Adam Back's Stand Against JPEG Inscriptions on Bitcoin

Key Points:

Adam Back, CEO of Blockstream and a pioneer in Bitcoin, has expressed concerns that ‘JPEG spam’ detracts from Bitcoin’s fundamental financial purpose.
The count of images inscribed on the Bitcoin blockchain has surged past 105 million, reflecting a 20% rise since May.
Related fees have amassed to nearly 7,000 BTC, equating to about $700 million at a rate of $100K/BTC.
Back contends that miners’ profits from these inscriptions are merely around 0.1%, overshadowed by risks to Bitcoin’s reputation and its use as a medium of exchange.

Adam Back, a notable figure in Bitcoin’s development, has joined the ongoing discussion regarding what he describes as ‘JPEG spam’ affecting the Bitcoin network. In a statement posted on X (formerly Twitter) last Friday, he argued that such practices inhibit the cryptocurrency’s primary function as monetary value.

He stated that Bitcoin should be viewed as belonging to humanity, with developers acting as custodians, necessitating consensus from users for any substantial modifications. This principle was reinforced during the block-size wars from 2015 to 2017, which prohibited miners from implementing unapproved protocol alterations.

Back criticized the increase in JPEG inscriptions—images directly recorded on Bitcoin due to the Taproot upgrade and the Ordinals protocol produced from it.

Currently, the amount of JPEGs recorded in Bitcoin’s ledger has escalated from 88 million in May to 105 million in September, leading to fees approximating 7,000 BTC.

The Fundamental Goal of Bitcoin

Supporters of the Taproot upgrade, like the Ordinals protocol, maintain that as long as users are prepared to pay for relaying transactions, these actions are valid uses of the network. They argue that Bitcoin’s decentralized nature allows for unrestricted uses of the network.

Moreover, they assert that the emergence of ‘JPEG spam’ enhances financial incentives for miners to uphold the Bitcoin network, especially given that block rewards diminish by half every four years.

While miners do profit from increased fees, Back emphasizes that this benefit is minor when considering rising hashrates and related expenses. He estimates that JPEG inscriptions merely yield 0.1% of mining revenues, significantly outweighed by potential reputational damage, elevated transactional complexity, and compromised accessibility to Bitcoin’s role as a peer-to-peer monetary system.

A Divisive Issue

The topic remains contentious within the Bitcoin community. Advocates view such inscriptions as legitimate economic behavior and part of the blockchain’s utility. In contrast, critics like Back argue they squander block space, undermining activities that boost Bitcoin’s intrinsic value.

Back suggested various solutions to encourage miners and pools to cease processing these transactions, alongside wallet-level innovations that could incentivize fee modifications favoring those refusing them. He warned about centralization dangers but posited that minor economic stimuli could render the mining of JPEG inscriptions unprofitable.