Expand FAQ (ordinals#944)

docs/src/faq.md

@@ -1,65 +1,66 @@
-Ordinal FAQ
-===========
+Ordinal Theory FAQ
+==================
 
-How many ordinals will there be?
---------------------------------
+What is ordinal theory?
+-----------------------
+
+Ordinal theory is is a protocol for assigning serial numbers to satoshis, the
+smallest subdivision of a bitcoin, and tracking those satoshis as they are
+spent by transactions.
 
-THERE WILL ONLY EVER BE 2,099,999,997,690,000 ORDINALS
+These serial numbers are large numbers, like this 804766073970493. Every
+satoshi, which is ¹⁄₁₀₀₀₀₀₀₀₀ of a bitcoin, has an ordinal number.
 
-What are ordinals?
-------------------
+Does ordinal theory require a side chain, a separate token, or changes to Bitcoin?
+----------------------------------------------------------------------------------
 
-Ordinals are serial numbers for satoshis, like this: 804766073970493. Every
-satoshi, which is ¹⁄₁₀₀₀₀₀₀₀₀ of a bitcoin, has an ordinal, and every ordinal
-has a satoshi. When a satoshi changes hands, so does its ordinal. There are a
-lot of satoshis, and so there are a lot of ordinals. Two quadrillion
-ninety-nine trillion nine hundred ninety-nine billion nine hundred ninety-seven
-million six hundred ninety thousand, to be precise.
+Nope! Ordinal theory works right now, without a side chain, and the only token
+needed is bitcoin itself.
 
-What are ordinals not?
-----------------------
+What is ordinal theory good for?
+--------------------------------
 
-Ordinals are not a side chain, a separate token, something that requires any
-changes to Bitcoin, or complicated.
+Collecting, trading, and scheming. Ordinal theory assigns identities to
+individual satoshis, allowing them to be individually tracked and traded, as
+curios and for numismatic value.
 
-What are ordinals for?
-----------------------
+Ordinal theory also enables inscriptions, a protocol for attaching arbitrary
+content to individual satoshis, turning them into bitcoin-native digital
+artifacts.
 
-Collecting, trading, and scheming. Ordinals could be used as the basis of
-Bitcoin-native NFTs, using a scheme to assign NFTs to ordinals, and then use
-those ordinals to track ownership of the NFT. But only could, nobody's written
-the code for that yet.
+How does ordinal theory work?
+-----------------------------
 
-How do ordinals work?
----------------------
+Ordinal number are assigned to satoshis in the ordinal in which they are mined.
+The first satoshi in the first block has ordinal number 0, the second has
+ordinal number 1, and the last satoshi of the first block has ordinal number
+4,999,999,999.
 
-Ordinals are assigned to satoshis in the ordinal in which they are mined. The
-first satoshi in the first block is ordinal 0, the second is ordinal 1, and the
-last satoshi of the firt block is ordinal 4,999,999,999.
+Satoshis live in outputs, but transactions destroy outputs and create new ones,
+so ordinal theory uses an algorithm to determine how satoshis hop from the
+inputs of a transaction to its outputs.
 
-Ordinals live in UTXOs, but transactions destroy spent inputs and create new
-outputs, so we need an algorithm to determine how ordinals hop from the inputs
-to the outputs of a transaction. Fortunately, that algorithm is very simple.
+Fortunately, that algorithm is very simple.
 
-Ordinals transfer in first-in-first-out order. Think of the inputs to a
-transaction as being a list of ordinals, and the outputs as a list of slots,
-waiting to receive an ordinal. To assign ordinals to slots, go through each
-ordinal in the inputs in order, and assign each to the first available slot in
-the outputs.
+Satoshis transfer in first-in-first-out order. Think of the inputs to a
+transaction as being a list of satoshis, and the outputs as a list of slots,
+waiting to receive a satoshi. To assign input satoshis to slots, go through
+each satoshi in the inputs in order, and assign each to the first available
+slot in the outputs.
 
