The recent upheaval in the crypto space has been marked by a surge in activity surrounding a relatively obscure concept—Inscriptions. These inscriptions, however, have not only caused chains to buckle under the pressure but have also triggered significant spikes in gas prices, leaving many scratching their heads.
At the heart of this phenomenon lies the concept of Ordinals, which originated in the realm of Bitcoin. Ordinals allow the direct inscription of data onto the blockchain—text, images, videos, you name it. This approach becomes particularly crucial for Bitcoin as it lacks support for smart contracts, making it the only route for the integration of NFTs and other tokens.
The intrigue doesn’t stop there. The Inscriptions fever soon spread to Ethereum and other EVM-based chains. Instead of engraving data on individual SATs, EVM inscriptions opt for embedding data in transaction calldata.
Now, what’s calldata, you ask? Calldata is the optional data sent in a transaction, often utilized for passing inputs to smart contracts or handling rollup data. It’s read-only and cost-effective, especially when compared to storing data in smart contract state.
So, what’s being etched onto EVM chains through these inscriptions? Primarily, it’s the realm of BRC-20 type tokens. These tokens store data in calldata (in JSON format) instead of within a smart contract, and the calldata includes crucial information like token ID, mint amount, and the operation.
The unique twist with xRC-20 tokens is that none of the logic resides on-chain. Unlike traditional ERC20 tokens, where rules are enforced by smart contracts, here, all the logic dances off-chain. Off-chain indexers take the stage, interpreting the nuances of inscription token transactions.
But with great innovation comes great disparity. The benefit of these inscriptions lies in the on-chain transparency—xRC-20 transactions and NFT metadata are all available for everyone to read. The operations are cost-effective, involving only the sending of calldata on-chain, bypassing the heavier on-chain execution of smart contracts.
However, the downside is palpable. There’s a heavy reliance on off-chain indexers, introducing a layer of fragmentation and trust. Unlike the EVM, which enforces rules for us, inscriptions take a step back, moving computation off-chain, leading to concerns about the erosion of composability.
The recent spate of spamming these inscriptions, driven by a desire to replicate the success of BRC-20 tokens on other chains, has caused disruptions. The affordability of these transactions, compared to smart contract transactions, has resulted in network congestion, leading to Arbitrum being taken down and a diminished experience on other chains like zkSync and Avalanche.
As this inscription craze continues, the crypto community watches with bated breath, wondering when and how this peculiar chapter in blockchain history will come to a close.
