Earlier this year, Ordinals a unique inscription on the smallest unit of a Bitcoin, called a Satoshi emerged as a controversial new development. Dismissed by some as spam and embraced by others as a way to bring BRC-20 tokens and NFTs to Bitcoin, the technology stimulated a flurry of developments.

Now there is excitement around recursive inscriptions, which is a very confusing yet potentially much more powerful development. Recursive Inscriptions essentially promise to allow more complex functionality to be built on Bitcoins blockchain, akin to smart contracts on Ethereum.

Some believe recursive inscriptions could see Ordinals develop from NFTs and digital artifacts to underpin a full-blown DeFi ecosystem on Bitcoin very soon. Others are confident it will enable Bitcoin to take on decentralized storage provider IFPS. One person Magazine spoke to believes it will eventually lead to an interconnected supercomputer being built on-chain.

Danny Yang, a Stanford PhD, creator of OCM Dimensions and Bitcoiner since 2013, says recursive inscriptions unlock the next evolution of Bitcoin:

People wont believe it when its presented to them now. Its not going to operate exactly like Uniswap, but other high-value digital assets will emerge on Bitcoin. Thats what Ordinals and recursive inscriptions will evolve into. They will become a new form of programmable assets and code.

These tech developments while at a very early and speculative stage are making Bitcoin interesting again. A Bitcoin maxi friend complained to me that I never write about Bitcoin. In truth, theres been very little new to write about until recently.

Thats pretty true, Yang agrees.

Yang has worked on recursive inscriptions since February in the form of Bitcoin generative NFT collections OCM Dimensions and OCM Genesis. He inscribed both of those innovative collections on Bitcoin in February (along with compression and 3D programming libraries) before anyone understood the significance of what he had done.

Yet OCM Dimensions was only publicly launched on June 15, the day that recursive inscription support was turned on for Ordinals.com. Yang explains to Magazine:

You have to show something before people start listening, and finally, after months of beating the drums about the significance of recursive inscriptions on Bitcoin, people are starting to get it after we showed what was possible with OCM Dimensions the first 3D, high resolution, animated and interactive work on Bitcoin.

For now, the smart contract-enabled Ethereum blockchain is the home of more developer activity than anywhere else, and it dominates the DeFi sector. Until this year, the idea of building a genuine smart contract the self-executing code used as building blocks for programmable money ecosystems was not possible on Bitcoin.

But some now say Ordinals and recursive inscriptions could see a DeFi ecosystem emerge on Bitcoin fairly soon. Its not going to be easy, though.

Ordinals allow you to uniquely identify a satoshi or a sat. A satoshi is 100 millionth of a Bitcoin. Identifying a fractionalized part of a Bitcoin means creating NFTs on Bitcoin or creating a provenance certificate on-chain is now possible. The idea of NFTs on Bitcoin, the most decentralized OG chain, is tantalizing for some.

In January 2023, developer Casey Rodarmor released the Ordinals protocol, creating Bitcoin NFTs on the Bitcoin blockchain. Rodarmor found an unintended loophole in the taproot scripts that command lines of Bitcoin code.

The Ordinals protocol creator argues that such NFTs are now complete, as the token and related images are stored on the Bitcoin blockchain rather than side chains or using off-chain storage systems like most Ethereum NFTs. Digital artifacts on Bitcoin are truly immutable.

Now you can own the actual art, not just a contract that points at a piece of art stored on centralized databases, says Carlo Fox, an Ordinals OG since February who created the Nakamoto Whales series. NFTs, as we know them on Ethereum and on other chains, are more like digital ownership certificates than actual on-chain art, and Ordinals change that.

I got super excited for Ordinals for a few reasons: for one, we now can create and own on-chain art that is truly immutable. When you understand the ramifications of this, its huge. Half the time, NFTs as we know them are stored on AWS, centralized, and controlled by creators who can turn your art into pictures of turds at any time.

Ordinals allow you to store any type of data on the most decentralized blockchain, and no one can modify it. Ordinal artifacts may be most likely of any on-chain data to exist 2,000 years from now. Thats meaningful, and I think it is particularly relevant when in the context of important works of art, literature and science. I believe that Ordinals will become the premiere destination for the most coveted and important on-chain art. Its akin to carving a statue out of gold, says Fox.