 Let's imagine a transaction with three inputs and two outputs. The inputs are
 on the left of the arrow and the outputs are on the right, all labeled with
 their values:
 
  [2] [1] [3] → [4] [2]
 
-Now let's label the same transaction with the ordinals that each input
-contains, and question marks for each output ordinal. Ordinals are long
-numbers, so let's use letters to represent them:
+Now let's label the same transaction with the ordinal numbers of the satoshis
+that each input contains, and question marks for each output slot. Ordinal
+numbers are large, so let's use letters to represent them:
 
  [a b] [c] [d e f] → [? ? ? ?] [? ?]
 
-To figure out which ordinal goes to which output, go through the input ordinals
+To figure out which satoshi goes to which output, go through the input satoshis
 in order and assign each to a question mark:
 
  [a b] [c] [d e f] → [a b c d] [e f]
@@ -71,7 +72,8 @@ transaction into one that pays fees, we'll remove the second output:
 
  [2] [1] [3] → [4]
 
-The ordinals, <var>e</var> and <var>f</var> now have nowhere to go in the outputs:
+The satoshis <var>e</var> and <var>f</var> now have nowhere to go in the
+outputs:
 
  [a b] [c] [d e f] → [a b c d]
 
@@ -88,3 +90,250 @@ Where can I find the nitty-gritty details?
 ------------------------------------------
 
