Inscription New breakthrough of Cryptocurrency or backward development?

Table of Contents

The cryptocurrency landscape is ever-evolving, and recent times have seen a significant surge in a novel concept called "inscriptions." Accounting for a substantial portion of transactions on various EVM chains, these inscriptions have sparked debates on whether they are just a passing trend or a lasting innovation. In this exploration, we dive into inscriptions, their origins, mechanics, and their impact on blockchain networks.

I. The Rise of Inscriptions in EVM Chains

In recent weeks, the blockchain space has witnessed a transformative surge propelled by a groundbreaking concept – inscriptions. These cryptographic engravings have swiftly become the driving force behind approximately 90% of transactions on various EVM chains, prompting a compelling inquiry into their nature: are inscriptions a mere crypto trend, destined to fade away, or do they signify a profound and enduring innovation?

source: @hildobby_ dune

This surge in inscriptions represents a departure from conventional transactional patterns, capturing the attention of blockchain enthusiasts and industry experts alike. The pressing question lingers in the air, begging for answers and insights into the longevity and implications of this phenomenon.

To unravel the mystery surrounding the rise of inscriptions, it's crucial to explore the driving factors behind their prevalence. Unlike conventional transactions, which predominantly involve the transfer of native tokens, inscriptions introduce an intriguing layer of functionality. The landscape has become dotted with these inscribed transactions, raising eyebrows and prompting a deeper examination of their purpose and potential impact.

As inscriptions continue to dominate transactional activities on EVM chains, their sheer prevalence invites contemplation. Are they indicative of a paradigm shift in how we perceive and execute transactions within the blockchain realm? Or are they merely a fleeting fascination, soon to be replaced by the next innovation?

II. Bitcoin's Exploration into Ordinals

In the ever-expanding universe of blockchain technology, Bitcoin stands as the trailblazer, having paved the way for decentralized currencies. However, the absence of smart contract support on the Bitcoin blockchain has long been a limiting factor, preventing the creation of tokens such as non-fungible tokens (NFTs) directly on the network.

A paradigm shift occurred in April 2023, marking a significant milestone in Bitcoin's evolutionary journey. Enter the concept of "Bitcoin Ordinals," a transformative development that captured the imagination of the blockchain community.

At its core, Bitcoin Ordinals represent a departure from the conventional narrative of introducing new features to the Bitcoin network. Instead, it capitalizes on the fundamental building blocks of Bitcoin – Satoshis. Each Bitcoin, divisible into 100 million Satoshis, serves as the native currency of the Bitcoin network.

Ordinals ingeniously leverage Satoshis by introducing the ability to "inscribe" arbitrary content onto these minuscule units of value. This process, aptly named "inscriptions," opens up a realm of possibilities previously unattainable on the Bitcoin blockchain. Imagine inscribing the metadata of an NFT onto a Satoshi, effectively making it a canvas for creative expression within the confines of the Bitcoin network.

This innovation, although seemingly intricate, works seamlessly out of the box. The beauty lies in its simplicity – a testament to the elegance of the underlying concept. Each Satoshi, with its inscribed content, can be transferred just like any other Bitcoin, enabling the existence of what can be deemed as "pseudo-NFTs" on the Bitcoin blockchain.

What sets the nomenclature "ordinals" apart is the unique identification mechanism applied to each Satoshi. The assignment of ordinal numbers to Satoshis, based on when they were mined, creates a distinct and immutable identifier for each unit. The nomenclature draws attention to this feature, emphasizing the ordinal numbers' role in uniquely identifying and categorizing the inscribed Satoshis.

source: @jarrodWattsDev on X

To summarize Bitcoin's narrative of exploration into ordinals:

A blockchain powerhouse lacking smart contract support, hence no native NFTs.

The introduction of inscriptions breathed new life into the Bitcoin network, allowing for the inscribing of metadata onto Satoshis.

The unique identification of Satoshis through ordinal numbers, or Bitcoin Ordinals, set the stage for a transformative journey that gained traction around April 2023.

III. Inscriptions on Bitcoin and EVM

We discover how inscriptions have bridged the gap between the traditional capabilities of these platforms and the demand for more complex functionalities, such as tokenization and NFTs.

On the Bitcoin Network: Pseudo-NFTs via Satoshis

Traditionally recognized for its role as a decentralized digital currency, Bitcoin lacked the inherent support for smart contracts, a feature pivotal for the creation and management of tokens like NFTs. The introduction of inscriptions revolutionized this narrative by allowing users to inscribe metadata onto Satoshis, the smallest units of Bitcoin.

This novel approach effectively transformed Satoshis into canvases for creativity within the Bitcoin network. Each Satoshi, comprising a multitude of inscriptions, became a representation of pseudo-NFTs, all made possible through the seamless integration of the inscription concept. The ordinals, uniquely identifying each Satoshi, further added a layer of organization and distinctiveness to the inscribed content.

The journey of inscriptions on the Bitcoin network gained momentum around April 2023, marking a fundamental shift in the capabilities of the original blockchain powerhouse. Users were now empowered to transfer and trade these pseudo-NFTs, unlocking a new dimension of value within the Bitcoin ecosystem.

source: @0xCygaar on X

In the EVM World: Expanding Possibilities

Fast-forwarding to November 16, 2023, the exploration of ordinals extended beyond Bitcoin, finding resonance in the Ethereum Virtual Machine (EVM) world. Here, where smart contracts thrive and NFTs are native, inscriptions assumed a different role — mimicking the functionalities of ERC-721 (NFT) and ERC-20 (fungible tokens) tokens.

