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March 02, 2023

Ember Nuggets #51 | Canto & Bitcoin Ordinals 📈

Nugget #1: What is Canto?

Launched in 2022, Canto is a permissionless, proof-of-stake, EVM-compatible, L1 blockchain built on the Cosmos SDK. Rather than focusing on tech innovation, it is more of a social experiment that utilizes open-source code to test mechanisms for funding public goods and incentivizing developer activity on the network.

Canto's grassroots movement of DeFi builders is led by Scott Lewis, known for DeFi Pulse and Slingshot Crypto, with notable contributors including Plex, b-Harvest, and NeoBase. Unlike other blockchain projects, there is no foundation, formal VC funding, or presale tokens. The token caught the industry's attention, rising over 700% in January.

You can learn more about Canto here.

Nuggets #2: Bitcoin NFTs and Ordinal Theory

NFTs on Bitcoin originated well before the mainstream adoption of NFTs on Ethereum and other chains. While not the first, one of the most notable NFT collections is the Rare Pepes on CounterParty. The card below sold at @Sothebysverse for $3.65M. Bitcoin was originally designed as a peer-to-peer payment system, but people have attempted to use it for other purposes, such as on-chain NFTs. CounterParty was one of the earliest Bitcoin-based NFT project, but it was limited by the 80-byte OP_RETURN function.

Ordinal Pepe.

The first rare Pepe NFTs, seen above, were mined on Bitcoin block 428,919. Block space has been limiting on Bitcoin, thus a limited proliferation of NFTs on-chain.

Casey Rodarmor, founder of Ordinals, found an alternative to store arbitrary data on-chain using SegWit's lower transaction fees and the "loophole" enabled by Taproot. Ordinal Theory views every single satoshi as non-fungible by agreeing upon a social convention (FIFO for sats).

Taproot enables users to store arbitrary data inside tapscripts almost without limit, allowing for the inscribing of data to a certain satoshi, making it non-fungible. SegWit allows witness data to be stored in a segregated witness section, costing 75% less and increasing the block size limit to 4 MB.

With the above, Bitcoin Core's self-imposed limit of 400 kB can easily be bypassed, and a 3.94 MB inscription transaction was mined in Jan 2023. Bitcoin's on-chain NFTs have sparked a philosophical debate among the crypto community. While some believe the network should focus on BTC transactions, others see NFTs as a potential source of organic growth and more transaction fees. Some traditionalists see NFTs as spamming the network & wasting blockspace, calling for miners to censor NFT transactions. Others see this as censorship that damages the permissionless nature of Bitcoin. It's too early to say what happens next but there have been a spike in Bitcoin NFTs over the past month.

That's all we've got for this week - thank you for reading!

Harsharn Singh

Ember Fund

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