So the business case for high-value NFTs minted on Bitcoin makes sense. Using the new tech to create cool 3D art for OCM Dimensions helped Yangs company Metagood sell the idea of launching tokens on Bitcoin Ordinals to Asprey Studios and the Italian car company Bugatti recently.

But OG Ordinals could only hold 4MB of data, and that is one reason why recursive inscriptions have emerged.

At its most basic recursive inscriptions let you record stuff associated with a particular Bitcoin and enable smart contract-type functionality Yang says they could have been called programmable inscriptions. By interlinking data through a series of calls (a contract for a sell order, for example), its possible to extract that data to run more complex processes anchored on Bitcoin blocks.

This enables recursive inscriptions to function like a distributed data repository, like putting AWS cloud on Bitcoin.

Composability getting disparate projects and protocols to work together seamlessly is an important part of crypto and one of the main reasons behind the exponential growth of the Ethereum DApp ecosystem.

Recursive inscriptions mean that even the most complex data sets, like video files and audio files, could now technically be hosted on Bitcoin. With a one-time cost to inscribe, data could be hosted forever on the most immutable and decentralized network in the world.

Inscriptions are like data legos, enabling data to be taken from somewhere else and built upon. In computer science, thats where the phrase recursive comes from, as recursive inscriptions are a mechanism that extracts data from existing inscriptions and utilizes that data within new inscriptions.

Recursion is a fully on-chain process that uses scripts to combine various other on-chain data sources. These can include image layers, audio, code or other data sources. Individual scripts of code merge these layers together through recursion.

Recursive inscriptions use data inscribed elsewhere on new inscriptions, cutting down on storage requirements.

Fox uses the example of PFP art. Instead of uploading thousands of unique images (which can be prohibitively expensive), you can upload 200 and use scripts to combine them via the fully on-chain recursion process. The possibilities this offers are only just being explored.

This is powerful because recursive inscriptions enable new types of applications that were not possible before it. Applications like on-chain AI couldnt be done on the base layer of Ethereum, but NewBitcoinCity builder Punk 3700 believes they could now be done on Bitcoin. Hes been playing around with Perceptrons, an early on-chain AI experiment on Bitcoin.

He explains that it wasnt possible to store the AI neural net models on-chain together with the artworks. So we split the AI models into different inscriptions and compose them at runtime.

One of the most fascinating elements of recursive inscriptions is that once the data is on the blockchain once, you can simply refer to it again and again, vastly cutting down storage costs and block space utilization.

Inscriptions are now reusable, explains Punk 3700, You can inscribe a very large code library like p5.js once, and other developers can reference that p5.js library at run time without inscribing it again.

This is super exciting because we start seeing a community-driven public infrastructure being built out. This means more complex inscriptions are being created at a fraction of the cost.

Essentially, any type of data can be an inscription. The most rudimentary use case combines multiple data sources together, and every piece of it can live on-chain. On-chain data might be able to communicate with each other, and data could be realized over time.

Fox explains further: The best way to think of it is anything you can do locally on a computer and have all little pieces live together in different files and work together.

He gives examples like open-source libraries, all on-chain, meaning important research papers on Bitcoin, with citations on recursions on-chain, meaning major discoveries can be published on Bitcoin blocks for time immemorial. Javascript packages can be inscribed on Bitcoin. Essentially, a tiny internet thats developed to live on Bitcoin cant be taken down, building and building until one day it has created an interconnected supercomputer living on Bitcoin.

The public hasnt grasped the significance of these developments, says Fox.

Long before the supercomputer cranks up, were likely to see Bitcoin DeFi and the chain emerge as a data storage competitor.

Toby Lewis co-founded OrdinalsBot, which automates inscriptions to help expedite development on Ordinals. He thinks that, for now, competing with the Web3 data storage provider IPFS is the best use case for recursive inscriptions. In the short term, both high-end and low-end NFTs can now be more affordably held on-chain.

The end point of storing data onto Bitcoin will get people excited. Thats because Bitcoin has better name recognition than IPFS [] Bitcoin becomes the ultimate store of truth.

Decentralized data storage on Bitcoin could disrupt NFT culture by allowing images, text files and audio files to be stored directly with tokens.