 [The BIP!](https://github.com/casey/ord/blob/master/bip.mediawiki)
+
+Why are ordinal inscriptions called "digital artifacts" instead of "NFTs"?
+--------------------------------------------------------------------------
+
+An inscription is an NFT, but the term "digital artifact" is used instead,
+because it's simple, suggestive, and familiar.
+
+The phrase "digital artifact" is highly suggestive, even to someone who has
+never heard the term before. In comparison, NFT is an acronym, and doesn't
+provide any indication of what it means if you haven't heard the term before.
+
+Additionally, "NFT" feels like financial terminology, and the both word
+"fungible" and sense of the word "token" as used in "NFT" is uncommon outside
+of financial contexts.
+
+How do ordinal inscriptions compare to…
+---------------------------------------
+
+### Ethereum NFTs?
+
+*Inscriptions are always immutable.*
+
+There is simply no way to for the creator of an inscription, or the owner of an
+inscription, to modify it after it has been created.
+
+Ethereum NFTs *can* be immutable, but many are not, and can be changed or
+deleted by the NFT contract owner.
+
+In order to make sure that a particular Ethereum NFT is immutable, the contract
+code must be audited, which requires detailed knowledge of the EVM and Solidity
+semantics.
+
+It is very hard for a non-technical user to determine whether or not a given
+Ethereum NFT is mutable or immutable, and Ethereum NFT platforms make no effort
+to distinguish whether an NFT is mutable or immutable, and whether the contract
+source code is available and has been audited.
+
+*Inscription content is always on-chain.*
+
+There is no way for an inscription to refer to off-chain content. This makes
+inscriptions more durable, because content cannot be lost, and scarcer, because
+inscription creators must pay fees proportional to the size of the content.
+
+Some Ethereum NFT content is on-chain, but much is off-chain, and is stored on
+platforms like IPFS or Arweave, or on traditional, fully centralized web
+servers. Content on IPFS is not guaranteed to continue to be available, and
+some NFT content stored on IPFS has already been lost. Platforms like Arweave
+rely on weak economic assumptions, and will likely fail catastrophically when
+these economic assumptions are no longer met. Centralized web servers may
+disappear at any time.
+
+It is very hard for a non-technical user to determine where the content of a
+given Ethereum NFT is stored.
+
+*Inscriptions are much simpler.*
+
+Ethereum NFTs depend on the Ethereum network and virtual machine, which are
+highly complex, constantly changing, and which introduce changes via
+backwards-incompatible hard forks.
+
+Inscriptions, on the other hand, depend on the Bitcoin blockchain, which is
+relatively simple and conservative, and which introduces changes via
+backwards-compatible soft forks.
+
+*Inscriptions are more secure.*
+
+Inscriptions inherit Bitcoin's transaction model, which allow a user to see
+exactly which inscriptions are being transferred by a transaction before they
+sign it. Inscriptions can be offered for sale using partially signed
+transactions, which don't require allowing a third party, such as an exchange
+or marketplace, to transfer them on the user's behalf.
+
+By comparison, Ethereum NFTs are plagued with end-user security
+vulnerabilities. It is commonplace to blind-sign transactions, grant
+third-party apps unlimited permissions over a user's NFTs, and interact with
+complex and unpredictable smart contracts. This creates a minefield of hazards
+for Ethereum NFT users which are simply not a concern for ordinal theorists.
+
+*Inscriptions are scarcer.*
+
+Inscriptions require bitcoin to mint, transfer, and store. This seems like a
+downside on the surface, but the raison d'etre of digital artifacts is to be
+scarce and thus valuable.
+
+Ethereum NFTs, on the other hand, can be minted in virtually unlimited
+qualities with a single transaction, making them inherently less scarce, and
+thus, potentially less valuable.
+
+*Inscriptions do not pretend to support on-chain royalties.*
+
+On-chain royalties are a good idea in theory but not in practice. Royalty
+payment cannot be enforced on-chain without complex and invasive restrictions.
+The Ethereum NFT ecosystem is currently grappling with confusion around
+royalties, and is collectively coming to grips with the reality that on-chain
+royalties, which were messaged to artists as an advantage of NFTs, are not
+possible, while platforms race to the bottom and remove royalty support.
+
+Inscriptions avoid this situation entirely by making no false promises of
+supporting royalties on-chain, thus avoiding the confusion, chaos, and
+negativity of the Ethereum NFT situation.
+
+*Inscriptions unlock new markets.*
+
+Bitcoin's market capitalization and liquidity are greater than Ethereum's by a
+large margin. Much of this liquidity is not available to Ethereum NFTs, since
+many Bitcoiners prefer not to interact with the Ethereum ecosystem due to
+concerns related to simplicity, security, and decentralization.
+
+Such Bitcoiners may be more interested in inscriptions than Ethereum NFTs,
+unlocking new classes of collector.
+
+*Inscriptions have a richer data model.*
+
+Inscriptions consist of a content type, also known as a MIME type, and content,
+which is an arbitrary byte string. This is the same data model used by the web,
+and allows inscription content to evolve with the web, and come to support any
+kind of content supported by web browsers, without requiring changes to the
+underlying protocol.
+
+### RGB and Taro assets?
+
+RGB and Taro are both second-layer asset protocols built on Bitcoin. Compared
+to inscriptions, they are much more complicated, but much more featureful.
+
+Ordinal theory has been designed from the ground up for digital artifacts,
+whereas the primary use-case of RGB and Taro are fungible tokens, so the user
