Layer 2 leap forward
Blockstream CEO Adam Back recently highlighted the inevitability of non-fungible tokens (NFTs) in Bitcoin. He is opposed to restricting these digital assets, which are usually in JPEG format, from the platform. On December 17, Back emphasized that efforts to stop integration would not only be futile, but could lead to less-optimal solutions.
Bitcoin transaction limits revisited
Despite being a pioneer and leader in the cryptocurrency world, Bitcoin is facing transaction capacity issues. The ability to process just 7 transactions per second has remained unchanged for 15 years. These limitations become apparent under heavy network load.
JPEG’s role in promoting change
Back suggests that adding JPEG and similar digital assets to Bitcoin could actually be a catalyst for growth and innovation. He suggests that this could lead to widespread adoption of secondary solutions, such as the Lightning Network, which is currently being developed by the Blockstream team.
Lightning Network: A Potential Solution
Lightning Network, an off-chain layer 2 solution, presents a viable way to manage increased transaction volumes. Back predicts that as Bitcoin expands the use of JPEG and BRC-20 tokens like ORDI, efficient solutions will need to be found to manage network congestion.
Impact of Bitcoin price rise
As the price of Bitcoin is expected to rise and the halving event is scheduled for April, demand for mainnet transactions is expected to surge. This increase may lead to higher transaction fees, especially due to the growth of BRC-20 tokens.
Network Transformation: A Data Perspective
Data from Bitcoin’s mempool and Dune Analytics show continued network overload and resulting rising fees, especially since the first Ordinal deployment.
BRC-20 token termination controversy Bitcoin Core developer Luke Dashjr proposes removing the BRC-20 token and the Bitcoin ordinal generation function. He sees this as an exploitation of a loophole that causes network congestion and inflated fees. But his proposal has met with opposition, with critics saying it could lead to further centralization and run counter to the interests of miners who benefit from higher transaction fees.
The integration of JPEGs and NFTs into Bitcoin is a sign of technological advancement, but it also brings to the forefront unresolved limitations of the network and ongoing debates about its future scalability and efficiency.