Lewis also thinks DeFi on Bitcoin is just becoming a realistic prospect now and that Bitcoin-native DeFi products are inevitable, even if they will be rudimentary for a while.

There is likely a large segment of users who will want to build and do something on Bitcoin, especially if the end state is a multichain ecosystem, posits Lewis. That is, use Bitcoins blockchain as the layer-1 base, and use Ordinals and recursive inscriptions to connect to other applications.

DEXs and automated market makers are starting to emerge. Lewis notes that Bitcoin can link up to other layer-2 applications as another way for smart contracts to emerge on Bitcoin.

This is the kind of DeFi that Punk 3700 has been building on Bitcoin. He launched a new protocol called Trustless Computer that enables writing smart contracts and building DApps on Bitcoin.

If Ethereum and Bitcoin have a baby, thats Trustless Computer.

One of the first DeFi protocols it deployed was a Uniswap fork.

Now that you could write smart contracts on Bitcoin, it turned out that building an AMM DEX was very simple. It took us just a couple of days. A month after deploying Uniswap on Bitcoin, Punk 3700 connected it to Ethereum layer-2 network Optimism and says it can trade with two-second latency and low transaction fees.

We now have a scalable infrastructure for DeFi to thrive on Bitcoin.

Bitcoin maximalists arent going to like the use of Ethereum protocols in conjunction with Bitcoin, but Punk 3700 says its the future.

This is the power of having a general-purpose programming language (Solidity) and a general-purpose virtual machine on Bitcoin. Developers can build any kinds of applications they want for Bitcoin.

Bitcoin is now no longer just a currency. It is becoming a DApp store.

At present, these use cases for recursive inscriptions and smart contracts on Bitcoin are highly speculative, and many Bitcoiners would no doubt argue abstracting it away on layer 2s means its no longer really Bitcoin at all.

But Leonidas, the founder of Ordinals marketplace Ord.io, is very excited about the new Web3 experiments on the Bitcoin layer 1 as well. He believes that the release of the Ordinals protocol earlier this year ended a long period of stagnation for the chain. Hes seeing a whole new wave of developers flood into the Bitcoin ecosystem, who are eager to build everything from NFT marketplaces to DeFi protocols.

I think people will be pleasantly surprised with how much you can actually do on Bitcoin layer 1, he says.

The issue was never that Bitcoin as a technology wasnt capable of handling Web3 use cases; its that a culture of toxic maximalism had driven the most talented developers to other ecosystems where they would be celebrated for their innovations rather than harassed.

Leonidas firmly believes that through Ordinals, Bitcoin has entered a new era where developers rather than idealists will dictate its future, and he is optimistic that Bitcoins brightest days lay ahead.

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Max Parasol is a RMIT Blockchain Innovation Hub researcher. He has worked as a lawyer, in private equity and was part of an early-stage crypto start up that was overly ambitious.

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Recursive inscriptions: Bitcoin 'supercomputer' and BTC DeFi ... - Cointelegraph

Northern Trust's use of smart contracts is part of a trend. JPMorgan Chase has incorporated them in its blockchain projects, and just this week PayPal integrated them in its new stablecoin project.

Mark Elias/Bloomberg News

When Northern Trust executives think about smart contracts, they see better products and money saved.

The blockchain-based contracts partly cut out the role of third parties in enforcing legal contracts, boosting productivity by around 20% on simple deals and up to 70% on more complex ones, said Justin Chapman, Northern Trust's head of digital assets and financial markets. What's more, the programs allow the Chicago-based bank to store and repurpose data from past transactions. That helps make other deals happen seamlessly, he said.

Northern Trust is part of a trend: JPMorgan Chase has incorporated smart contracts in its blockchain projects, and just this week PayPal integrated them in its new stablecoin project. Meanwhile,Alenka Grealish, senior analyst at Celent, said she has been working with other financial institutions to use smart contracts on permissioned blockchains in supply chains, environmental-social-governance matters and trade finance.

Todd McDonald, co-founder of the enterprise vendor r3, said that he has yet to find a sector in the financial services area without an internal use case for smart contracts.

"This is part of a broader discussion on the future of finance," said R.A. Farrokhnia, a professor at Columbia Business School who studies fintech. "Who's going to be left behind, who's gonna do it right and what it takes for you to disrupt your own organization."

