Is the future of Bitcoin determined by AI?

Could Bitcoin take over Ethereum’s role in the NFT ecosystem? More and more NFTs are being rolled out on Bitcoin, and strangely enough, this does not (yet) affect the transaction costs. Also, the first AI-made NFTs are already trading, what does this mean for the market?

What is the purpose of Bitcoin?

Ever since Satoshi Nakamoto entrusted his Bitcoin project to the community, there has been a debate about what the purpose of Bitcoin is. Some believe it should be used primarily for simple financial transactions, while others believe it should support more complex data.

The Ordinal project enabled NFTs on Bitcoin. These NFTs are processed by the smallest fungible bitcoin unit known as satoshis.

Each Satoshi in Bitcoin can become unique

It is actually quite contradictory because there are 100 million satoshis per bitcoin and there are 19 million bitcoins in circulation. If something is not unique, it is called sats, because all satoshi are interchangeable. It doesn’t matter if you use one or the other satellite.

Ordinal adds data to a single Sat and converts it to an NFT. This process, known as inscription, allows the creation of non-fungible tokens, preserving the key feature of fungibility in Bitcoin’s design.

Since early February, ordinal NFTs have grown exponentially to store images, videos, and even documents in Bitcoin. Although the transaction costs are (still) low, Ordinal activity has increased the network costs per block by an average of 25% and has grown to almost 30% of the maximum block area.

From smart contracts to Bitcoin NFTs

The Taproot 2021 update, which reduced data storage costs, was originally planned for future smart contract development. But the reality is that anything within Bitcoin’s 4 MB block size limit can now be stored by Ordinal.

Many in the community have expressed concern that this could overwhelm Bitcoin, especially as many more users are likely to be added, increasing transaction costs.

But one of the most important things about Bitcoin and the community is that no one likes censorship. Bitcoin is a network that does not require third-party permission to do anything. And if these values ​​really matter, then there is a very good chance that Bitcoin-based NFTs will continue to exist.

Bitcoin can technically compete with altcoins

In addition, Ordinals paved the way for additional data on the blockchain, including rollups. This is a common technique on altcoin blockchains and allows multiple smart contracts to be merged into one transaction. This ensures that the network is not overloaded.

As developers expand Bitcoin’s smart contract capabilities, BTC will have more and more potential use cases. This allows Bitcoin to compete with other blockchains in terms of decentralized applications and smart contracts, with the added benefit of Bitcoin being the most secure of all cryptocurrencies.

The role of artificial intelligence in Bitcoin and NFTs

The next step in the NFT world and perhaps also for Bitcoin is AI. The deal between Microsoft and OpenAI has sparked a lot of interest from artificial intelligence investors.

Artificial intelligence-based systems have the potential to scale traditional cryptographic processes, automate content creation, reduce the risk of human error, and reduce programming time.

For example, DALL-E (also from OpenAI) is one of the most popular text-to-image generators. These are perfect tools for NFT creators as they can quickly generate new content, but also simplify the creative process.

DALL-E can efficiently generate a large number of items for NFT collections, typically consisting of more than 5,000 individual items.

The arrival of AI also raises new problems for the community. After all, who owns an artificially created NFT? Are these all community members to whom the AI ​​has provided feedback and suggestions? Or just the programmer instructing the AI ​​to create art?