Purely off-chain coin colouring

Feb 4 - Feb 4, 2023

  • The Bitcoin-dev mailing list recently featured a discussion on the challenges of creating non-fungible tokens (NFTs) with off-chain content.

One issue is that keeping jpegs on-chain can increase blockspace, driving up costs for everyone. NFT collectors prefer on-chain content, but externalized storage costs while privatizing benefits are not an ideal solution. To address this issue, the writer proposes an alternative approach where people pay sats over lightning to host an NFT. This eliminates the need for miners to collect fees and allows the host to incur the obligation to preserve the NFT on behalf of its owners. The proposed approach involves setting up a nostr relay gated by proof-of-work submissions with no expiry and targeting 200MB of events per day. Any event that includes an ordinal tag is treated as a digital asset and added to the digital asset database. A regular proof-of-work adjustment targets 200MB worth of events per day. The ord tool can encode digital artifacts into a nostr event, apply proof of work to it, and send it to the relay. Adding a lightning-based Patreon-type setup would enable content creators to post content to a closed relay, and patrons could pay a fee over lightning to receive events.Finally, the writer discusses the appropriateness of the term "inscription" for an off-chain NFT protocol. The term gives a connotation of permanence and indelible association with a particular satoshi, which is not entirely accurate. Instead, the writer proposes an off-chain scheme where the "digital asset" includes the ordinal that controls ownership and is identified by the hash of its contents, including that ordinal's identity. Therefore, there is an indelible association with a particular satoshi despite it being an off-chain NFT protocol.

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