The contracts cut out middlemen. That's why they became central to the decentralized finance, or defi, movement that helped popularize them. But they predate that trend. And, with more crypto providers sinking in legal troubles, they may be set to outlast it.

The $156.8 billion-asset Northern Trust entered the digital arena in 2017, when it developed a regulator-approved blockchain network for private equity fund administration.Monthsbefore it transferred that network to Broadridge Financial Servicesin 2019, it started using smart contracts to capture and automate the legal terms attached to asset transfers.

"Smart contracts are a representation of a traditional contract," Chapman said. "You are capturing the definition of the asset itself, the issuance of the asset and the issuing process through a smart contract, and you're entering [that information] onto a register for onward transactions to happen on it."

That boosts productivity. But Chapman said the biggest benefit is in research and development.

"What you tend to find is that the insights are stronger," Chapman said. "You see an enhanced product. If we have a business idea or a problem, we can repurpose different types of smart contracts for different purposes."

Another upshot is that deals on shared networks are more transparent to the parties involved, Chapman said, even while that has taken getting clients to understand how to interpret legal clauses in code.

"We don't get as many challenges or questions as we used to," Chapman said. "Smart contracts are just a code conversion from a written set of documentation. They're nothing too complicated."

With the Chicago-based bank expecting that 5%-10% of all funds will be tokenized by 2030, the computer programs have become critical to its plans for the digital age.

"The smart contract is the entry point to the new ecosystems and environments as we see them," Chapman said.

In 2020, Northern Trust also began exploring bond tokenization and fractionalization agreements, a year before it helped launch the crypto asset custodian Zodia Custody. It has since also become a participant in Swift's digital-asset project.

Northern Trust had $14.5 trillion of assets under custody/administration and $1.4 trillion of assets under management at June 30. Those client-asset categories are drivers of its largest segment of fee income, the company said in its second-quarter earnings news release.

Smart contracts pose one big problem: They're prone to hacks.

"Historically, we've seen in the industry, [that] the smart contract could be the weakest point, particularly as the code point," Chapman said. "We have taken on additional cadence [to address that risk]."

When the bank first started using smart contracts, most were based on infamously fraud-prone defi protocols. That required them to recode contracts built on public networks, said Arijit Das, senior vice president in digital asset innovation technology at Northern Trust.

"Most public smart contract standards did not cater to the privacy needs of closed networks," Das said. "The implementers of smart contracts had to code these privacy and security needs into the smart contract logic."

Northern Trust soon developed its own system on hyper-ledger fabric technology with smart contracts coded in Golang, Google's open-source programming language. That, along with recent fintech strides to pioneer smart contract languages that are more secure, has made the programs safer. To double-check smart contracts' cyber protections and avoid fat-finger mistakes, the bank has also introduced an internal audit system.

"We see activity in this space as the industry has recognized the need to solve the problem of privacy for all chains," Das said. "A lot more attention is focused on the needs of large, private permissioned systems with institutional participants."

But some experts think there may need to be even more protections in place before smart contracts can be safely integrated into traditional financial services.

That includes placing a "pause" button often called an "article" in case one party encounters a hiccup or needs to renegotiate the deal, said Hillary J. Allen, professor at American University College of Law.

Other risks involve human error, picking the wrong coding languages,or trouble in sourcing external data,said Monica Summerville, head of capital markets at Celent.

Then there are also unresolved questions over who bears liability for any legal issues the contracts cause. "I would say the safer rule is that if it's your system, you own it," Allen said.

Banks should also beware that smart contracts, while traceable, are irreversible. That means that they can fail to account for unwanted eventualities that leave parties unable to overwrite prior terms. At Northern Trust, there is often no way to reverse smart contracts, though the bank can layer other contracts on top of them to override the previous terms, Chapman said.

"What if these things work exactly like they're supposed to, and we still don't want that?" Allen asked. "Sometimes there will be situations where you want some flexibility and discretion. There's no discretion. That's sort of touted as a feature, not a bug. But I wonder if it's a bug."

Tech tailwinds are nonetheless pushing financial institutions toward the blockchain, and with it, smart contracts.

