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Written by Lisa Pauline Mattakal and Medha Singh
(Reuters) – Imagine digitally etching 3D images of things like multicolored balls onto a tiny bit of bitcoin. Then imagine selling it for $16.5 million.
Just when you thought cryptocurrency couldn’t get any stranger, bitcoin accidentally spawns a new breed of NFTs.
The newcomers in 2023 materialized after upgrades to the bitcoin network that enabled each satoshi — the smallest denomination of bitcoin, or one hundred million — to store a few megabytes of data, from text and images to audio and video.
Data storage was an unintended consequence of the upgrades. Now cryptocurrency enthusiasts have included a total of 385,000 known “Ordinals” on Bitcoin since January, including more than 200,000 image files and more than 150,000 text files, according to Glassnode Market Intelligence.
“I think this is really the beginning of a fundamental shift in what you can do with bitcoin,” said Alex Miller, CEO of bitcoin developer network Hiro.
The colorful balls are part of TwelveFold, a set of 300 images of 3D objects displayed in a square grid, from the developers of NFT Yuga Labs, best known for the Bored Ape yacht club. The group is called a “visual code” for the data on the blockchain.
They became a profit token this month when the company auctioned 288 of them for $16.5 million, according to data from research firm Delphi Digital.
Other Ordinals bestsellers—named after the software protocol that facilitates writing—include JPEG images of rocks and mysterious crowned figures, which sold for $213,845 and $273,010, respectively, according to Galaxy Digital Research.
Although the market for Bitcoin NFTs has been raging since January, Galaxy estimates that it could reach $4.5 billion by 2025, basing its bullish forecast on factors such as the growth of the more established NFT market and the fact that bitcoin is the most popular cryptocurrency. .
Not much can be accurately predicted in the highly unpredictable market for NFTs, though.
Total sales of NFTs — excluding Ordinals — were about $1 billion last month, according to CryptoSlam data, a rebound from November’s $324 million but still a fraction of the roughly $5 billion this past January and the $2.7 billion in May.
However, the bitcoin NFT has been building a head of steam in a short period of time. Satoshis listed with NFTs participate in about 7% of the total number of Bitcoin blockchain transactions, according to Glassnode data.
Lots of transactions, https://www.reuters.com/graphics/FINTECH-CRYPTO/WEEKLY/klvygnxeavg/chart.png
kind of absurd
One of the biggest challenges facing this new class of NFTs is the dearth of easy-to-use marketplaces, with early transactions taking place over-the-counter on shared online spreadsheets, according to market players.
Delphi Digital said this lack of infrastructure is a clear barrier to entry.
Not everyone is happy with this increase in activity, especially some bitcoin fans who believe that the cryptocurrency should only be used for payments.
The average fee for conducting a bitcoin transaction, measured over a 7-day period, rose to $1,981, the highest since November, as Ordinals traded higher from less than $1 at the beginning of February, according to data from Blockchain.com.
It’s kind of absurd,” said Corey Klebstein, CEO of bitcoin-focused financial services firm Swan, who sees problems with “getting their prices through this non-cash use case.”
Some critics say The Ordinals also clog the net; The average 7-day time to confirm bitcoin transactions rose to more than 186 minutes in late February, the highest level since bitcoin was sold in November, according to Blockchain.com.
This has since dropped to over 124 minutes, although it’s still much longer than the range of 12.8 to 35 minutes transaction time in January and February.
“Ordinals has brought more eyes to the network,” said Brendon Sydow, developer at Core DAO blockchain. “But NFTs on bitcoin distract from the network’s primary purpose, which is to serve as a permissionless network that is globally available, 24/7, and uncensored.”