A new protocol known as "Ordinals" has recently been introduced to Bitcoin, causing significant debate within the community. This protocol allows users to hash image, audio, and movie files directly onto the blockchain, which deviates from Bitcoin's original purpose of solely supporting the storage of transaction data in its blocks.
Last week, a landmark event took place in the world of Bitcoin as the largest block was successfully mined. This block, however, was unique compared to previous blocks as it contained data from an image (jpeg), reminiscent of a Non-Fungible Token (NFT), yet more closely related to a digital artifact.
The recent introduction of these inscriptions onto the Bitcoin blockchain has caused substantial controversy. The first instance of a maximum filled block was demonstrated with block 774628, which measured at 3.99 MB and was dominated by a single transaction. This means that for a 10-minute period, no other transactions could take place. The addition of file data to the blocks is expected to result in higher fees and a decrease in the transaction throughput of Bitcoin.
The consequences of higher fees and reduced transaction throughput on the Bitcoin network are likely to drive more individuals to adopt Litecoin. Litecoin boasts ten times more on-chain capacity to support transactions, with fees that remain significantly lower than those of Bitcoin, yet providing nearly equivalent security.
Additionally, the implementation of Ordinals in Bitcoin undermines its fungibility, which is a critical aspect of a good currency. Litecoin addresses this issue through the integration of Litecoin MWEB, which pools Litecoin together and breaks the link between individual Litecoin and their UTXO sets. In other words, if MWEB were adopted on Bitcoin, the ordinal inscriptions could be eliminated by pegging into MWEB.
Consider this: currently, one Bitcoin satoshi is encoded with the file data and can move freely in the UTXO data set and be transferred between users. However, once this satoshi is added to MWEB, the linkability would likely be lost as it is mixed with the larger pool.
A logical next question to ask is whether Litecoin can also support ordinals and inscriptions. The answer is yes, it can. It's important to note that Bitcoin and Litecoin share 99% of the same code base and are mutually compatible, with Bitcoin serving as a test network at times for Litecoin, and vice versa.
Since Litecoin has more on-chain capacity and lower fees ordinals and inscriptions would be more widely accessible to people on Litecoin than Bitcoin. This makes Litecoin a more attractive option for individuals seeking to utilize these digital artifacts and participate in the NFT market.
As the fees on the Bitcoin network continue to rise and transaction wait times become increasingly longer, it is expected that a growing number of users will turn to Litecoin. With its lower fees and more efficient transaction times. Litecoin presents a compelling alternative for individuals seeking a more streamlined and cost-effective digital currency experience. This shift towards Litecoin is likely to gather momentum as the limitations of the Bitcoin network become increasingly pronounced, and users seek out more practical and affordable solutions.