With the development of the cryptocurrency market, the NFT track has gradually formed its unique market. However, under the continuous impact of the bear market in cryptocurrency, the development of the NFT track this year is full of difficulties and challenges. According to NFTGO data, as of August 7th, compared with last year, the total market value of NFT is about 5.64 billion US dollars, a decrease of more than 46.92% in the past year; the total transaction volume is 9.54 billion US dollars, a decrease of more than 69.69%; there are more than 1.32 million traders, a decrease of 27.86%. Therefore, from a data perspective, the market value of NFT is shrinking, and popularity and funds are constantly flowing away.
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Data source: NFTGO
In fact, although NFT projects such as Bored Ape Yacht Club (BAYC) and Cryptopunks have generated millions of dollars in transactions, once driving the NFT craze, the development of the NFT track has always been controversial. For example, some people believe that because NFT itself has no value, NFT based on “value recognition” is more of a gimmick for speculation; or, most NFTs are currently stored in centralized servers such as AWS and do not truly exist on the chain. Holders may need to deal with project parties suddenly going offline, unclear copyright, and even the dilemma of NFT theft without any recourse. However, it is undeniable that the development of any emerging field is not achieved overnight, and these doubts are the driving force behind the continuous development and innovation of NFT.
Going back to the beginning of this year, Casey Rodarmor released the Bitcoin Ordinals protocol. This protocol allows users to record different types of metadata (images, videos, PDFs, etc.) on satoshis, and it can directly create and store Bitcoin NFTs on the Bitcoin network, giving birth to the first Bitcoin network NFT. Currently, according to Dune data, the number of Inscriptions cast using Ordinals has exceeded 12 million in half a year.
With the trend of this new NFT narrative, the Ethereum Inscriptions protocol Ethscriptions has recently become popular in the cryptocurrency community. The following will start from the operation process of Ethscriptions to introduce its advantages, challenges, and opportunities for development.
Understanding Ethereum Inscriptions Ethscriptions
On June 17th, Ethscriptions, an Ethereum Inscriptions developed by Tom Lehman, co-founder and former CEO of Genius.com, was officially launched. This is a new protocol that uses transaction-invoked data to create and share digital collections on Ethereum.
Operation Process of Ethscriptions
Ethscriptions uses the Ethereum blockchain to store ownership information for each digital collection, but the file size cannot exceed 96KB, and the protocol currently only supports images. However, the creators of Ethscriptions said that they will support various types of files in the future.
Successful transactions on the Ethereum network will create an Ethscription inscription if the input data is a valid data URI. In this process, Ethscriptions utilize a feature called “Calldata,” which is data stored in an Ethereum smart contract. It writes the data in Ethereum’s Calldata, which is cheaper and more decentralized than using smart contract storage.
URI refers to Uniform Resource Identifiers for different data. To ensure uniqueness and uniqueness, each URI is carefully designed and must meet the condition that there are no other Ethscriptions with the same content in the previous block or earlier transactions in the same block. This clever approach ensures that no other Ethscription shares the same information.
When someone creates an Ethscription, they are considered the creator of that Ethscription. The recipient of the transaction is referred to as the initial owner.
Owners can also transfer their Ethscriptions to others. Find the ID of the Ethscription you want to transfer, which is the transaction hash that created the Ethscription. Write the Ethscription ID in the “hexadecimal” field and send the transaction to the recipient. When this transaction is processed, the recipient becomes the new owner.
Currently, users can view all created Ethscriptions through the website ethscriptions.com launched by Tom Lehman. The website also provides tools to create Ethscriptions on the Ethereum blockchain.
Differences and Similarities between Ethscriptions and Ordinals
The inscription models on Ethereum and Bitcoin may bring new trends to the NFT field, and the creators of Ethscriptions have claimed that they can be compared to Bitcoin’s “Ordinals Inscriptions.” The common point of the two protocols is that they define assets in the same way, using Ethereum as a database and only writing the data that defines the assets on Ethereum without using smart contracts. The differences between the two are as follows:
Different platforms. Ethscriptions operate on the Ethereum network, while Bitcoin Ordinals operate in the Bitcoin ecosystem. This platform difference will subsequently affect various aspects of their functionalities and features.
Different operation modes of the protocols. Bitcoin Ordinals store smart contract transaction data on the Bitcoin network, while Ethscriptions use the Calldata feature to create inscriptions. Additionally, Ethscriptions require each image to be unique, meaning that no two Ethscriptions can be the same. However, Bitcoin Ordinals allow the same image to be used on different tokens.
Different supported data sizes and types. Currently, Ethscriptions restrict the data size to be less than 96KB, while Bitcoin Ordinals allow the creation of inscriptions of up to 4 megabytes. Although Ordinals support all types of digital files such as text, video, music, or games, Ethscriptions only support images. However, in the future, it plans to eventually add different file types.
