Bitcoin is money for everyone; it’s an open system that anyone can choose to join and support. Once you acquire Bitcoin using a wallet where you hold the private key, 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, or play some childish games with it; there is no right or wrong way to use your Bitcoin, as long as you’re happy to pay the costs involved.
Bitcoin’s incentive structure tends to see the supply flow towards prudent people; if you make an economic miscalculation, you are likely to end up with less Bitcoin in the future. Since there are no central banks or bailouts in Bitcoin, those mistakes are permanently etched into the blockchain for all time.
Over the last decade, we’ve seen plenty of people come up with bad ideas on how to use Bitcoin, like burning it to create a 3rd party token or handing it over to unregulated offshore third parties to lend out for a few percentage points.
Those who made those bets ended up with less Bitcoin, but lessons fade with time, and new narratives emerge as new users flow into the ecosystem with no idea of the history of Bitcoin.
Buying and holding Bitcoin has been one of the best-performing trades over the last 13 years, but for some, that’s not enough; for some, they need something else to maintain their attention. To play stupid games in the hope of winning stupid prizes, and this is a trend that will continue for many years to come, simply with a new lick of paint and fancy term.
The latest in a long line of stupid games is the “Rare Satoshis” concept.
What are satoshis?
At the core of this digital currency lies satoshis, the smallest unit of Bitcoin. They are named after the mysterious creator of Bitcoin, Satoshi Nakamoto. A satoshi equals one hundred millionth of a Bitcoin, making it incredibly small. When you divide the current Bitcoin price in fait by 100 million, the value of a satoshi is likely to be insignificant.
The remarkable divisibility of Bitcoin provides for interesting use cases such as micropayments via the Lightning Network, which allows users to pay for only what they use instead of clunky subscription models or paying a set fee for access to services they don’t fully utilise.
While satoshis might not be worth much in terms of relative purchasing power, it is still Bitcoin and can continue to appreciate in value as the price of Bitcoin increases.
Most people will never own a full Bitcoin; they will be holding their wealth in satoshis; for those who plan to save in Bitcoin, it would be best to familiarise themselves with the denomination.
What are rare satoshis?
Over the last year, we’ve seen the expansion of a new protocol that can be layered on top of Bitcoin and used to add serial numbers to individual satoshis to provide them with an identity.
The Ordinals Protocol allows for the ordered identification of satoshis, and when a serial number is given to each Satoshi, it can be used to identify its exact location and position in the sea of Bitcoin blocks.
At first, the protocol was used to create NFT-like “assets“, tying a file embedded into the chain to a serial number; later, it was used to create tokens and tie them to serial numbers, and now a third use case is to give certain satoshis mythical attributes.
Using Ordinal theory, a group of collectors can classify and number satoshis in terms of rarity and uniqueness and create a secondary market for satoshis.
While the rest of the world only focuses on what is consensus, seeing all satoshis as equal and fungible, those that subscribe to Ordianl theory have taken a short left and created their own rate card for Satoshis.
What are sattributes?
The Ordinals protocol recognises several different rarity levels, depending on specific factors.
- Common: Any sat that is not the first sat of its block
- Uncommon: The first Satoshi of each block
- Rare: The first Satoshi of each difficulty adjustment period
- Epic: The first Satoshi of each halving epoch
- Legendary: The first Satoshi of each cycle
- Mythic: The first sat of the Genesis block
Like anything that doesn’t have enforced rarity through the Bitcoin protocol, communities can come up with their own way of viewing data and ascribing some story to it that gives it value. While these satoshis might be labelled rare, there could be endless stories on why one Satoshi has something special about it.
As for the Bitcoin network, it doesn’t recognise any of these stories; all Satoshis are the same, but for those that love a good story, here are some of the popular reasons that make a Satoshi rare.
- Vintage: The Satoshis from the first 10 000 blocks
- Nakamoto: The Satoshis from blocks mined by Satoshi Nakamoto
- First transaction: Satoshis transferred between Satoshi and Hal
- Palindrome: Satoshis that number reads the same backwards and forward
- Pizza: Satoshis that are part of Bitcoin Pizza Day’s transaction
- Block 78: Satoshis from a block mined by someone other than Satoshi or Hal
- Block 9: The oldest Satoshis in circulation
What Makes a Satoshi Rare?
Apart from the “sattributes” set out by the ordinals protocol, users will come up with a host of other narratives to try and “manifest” a rare satoshi.
Narratives that contribute to Satoshi’s rarity are its provenance. Satoshis that have a known history or are linked to significant events within the Bitcoin ecosystem carry a premium. For example, a rare satoshi that was involved in a famous transaction or belonged to a prominent member of the Bitcoin community would undoubtedly be highly sought after by collectors.
The cost of a satoshi also plays a role in its rarity; if a collector spent a certain amount in fees to pan for a certain “rare satoshi”, it would stand to reason that they’re not going to let it go at a loss and they would feel that this Satoshi would command a premium based on their bad decision to perform several on-chain transactions to find this specific Satoshi.
The Hunt for Rare Satoshis: A Fools’ errand.
The hunt for rare satoshis is just about the thrill of the chase and for clout among a certain cohort of people. It is driven by the potential value and prestige associated with owning these scarce digital assets, which was popularised by the NFT crowd, and we all know how well that worked out for them.
Hey NFT bro, how’s the floor price for your JPEG doing?
Just like collectors of rare stamps or vintage cars, those who possess rare satoshis can enjoy a sense of exclusivity and status within their niche Ordinals community. However, those attributes they value don’t matter for the rest of us.
Beyond the satisfaction of personal achievement and spending money and time completing a meaningless task, there isn’t much to this trend.
Where the danger of this trend comes into play is through the allure to create a story around something that is worth 100 millionth of a Bitcoin and try to sell it to someone else for more than 100 millionth worth of a Bitcoin.
Instead of creating unregistered securities through altcoins and NFTs, the game seems to be centred around selling people on ordinary Satoshis with an extraordinary story for a profit.
If you can take a Penny and make someone believe it should be worth a Pound, and you make the sale, it’s all profit, isn’t it?
Rare Sats is an idiot tax.
While there are clear issues with the concept of rare sat, that hasn’t stopped a growing number of “Sat Hunters” out there who are trying to track down these sats and claim them for themselves. Groups are even going as far as making repeated deposits & withdrawals on exchanges to harvest the rare sats stored there.
Now that the idea is out in the wild, the race towards rare satoshis will capture both seasoned enthusiasts and curious newcomers getting caught in the hype. The only question is who will be left holding the bag and finding out they spent millions of satoshis to own 4 or 5 satoshis, a failed economic calculation by any stretch of the imagination.
Rare satoshis remind me of a bunch of neighbourhood kids who collected a few coins from their mum’s purse and placed some tape on it.
When this tape is present on a coin, it becomes a magical coin.
It allows you entry to the clubhouse, and among the kids, they have a certain code and consensus around these tapped coins. These tapped coins hold a certain value above other coins, but no one else really respects this idea.
To the average onlooker, it’s still a bunch of coins with tape on them.
Which side of the ordinals debate are you on?
Do you like the idea of bringing NFTs to the Bitcoin base chain, or is it a distraction? Does it bring additional utility or a new set of narrative attack vectors for Bitcoin? How do you think the incentive structure around transactions will change with this new form of transaction competing for on-chain block space?
Let us know in the comments below.