TLDR: The article discusses the challenges associated with Bitcoin Ordinals, the NFTs of Bitcoin, emphasizing scalability issues due to Bitcoin limitations. The proposed solution (EAST Account Vault Model) involves leveraging NEAR's Chain Signature and Account Aggregation, allowing smart contract functionalities for Bitcoin Assets.
Ordinals: The Good, The Bad, and The Ugly
The year 2023 witnessed the arrival of Bitcoin Ordinals, a novel approach to creating “NFTs” directly on Bitcoin. By assigning unique ordinal numbers to individual satoshis (the smallest unit of Bitcoin), data like images, videos, and even text can be inscribed, giving birth to truly on-chain Bitcoin NFTs. This innovation ignited excitement, like BRC-20 (token equivalent) tokens ORDI and SATS. And with NFT collections like BTC Degods, Bitcoin Frogs, and Pizza Ninjas garnering substantial attention.
However, the path for wider adoption isn't without hurdles. The BRC-20 token-based minting competition, exemplified by projects like "ORDI” highlights the significant issue of high gas fees on Bitcoin. Additionally, the inherent limitations of Bitcoin script compared to the versatility of smart contracts pose challenges for complex trading or programmability. Finally, onboarding remains a hurdle: both minters and traders need BTC, creating a barrier to entry for those unfamiliar with the cryptocurrency.
Bridging these gaps is crucial for the sustained growth of Ordinals. Utilizing stablecoins like USDT/USDC for minting could attract new users comfortable with familiar currencies. This, combined with improvements in user interfaces and accessibility tools, could unlock the true potential of Ordinals, paving the way for mass adoption and ushering in a new era for digital collectibles on the world's biggest blockchain.
The current state of Ordinals scaling and programmability
Partially Signed Bitcoin Transactions (PSBT) is the de facto way to trade Ordinals, this solution is used across Ordinals marketplaces on Bitcoin. This technology allows multiple parties to contribute signatures to a transaction, essentially enabling seller to sign PSBT to sell their NFTs, and then the buyer sign the same transaction plus attaching BTC. Lightning Network, the Bitcoin's fast payment channel, is also used for facilitating payments for ordinals transactions such as minting.
Bridging Ordinals to other blockchains presents another potential path forward. Projects like Rootstock aims to enable NFT movement between Bitcoin and compatible blockchains, offering potential solutions for scaling and programmability limitations. However, this introduces security considerations and the complexity of bridge protocols themselves. The other way around, bridging EVM assets to Bitcoin is already established with protocols like BRC-721E and Teleburn-1155.
Finally, there's the issue of standards. While BRC-20 tokens were initially favored, they have problems like creating too many UTXOs, led to the creation of Runes, which was initiated by Ordinals’ creator Casey Rodarmor. Runes enable a UTXO to contain any amount of any number of assets.
Overall, Ordinals hold immense potential, but scalability, programmability, and standardization issues require innovative solutions. One solution in particular is using EAST Account Vault Model.
Scaling Ordinals with Account Vault Model (AVM)
“The Account Vault Model (AVM) is a new paradigm of cross-chain transactions. It works by transferring the ownership of an account to a smart-contract. This AVM is built on top of the NEAR account model, where an account is human-readable, permissioned through access keys, and could host a smart contract inside it. The ability to manage an account using multiple access keys enabled the transfer of an account to a smart-contract.”
This is an excerpt from the first article explaining AVM. If you haven’t read the first article, please do it now here. The followings are the steps needed to trade Ordinals on AVM.
First, a NEAR account will create a sub-account, this will act as the Account Vault, e.g. temp.alice.near. This account will have its Bitcoin address (vault-2.btc), which owns an Ordinal. The Ordinal inside the address can be transferred from any other address, or minted a new Ordinal.
Figure 1 Account Vault Generation
Next, this account temp.alice.near will be sent and owned by the marketplace in a wrapper contract (smart-contract.near). Technically, the full access key will be given to the marketplace, and the marketplace will replace the access keys with a new one. The marketplace needs to know what Ordinals this account holds, this information will be given by the EAST decentralized indexers.
(EAST decentralized indexers are responsible for indexing Ordinals, this will be explained more in detail another time, for now let’s keep it simple).
Figure 2 Wrapping Account Vault as NFT
After receiving the account, the marketplace will wrap it as an NFT on NEAR. Thus, this account can be traded on any NEAR NFT marketplace. After wrapping the Ordinal NFT, the seller can put it as direct sale, receiving offers, or even starting an auction. To onboard mainstream masses you can create a sale that accepts USDT/USDC as payment, you can see the flow with the diagram below.
Figure 3 AVM-based Ordinals trading with USDC
When a buyer wants to unwrap it back to Bitcoin, several steps must be taken. The NEP-171 NFT will be burned and the buyer will be given new full access keys for the account. After the buyer is in control of the account (temp.alice.near), he/she can sign a transaction to send the Ordinal to his/her other Bitcoin address.
Conclusion
The future of Ordinals hinges on overcoming its limitations. Innovative solutions like the Account Vault Model (AVM) offer promising avenues for overcoming programmability constraints. Standardization efforts like Runes are also crucial for long-term sustainability. Ultimately, whether Ordinals flourish or fade depends on its ability to bridge these gaps and deliver on its potential. The Account Vault is built on top of NEAR Blockchain, our solution is fully decentralized and non-custodial without needing a centralized bridge.