Author: Che Kohler Compiled: Cointime.com 237
Bitcoin is everyone's currency; it's an open system that anyone can opt in to and support. Once you get bitcoins using a wallet that holds your private keys, no one can tell you what to do with it.
You can spend it, save it, try to earn a yield on it, borrow against it as collateral, or play some childish games; there is no right or wrong way to use Bitcoin, as long as you are willing to bear the associated costs.
Bitcoin’s incentive structure tends to flow supply to the prudent; if you make poor economic judgment, you may own fewer Bitcoins in the future. Since there is no central bank or bailout in Bitcoin, these errors are permanently recorded on the blockchain.
Over the past decade, we’ve seen a lot of people come up with bad ideas about how to use Bitcoin, such as destroying it to create third-party tokens, or handing it over to unregulated offshore third parties for lending of a few percent.
Those who made the bet ended up owning less Bitcoin, but time will dilute the lesson and new narratives will emerge as new users with no Bitcoin history flow into the ecosystem.
Buying and holding bitcoin has been one of the best-performing trades of the past 13 years, but for some, that's not enough; they need something else to keep their focus. Playing silly games in hopes of winning silly prizes is a trend that will persist for years to come, just with new colors and fancy terminology.
The "Rare Satoshis" concept is the latest example in one of those silly games.
What are Satoshis?
At the heart of this digital currency are Satoshis, the smallest unit of Bitcoin. They are named after Satoshi Nakamoto, the mysterious creator of Bitcoin. 1 satoshi is equal to one hundred millionth of a bitcoin, which is very small. When you divide the current bitcoin price by 100 million in fiat currency, the value of one satoshi may be insignificant.
Bitcoin’s divisibility offers some interesting use cases, such as micropayments via the Lightning Network, allowing users to only pay for what they actually use, rather than clunky subscription models or flat fees for accessing underutilized services.
While a Satoshi may not have much value in terms of relative purchasing power, it is still Bitcoin and will likely continue to grow in value as the price of Bitcoin rises.
Most people will never own a whole bitcoin; they will store their wealth in satoshis; for anyone planning to save in bitcoin, it is good to be familiar with this unit.
What are Rare Satoshis?
In the past year, we have seen the expansion of a new protocol that can be layered on top of Bitcoin and give each Satoshi an identity with a serial number.
The Ordinal Protocol allows the orderly identification of Satoshi. When each Satoshi is assigned a serial number, it can be used to determine its specific position and order in the Bitcoin block.
At first, the protocol was used to create non-fungible token (NFT)-like "assets" that tied files embedded into the blockchain to serial numbers; later, it was used to create tokens and tie them to serial numbers, and now a third use is to give specific Satoshis mysterious properties.
Using ordinal number theory, a group of collectors can sort and number satoshis based on scarcity and uniqueness, and create a secondary market for satoshis.
While the rest of the world only focuses on the consensus that all satoshis are equal and fungible, those who subscribe to ordinal number theory take a different path and create their own pricing tables for satoshis. "Sattributes" are scarcity levels defined in the Ordinals protocol. Depending on the specific factors, it can be divided into the following levels:
1. Common: not the first Satoshi of the block it is in
2. Uncommon: the first Satoshi of each block
3. Rare: the first satoshi in each difficulty adjustment cycle
4. Epic: the first satoshi in each halving era
5. Legendary: the first satoshi in each cycle
6. Mythic: the first satoshi in the Genesis Block
narrative scarcity
As with anything that the Bitcoin protocol doesn't enforce scarcity, it's up to the community to decide how to view the data and give some of it a story that adds value. While these satoshis are marked as scarce, there could be endless stories explaining why a certain satoshi is special.
As for the Bitcoin network itself, these stories are not endorsed; all Satoshis are the same. But for those who are into the story, here are some common reasons why a certain Satoshi becomes scarce:
1. Vintage: Satoshi in the first 10,000 blocks
2. Nakamoto: Satoshi in the blocks mined by Satoshi Nakamoto
3. First transaction: Satoshi transferred between Satoshi Nakamoto and Hal
4. Palindrome (Palindrome): the number reads the same from front to back and from back to front
5. Pizza: Satoshi in the Bitcoin Pizza Daily Deal
6. Block 78 (Block 78): Satoshi mined by someone other than Satoshi Nakamoto or Hal
7. Block 9 (Block 9): The oldest Satoshi in circulation
What makes Satoshi scarce is its source. Satoshis with a known history or associated with important events within the Bitcoin ecosystem have a higher value. For example, a rare Satoshi that participated in a famous transaction or belongs to a well-known member of the Bitcoin community will undoubtedly be sought after by collectors.
The cost of a Satoshi also affects its scarcity; if collectors spend a certain amount of fees to find a certain "rare Satoshi", they will not sell it at a loss, and believe that Satoshi will command a higher premium because they have made multiple on-chain transactions to find a specific Satoshi.
The pursuit of the rare Satoshi is only for the thrill and popularity of a certain group. It stems from the potential value and prestige of owning these scarce digital assets, a concept popularized by the NFT (non-fungible token) crowd, and we all know how well they go after it.
Like collectors collecting rare postage stamps or antique cars, those who own a rare Satoshi can enjoy a sense of exclusivity and status within the Ordinals community to which they belong. However, these attributes that they value are not important to others.
The danger of this trend is trying to write a story for something worth a ten-millionth of a bitcoin and trying to sell it to someone else for more than a ten-millionth of a bitcoin. Rather than creating unregistered securities through altcoins and NFTs, the trend seems to be centered on selling people the idea of an ordinary Satoshi with an extraordinary story attached.
If you can pick up a penny and convince someone it should be worth a pound and you sell it, that's pure profit, right?
Rare satoshi is a tax for dummies.
Despite the obvious problems with the concept of rare Satoshis, a growing number of "Sat Hunters" are attempting to track down and claim them for themselves. Some groups even go so far as to make repeated deposits and withdrawals on exchanges in order to obtain the rare Satoshi deposited there.
Now that the idea has spread, the race to chase the rare Satoshi will draw both seasoned enthusiasts and curious newbies alike. The only question is who ends up saddled with losses and finds themselves spending millions of satoshis to own 4 or 5 satoshis, a failed economic calculation.
Rare Satoshi reminds me of a bunch of neighborhood kids taking a few coins from their mom's purse and taping them on.
When the tape is on this coin, it becomes a magic coin.
It gets you into the club and it creates a certain code and consensus among the kids. These taped coins are still just a bunch of taped coins to others.
Which side of the Ordinals agreement do you support?
Do you like the idea of introducing NFTs to the Bitcoin base chain, or do you think it's a distraction? Does it bring additional utility or new ways of attacking the narrative? How do you think the incentive structure for transactions will change as this new form of transaction competes for on-chain space?