Ethscriptions: Constant Controversy, Innovation or Regression?
An Overview of Ethscriptions’ Potential
Compared to traditional NFTs that rely on smart contracts, Ethscriptions is a new protocol that makes NFT assets more economical and decentralized. Since its creation, Ethscriptions has gained popularity in the community and has its own advantages:
Low user entry barriers. Users do not need extensive technical knowledge to create and sell digital assets using an easy-to-use interface. This provides clear instructions and guidance for beginners in the NFT world, creating a seamless user experience.
High transparency and security. At the core of NFTs is a smart contract hosted on the Ethereum Request for Comment (ERC) chain. Traditional NFT platforms mostly provide on-chain verification while storing NFT source file content off-chain. In contrast, Ethscriptions stores data on a decentralized network and utilizes the Ethereum blockchain to ensure transaction security and transparency. The ownership history of each NFT is traceable, preventing forgery or tampering while ensuring uniqueness.
Wide market reach. Backed by the leading Ethereum community, Ethscriptions is highly accessible and open to anyone with internet connectivity, allowing artists, collectors, and enthusiasts to efficiently explore and participate in the world of NFTs. Currently, Ethscriptions has gained support from popular NFT markets OpenSea and Emblem Vault.
Constant Challenges for Ethscriptions
Although the Ethscriptions protocol has caused a sensation in the Ethereum community, with tens of thousands of images and inscriptions being engraved on the Ethereum network within hours, many community members believe that Ethscriptions is a step backward.
For example, crypto KOL Chainleft believes that Ethscriptions lacks innovation. Firstly, although this protocol was created as early as 2016, people have been storing custom data or art in data calls, which has been around for years and is not groundbreaking or a good way to store data.
In addition, Ethscriptions’ liquidity mechanism is not yet perfect. NFTs minted based on Ethscriptions currently need to be packaged into Ethereum’s ERC-721 or ERC-1155 NFTs using tools like Emblem Vault, and then traded on Opensea. This trading method still relies on Ethereum’s smart contracts and platforms like Opensea.
Lastly, Ethscriptions needs improvement in terms of functionality and interaction. For example, there are limitations on the supported data sizes and types, which restrict the diversity of NFT minting. Additionally, Ethscriptions differs in that it does not include any smart contract logic, making it more difficult to combine with existing Ethereum smart contracts compared to traditional NFTs. How can NFTs generated by Ethscriptions interact with existing Ethereum smart contracts? This may require the emergence of a series of new tools and platforms.
The Opportunities of Ethscriptions, Still Requires Developers to Drive Innovation
The future of Ethscriptions may bring further innovation and development to the Ethereum ecosystem. As the NFT space continues to evolve, Ethscriptions will continue to develop to meet the ever-changing needs of users. A series of innovative tools and platforms, as well as a diverse range of applications, will continue to emerge. Here are some possible directions for the future development of Ethscriptions:
Enhanced features and functionality. Ethscriptions may introduce new features and expanded functionality to provide creators and users with more immersive and engaging experiences. This could include support for other file types, such as 3D models, augmented reality (AR) assets, and virtual reality (VR) experiences, opening up a world of possibilities for digital expression.
In addition, as the Ethereum network continues to grow and scale, these advancements will enable Ethscriptions to handle larger volumes of transactions and provide a seamless user experience while maintaining platform security and integrity.
Community-driven development. With its low barrier to entry, Ethscriptions can foster a vibrant community of creators, collectors, and enthusiasts who actively contribute to the platform’s development and improvement, nurturing a thriving ecosystem.
Smart contract automation integration. Automated smart contracts can streamline transaction execution, reduce costs, and provide enhanced security and transparency, making Ethscriptions more efficient and user-friendly. Ethscriptions can integrate smart contract automation functionality to simplify the process of creating, selling, and transferring NFTs.
Expanded market and ecosystem. Ethereum is currently one of the leading public blockchain ecosystems, and with the growing strength of the Ethereum platform and ecosystem, there may be dedicated platforms for purchasing, selling, and trading Ethscriptions. Collaborations with other NFT markets and platforms can increase the exposure and accessibility of minted products.
In conclusion, as analyzed in the above series, the emergence of Ethereum-based Ethscriptions provides a new form of asset for NFTs, presenting developers and users with a new choice in the field of encrypted NFTs. Whether for project teams, investors, developers, or users in the new field, making the project better is the optimal choice for “incentive compatibility”. Whether Ethscriptions will be a fleeting trend or a future new direction, its development lies in the hands of every ecosystem developer, creator, and participant.