using Bitcoin in El Salvador are to attract private, foreign investment and to spur tourism, the promise of hard money that is unconfiscatable, uncensorable and resistant to manipulation is why El Salvador made bitcoin legal tender.
However, Ordinals do not provide any of the hard money benefits of Bitcoin.
NFTs On Bitcoin Are As Bad As NFTs Elsewhere
The Bitcoin community has seen recent, vivid examples demonstrating that NFTs are bad investments.
For example, a Malaysian investor who bought Jack Dorsey’s first tweet NFT for $2.5 million struggled to find bids when he later tried to sell it. Even El Salvador President Nayib Bukele appeared to recognize the lack of real value in NFTs as he auctioned his tweet announcing the country’s Bitcoin Law approval in its legislative assembly — the NFT was never sold and Bukele did not pursue the endeavor any further.
Numerous maximalists and Salvadorans have been discouraging Bitcoin NFTs because they believe that folks who get rug-pulled could suffer significant financial harm. For many of these critics, defending Bitcoin’s social layer and calling out potential scams is essential to keeping the Bitcoin network secure.
There are several key elements that critics consistently bring up, which could demonstrate that Bitcoin NFTs on the Ordinal protocol are grifts and no different than NFTs on other protocols. These are as follow:
- The hype around NFTs is arbitrarily assigning exaggerated values to things that are not inherently scarce.
- The Ordinal protocol cannot actually track individual satoshis as claimed by the creators and promoters of the protocol.
- The Bitcoin protocol is unaware of the inscriptions or Ordinals, so none of it is verifiable by the network.
- There are debatable concerns on the impact of inscription activity on storage resources of node runners.
- The NFTs scams are a significant distraction from the integrity of Bitcoin’s primary purpose.
- Finally, the intellectual dishonesty that markets Ordinals as “art investment” that will increase in value over time.
Taking the above elements into account, an El Salvador Ordinals buyer risks purchasing an expensive, low-quality, reproducible image that’s likely to decrease in value. While there is a valid argument that the marketplace will decide whether it wants such a digital product, critics point out that people should be aware of the inherent grift of the NFT space and the similarities to promotions of Ordinals.
To paraphrase the creator of Timechain Calendar, TC, who has spoken on this topic in several Twitter Spaces conversations that I’ve heard, “A blockchain makes a very poor database. It only works in Bitcoin because it is only verifying the truth about Bitcoin transactions.”
Another Bitcoiner, Magoo, has opined in similar Twitter Spaces that adding engineering complexity to the Bitcoin timechain or any software is congruent with increasing possible attack vectors. These attack vectors can appear not only in the network itself but also in the social layer. As such, Ordinals have the potential to manifest attack vectors in each of these layers. It has encouraged people to focus their energy on an activity that Bitcoin was not designed or optimized for.
Ordinals Contradict Proof Of Work
While the CEO of BTC Inc (which operates Bitcoin Magazine), David Bailey, has argued that Bitcoin NFTs on the Ordinals protocol are compatible with Nakamoto consensus, they are antithetical to Bitcoin because their marketing suggests that they will increase in value, and that violates the concept of proof of work.
In the same line of thought, Hay proposed that a government Ordinal collection would be all benefit and no risk, implying that it’s easy money — but the principles behind proof of work demand that money should not be easy to generate through natural law.
Saifedean Ammous wrote about this topic in several sections of his book “The Bitcoin Standard,” emphasizing that creating hard money requires an effort to provide value and benefit to the market and society. Ordinals are a high-time-preference activity based on easy money and speculation; therefore, encouraging El Salvador’s Bitcoin adoption acceleration by releasing an Ordinals collection is peak fiat mentality.
Salvadorans Don’t Need Ordinals
El Salvador has a rich pool of artistic talent, including musicians, actors, filmmakers, dancers, folklorists, writers, architects and visual artists. Those Bitcoiners eager to help the country with its adoption will do well to support the existing artist community by promoting them and paying for their crafts by using bitcoin.
As a starting point, Bitcoiners can go to the National Artisan Market, where people can find paintings, indigo-dyed apparel, hammocks and sculptures. Bitcoiners can also provide opportunities to digital artists, such as graphic designers, through contracts for working on web projects, apps and in print, and they can support digital content creators by giving value-for-value tips for their published works.
Ultimately, Salvadorans are more concerned about improving their day-to-day situations than collecting JPEGs on mobile phones. The everyday Salvadoran demands that their government focus on security, infrastructure, public transit, traffic, health and education. Therefore, issuing an NFT collection is far from what Salvadorans value.
Given that El Salvador has had relatively positive success with its Bitcoin adoption, it’s easy to forget that its current government had a rough start and faced much criticism with its formal Bitcoin adoption launch.
Many criticized the government’s release of the Chivo wallet over insufficient accompanying education and the technical challenges experienced by some users. The primary recipient for much of this negative feedback was not the government itself, but Bitcoin as a whole, thereby hindering Bitcoin adoption.
Heading into Bitcoin’s second anniversary as legal tender in El Salvador, some of the negative perceptions created around Bitcoin are finally beginning to fade. But if the government were to release a Bitcoin NFT collection, that would only rewind the progress made.
The government must not promote Ordinals or NFTs, as many perceive them as scams. El Salvador needs to generate confidence and trust, and when Ordinals, like NFT projects of the past, inevitably crash, El Salvador cannot be associated with them. Unfortunately, any negative perception about Ordinals would lead to reputational damage for the country, which is precisely where the attacks on Bitcoin adoption continue.
The Bitcoin Mission is Clear
Despite being inundated with all of the Ordinal noise, it is refreshing to see folks like South Africa’s Bitcoin Ekasi work toward the Bitcoin mission with absolute clarity. In a recent tweet, the Bitcoin Ekasi team said it is “not here to have fun” but to change the world. There is a real chance of failure for groups like Bitcoin Ekasi due to these distractions from the primary mission of adopting the hardest money in the world. With that same level of clarity, El Salvador must remain undeterred from these attacks.
This is a guest post by Jaime García. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.