But the switch to digital assets is going to be harder than the one from fax machines to email servers, Farrokhnia said. That could be a problem for banks withtechnology architectures that don't integrate with blockchain servers or executives who aren't up to date on the new technology.

"The learning curve was relatively easy, and it didn't require banks to change their entire systems. Blockchain is the exact opposite," Farrokhnia said. "How do you still, run the company the way you've been running it, but in an alternate universe?"

To avoid being left behind in an advancing tech race, financial institutions may need to start catching up. They can start by watching the fintech scene, Farrokhnia said.

"Ensure that you have your pulse on the market," he said. "Startups are very good at innovation. But big banks are good at distribution. If you marry the two, then you have something powerful."

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How blockchain is helping Northern Trust self-execute contracts - American Banker

In todays digital landscape, blockchain technology has emerged as a revolutionary force, transforming various industries and providing secure and transparent solutions. With the rapid growth of decentralized applications (dApps) and smart contracts, the need for robust data security and privacy measures has become paramount. This is where NuCypher, in collaboration with Bitcoin Era which is an Online trading platform, comes into play, offering a cutting-edge solution for securing smart contract data on the blockchain.

NuCypher is a decentralized threshold cryptography network that prioritizes data privacy and secure sharing on public blockchains. It achieves this through the use of proxy re-encryption, a cryptographic technique that allows encrypted data to be accessed and shared securely without compromising its integrity. This makes NuCypher an ideal solution for protecting sensitive information within smart contracts.

By integrating with NuCypher, developers and users gain access to a powerful framework that safeguards sensitive data within smart contracts. Proxy re-encryption enables authorized individuals or entities to delegate access to encrypted data, ensuring that only those with the proper permissions can decrypt and view it. This delegation mechanism enhances security, as the original data remains encrypted and protected against unauthorized access. NuCyphers decentralized nature, with independent nodes executing proxy re-encryption operations, further strengthens its security and privacy measures.

By integrating NuCypher into blockchain networks, developers and businesses can enhance the security and privacy of their smart contract data. Lets delve deeper into how NuCypher achieves this:

NuCypher utilizes sophisticated encryption algorithms to guarantee the security and confidentiality of data transferred within smart contracts. By implementing this approach, NuCypher effectively safeguards against unauthorized access and potential data breaches, thereby providing a robust layer of protection for sensitive information. This ensures that only authorized parties can access and utilize the data, maintaining the integrity and privacy of the smart contract ecosystem.

NuCypher provides developers with the ability to incorporate fine-grained access controls, enabling them to specify which individuals or entities can access particular encrypted data. By utilizing this feature, the privacy of smart contract data is significantly improved, as only authorized parties possess the capability to decrypt and utilize the information effectively.

NuCypher possesses a remarkable capability to dynamically delegate access to encrypted data, distinguishing it as one of its standout features. This functionality empowers users to grant or revoke access permissions in real time, offering them unparalleled flexibility and control throughout the entire data-sharing process.

NuCypher utilizes a decentralized key management system, ensuring that encryption keys are stored securely and protected from single points of failure. This enhances the resilience and reliability of the overall system.

By employing Byzantine fault tolerance, NuCypher is capable of withstanding malicious attacks or network disruptions, maintaining the integrity and security of smart contract data even in adverse conditions.

The integration of NuCypher with blockchain technology opens up a world of possibilities across various sectors. Here are some notable use cases:

In the healthcare industry, protecting patient data is of utmost importance. By leveraging NuCyphers secure data-sharing capabilities, medical records and sensitive information can be stored on the blockchain while maintaining privacy and compliance.

Smart contracts have revolutionized the finance sector by enabling secure and automated transactions. With NuCyphers integration, financial institutions can ensure that sensitive financial data, such as transaction details and account balances, remains confidential and tamper-proof.

NuCyphers data encryption and access control features can play a vital role in supply chain management. By securing critical information such as inventory data, shipment details, and vendor contracts, organizations can mitigate the risk of unauthorized access and data manipulation.

Protecting intellectual property is crucial for creators and innovators. By utilizing NuCyphers secure data sharing capabilities, artists, writers, and inventors can protect their works while securely licensing and sharing them on blockchain platforms.