+experience for inscriptions is likely to be simpler and more polished than the
+user experience for RGB and Taro NFTs.
+
+RGB and Taro both store content off-chain, which requires additional
+infrastructure, and which may be lost. By contrast, inscription content is
+stored on-chain, and cannot be lost.
+
+Ordinal theory, RGB, and Taro are all very early, so this is speculation, but
+ordinal theory's focus may give it the edge in terms of features for digital
+artifacts, including a better content model, and features like globally unique
+symbols.
+
+### Counterparty assets?
+
+Counterparty has its own token, XCP, which is required for some functionality,
+which makes most bitcoiners regard it as an altcoin, and not an extension or
+second layer for bitcoin.
+
+Ordinal theory has been designed from the ground up for digital artifacts,
+whereas Counterparty was primarily designed for financial token issuance.
+
+Inscriptions for…
+-----------------
+
+### Artists
+
+*Inscriptions are on Bitcoin.* Bitcoin is the digital currency with the highest
+status and greatest chance of long-term survival. If you want to guarantee that
+your art survives into the future, there is no better way to publish it than as
+inscriptions.
+
+*Cheaper on-chain storage.* At $20,000 per BTC and the minimum relay fee of 1
+satoshi per vbyte, publishing inscription content costs $50 per 1 million
+bytes.
+
+*Inscriptions are early!* Inscriptions are still in development, and have not
+yet launched on mainnet. This gives you an opportunity to be an early adopter,
+and explore the medium as it evolves.
+
+*Inscriptions are simple.* Inscriptions do not require writing or understanding
+smart contracts.
+
+*Inscriptions unlock new liquidity.* Inscriptions are more accessible and
+appealing to bitcoin holders, unlocking an entirely new class of collector.
+
+*Inscriptions are designed for digital artifacts.* Inscriptions are designed
+from the ground up to support NFTs, and feature a better data model, and
+features like globally unique symbols and enhanced provenance.
+
+*Inscriptions do not support on-chain royalties.* This is negative, but only
+depending on how you look at it. On-chain royalties have been a boon for
+creators, but have also created a huge amount of confusion in the Ethereum NFT
+ecosystem. The ecosystem now grapples with this issue, and is is engaged in a
+race to the bottom, towards a royalties-optional future. Inscriptions have no
+support for on-chain royalties, because they are technically infeasible. If you
+choose to create inscriptions, there are many ways you can work around this
+limitation: withhold a portion of your inscriptions for future sale, to benefit
+from future appreciation, or perhaps offer perks for users who respect optional
+royalties.
+
+### Collectors
+
+*Inscriptions are simple, clear, and have no surprises.* They are always
+immutable and on-chain, with no special due diligence required.
+
+*Inscriptions are on Bitcoin.* You can verify the location and properties of
+inscriptions easily with Bitcoin full node that you control.
+
+### Bitcoiners
+
+Let me begin this section by saying: the most important thing that the Bitcoin
+network does is decentralize money. All other use-cases are secondary,
+including ordinal theory. The developers of ordinal theory understand and
+acknowledge this, and believe that ordinal theory helps, at least in a small
+way, Bitcoin's primary mission.
+
+Unlike many other things in the altcoin space, digital artifacts have merit.
+There are, of course, a great deal of NFTs that are ugly, stupid, and
+fraudulent. However, there are many that are fantastically creative, and
+creating and collecting art has been a part of the human story since its
+inception, and predates even trade and money, which are also ancient
+technologies.
+
+Bitcoin provides an amazing platform for creating and collecting digital
+artifacts in a secure, decentralized way, that protects users and artists in
+the same way that it provides an amazing platform for sending and receiving
+value, and for all the same reasons.
+
+Ordinals and inscriptions increase demand for Bitcoin block space, which
+increase Bitcoin's security budget, which is vital for safeguarding Bitcoin's
+transition to a fee-dependent security model, as the block subsidy is halved
+into insignificance.
+
+Inscription content is stored on-chain, and thus the demand for block space for
+use in inscriptions is unlimited. This creates a buyer of last resort for *all*
+Bitcoin block space. This will help support a robust fee market, which ensures
+that Bitcoin remains secure.
+
+Inscriptions also counter the narrative that Bitcoin cannot be extended or used
+for new use-cases. If you follow projects like DLCs, Fedimint, Lightning, Taro,
+and RGB, you know that this narrative is false, but inscriptions provide a
+counter argument which is easy to understand, and which targets a popular and
+proven use case, NFTs, which makes it highly legible.
+
+If inscriptions prove, as the authors hope, to be highly sought after digital
+artifacts with a rich history, they will serve as a powerful hook for Bitcoin
+adoption: come for the fun, rich art, stay for the decentralized digital money.
+
+Inscriptions are an extremely benign source of demand for block space. Unlike,
+for example, stablecoins, which potentially give large stablecoin issuers
+influence over the future of Bitcoin development, or DeFi, which might
+centralize mining by introducing opportunities for MEV, digital art and
+collectables on Bitcoin, are unlikely to produce individual entities with
+enough power to corrupt Bitcoin. Art is decentralized.
+
+Ordinal theory and inscriptions do not meaningfully affect Bitcoin's
+fungibility. Bitcoin users can ignore both and be unaffected.
+
+We hope that ordinal theory strengthens and enriches bitcoin, and gives it
+another dimension of appeal and functionality, enabling it more effectively
+serve its primary use case as humanity's decentralized store of value.