Inscriptions on EVM chains involve a strategic utilization of calldata within transactions. Unlike smart contracts, which typically incur higher gas fees due to the computational overhead, inscriptions streamline the process by focusing on the transfer of data. This cost-effective approach has proven to be a compelling alternative, especially for actions like minting, transferring, or even implementing more complex rules within the realm of inscriptions.

The versatility of inscriptions on EVM chains is exemplified by their ability to emulate a spectrum of token types. From simple ERC-20 tokens with straightforward data like "mint," "amount," and "symbol," to more intricate inscriptions incorporating smart contract-like rules for pricing, supply, and transaction fees — the possibilities are expansive.

However, the question arises: Why choose inscriptions over native smart contracts on EVM chains? The answer lies in the realm of cost-effectiveness. Inscriptions, by leveraging calldata and simplifying transactions, substantially reduce gas fees compared to their smart contract counterparts, making them an attractive option for users seeking efficiency and affordability in their blockchain interactions.

IV. Mechanics of EVM Inscriptions

Why choose inscriptions over the well-established smart contracts within the EVM ecosystem?

Cost-Effectiveness through Calldata

One of the key advantages propelling the adoption of inscriptions on EVM chains is their inherent cost-effectiveness, particularly in comparison to the gas fees associated with smart contracts. The mechanics of EVM inscriptions revolve around the strategic use of calldata, a feature inherent in Ethereum transactions. Calldata, or call data, serves as the vehicle for carrying instructions within a transaction.

Unlike smart contracts that involve complex computational processes, inscriptions streamline their transactions by mainly focusing on transferring calldata. This simplicity significantly reduces the associated gas fees, as the EVM doesn't need to execute extensive operations. The elegance lies in the efficiency of this approach — transactions often involve transferring native tokens (e.g., MATIC or BNB) along with calldata, providing a straightforward and cost-effective mechanism.

Step-by-Step Breakdown

Understanding the step-by-step process of EVM inscriptions is crucial to appreciating their appeal:

1. Create a New Transaction: The journey begins with the initiation of a new transaction. This could be as simple as sending a specified amount of native tokens to another address.

2. Send 0 Native Tokens: A unique aspect of EVM inscriptions is the often-counterintuitive action of sending 0 native tokens to the recipient. This transaction, seemingly trivial, serves as the vessel for the more critical payload — the calldata.

3. Include Calldata: Within this seemingly inconspicuous transaction lies the heart of the inscription — the calldata. The calldata contains explicit "instructions" outlining the desired action, such as "mint," "transfer," or more complex commands, depending on the nature of the inscription.

To illustrate, an inscription for a simple ERC-20 token might include calldata resembling: "mint" "100000000" "pols." This concise representation captures the essence of the inscription, instructing the EVM to mint 100,000,000 units of the "pols" token.

V. Pros and Cons of EVM Inscriptions

Advantages

>Cost-Effectiveness and Efficiency:

At the forefront of the advantages lies the inherent cost-effectiveness of EVM inscriptions. The streamlined mechanics, particularly the emphasis on calldata in transactions, significantly reduce gas fees. Compared to the computational overhead associated with executing smart contracts, inscriptions offer a more economical alternative. Users engaging in transactions, whether simple token transfers or complex rule-based inscriptions, find a cost-efficient solution within the EVM inscription paradigm.

Challenges and Limitations

>Dependence on Off-Chain Indexers:

One prominent challenge stems from the reliance on off-chain indexers for data retrieval. While the calldata and inscriptions are stored on-chain, accessing and interpreting this data in real-time on-chain proves challenging. To comprehend the state of an inscription token or collection, users often need to rely on external indexers, introducing an element of centralization. This reliance on off-chain elements potentially undermines the decentralized ethos that blockchain networks strive to achieve.

>Lack of Real-Time On-Chain Visibility:

A significant limitation of EVM inscriptions is the absence of real-time on-chain visibility. Unlike traditional smart contracts, where the state changes are immediately visible on the blockchain, inscriptions necessitate off-chain mechanisms for data retrieval. This lack of direct on-chain visibility poses challenges for smart contracts and applications attempting to interact with inscription data in real-time. Users, unless running their own indexers, may find themselves reliant on centralized APIs to access and interpret inscription-related information.

Impact on Blockchain Networks

>Examination of Consequences:

The rise of EVM inscriptions, while heralded for its cost-effectiveness, has not been without consequences. The cost advantages of inscriptions have led to a surge in transactions, with some users engaging in what can be described as "spamming." This surge, driven by the desire to capitalize on the affordability of inscription transactions, has resulted in network disruptions on platforms like Arbitrum and contributed to degraded experiences on other chains like zkSync and Avalanche.

>Looking Beyond Cost:

The influx of inscriptions raises questions about the sustainability of this trend. While the cost advantages are evident, the potential drawbacks, including network disruptions and degraded user experiences, prompt a broader consideration of the long-term viability of EVM inscriptions. It remains to be seen how the blockchain community adapts to these challenges and whether the trend of inscription spamming will subside or persist.

In conclusion, while inscriptions offer a more economical alternative to smart contracts, their dependence on off-chain elements and potential drawbacks raise intriguing questions about their sustained impact on the evolving landscape of blockchain technology. The journey of inscriptions continues, prompting industry players to assess their role in shaping the future of decentralized transactions.

About Orochi Network

Orochi Network is a cutting-edge zkOS (An operating system based on zero-knowledge proof) designed to tackle the challenges of computation limitation, data correctness, and data availability in the Web3 industry. With the well-rounded solutions for Web3 Applications, Orochi Network omits the current performance-related barriers and makes ways for more comprehensive dApps hence, becoming the backbone of Web3's infrastructure landscape.