In conclusion, NuCyphers integration with blockchain technology brings a new level of security and privacy to smart contract data. By leveraging advanced encryption techniques, access controls, and decentralized key management, NuCypher offers a robust solution for safeguarding sensitive information in various industries.

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NuCypher's Integration with Blockchain: Securing Smart Contract Data - Business Post Nigeria

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Navigating financial markets on Blockchain and smart contracts - Cyprus Mail

Ethereum 2.0 staking skyrocketed after the successful Shanghai upgrade, sending ETH price to a 2023 peak of $2,120 on April 17. On-chain data examines the negative correlation emerging between smart contract deposits and the ETH price.

The much-anticipated Shanghai upgrade went live on April 12, marking Ethereums full transition to the Proof of Stake (PoS) consensus mechanism. As the crypto market momentum cooled in Q2, ETH holders began to stake their coins for passive income rather than perform productive DeFi transactional activity.

Now, 4 months later, it appears that the ongoing, unprecedented rise in ETH 2.0 staking has started negatively impacting the Ethereum price.

Ethereums transition to the PoS consensus has triggered an astronomic rise in the ETH staking. According to data from Glassnode, about 37.8 million ETH (31.4% of the total circulating supply) is now locked up in DeFi smart contracts.

Typically, increased staking is often bullish for price. But worryingly, with more than 30% of the ETH supply now locked up, the chart below illustrates an emerging adverse effect.

Between July 25 and August 10, Ethereum Supply in Smart Contracts nominally increased from 31.08% to 31.4%. This saw another 432,547 ETH worth approximately $800 million temporarily removed from the global market supply.

In reaction, Ethereum price has remained relatively stagnant, hovering between the 2% price boundary, around $1,850 and $1,890, during that period.

Supply in Smart Contracts tracks the total percentage of the assets circulating supply currently locked up in DeFi staking protocols. In the short-term, increased staking can be bullish, as it secures the network and temporarily mops up excess market supply.

However, it could lead to a drastic change in investor behavior in the long term. According to official data from Ethereum mainnet, 22.9 million or 60.58% of the total 37.8 million ETH staked are currently deposited in ETH 2.0 staking contracts.

This depicts a significant change in Ethereum investors behavior. With the current APR of 4.3%, investors now appear to prefer ETH 2.0 staking to DeFi protocols.

This effectively means that investors inadvertently deprive DeFi protocols built on the Ethereum network of much-needed liquidity and funding. If this trend continues, ETH prices could stagnate in a vicious cycle of utility decline.

Furthermore, the volume of transactional activity on the Ethereum network has declined since March 2023. This also validates of the emerging negative impacts of Ethereum 2.0 staking on ETH price.

The Santiment chart below shows how ETH Transaction Volume has further dropped in August. Evidently so, between August 1 and August 6, it dropped by 62% from 2.53 million ETH to 955,000 ETH transacted.

Although it has since recovered slightly to hit 1.77 million ETH on August 9, this is still far off last months peak of 3 million ETH transacted on July 14.

Transaction Volume evaluates changes in the overall economic activity on a blockchain network. It is often bearish when it persistently declines over an extended period, as observed above.

In conclusion, it appears the heightened ETH 2.0 staking has caused a decline in the overall economic activity on the Ethereum network.If this pattern persists, ETH prices could grow increasingly sticky over time.

Considering ETH 2.0 stakings negative impacts identified above, ETHs short-term price action could remain neutral.

The In/Out of Money (IOMAP) data shows the distribution of current ETH token holders within the 20% price range. It also corroborates the prediction that the Ethereum price could continue hovering below $1,900.

At that zone, 8.94 million wallets had bought 36.16 million ETH coins at a minimum price of $1,904. If they decide to exit their positions after breaking even, the ETH price will likely retrace.

Conversely, the bears will struggle to force a downswing below $1,700. As seen above, a cluster of 7.32 million holders had bought 9.8 million ETH at the maximum price of $1,841.

They could mount a formidable support buy wall to avoid slipping into a net-loss position. But if that support level cannot hold, ETH could drop toward $1,650.

In line with the Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, but market conditions are subject to change without notice. Always conduct your own research and consult with a professional before making any financial decisions.

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Is Ethereum Price Stagnating due to ETH 2.0 Staking? - BeInCrypto