Inscriptions have taken down multiple chains and caused huge gas spikes over the last couple of days.
However, very few people actually understand what’s going on.
Here’s a simple explanation of inscriptions – how they work and why they’re being spammed everywhere.
The concept of Inscriptions started with Bitcoin’s Ordinals. Ordinals allow data to be inscribed directly on chain – this can be text, images, videos, etc.
This is the only way for BTC to add support for NFTs and other tokens since it doesn’t support smart contracts.
People then realized that they could do the same thing on Ethereum (and other EVM-based chains).
Instead of inscribing data on individual SATs, EVM inscriptions inscribe data in transaction calldata.
But what is calldata?
Calldata is optional data that can be sent in a transaction. Most of the time this data is used when passing inputs to smart contracts. It’s also used for rollup data.
Calldata is read-only and cheap to use, especially when compared to storing data in smart contract state.
So what are people inscribing on EVM chains?
Right now, it’s mostly BRC-20 type tokens. BRC-20 tokens are tokens where the token data is stored in calldata (in JSON format) instead of in a smart contract.
The calldata includes the token id, mint amount, and the operation.
The calldata needs to follow a specific format in order to qualify as an (x)RC-20 token.
The interesting part about xRC-20 tokens is that none of the logic lives on-chain. Normally for ERC20 tokens, rules are enforced by smart contracts. Here, all the logic is handled off-chain.
It’s up to off-chain indexers to interpret what an inscription token transaction is doing.
In this example we have an arbscription token (BEEG ticket) that’s being minted for qty 1000.
Off-chain indexers need to verify that the token exists and can be minted (not over-minted).
Minting token involves sending a transaction to yourself with calldata that includes a “mint” op and the amount minted.
Transferring tokens is similar except with a “transfer” op. Some protocols also emit events for this.
There’s a fair amount of discrepancy right now.
So what’s the benefit of these inscriptions?
The first upside is that everything is completely on-chain. xRC-20 txns and NFT metadata is all stored on-chain and available for everyone to read.
This is good because you only need to rely on the availability of the chain.
The other upside is that operations are very cheap. Smart contracts need to execute logic and store data on-chain. Inscriptions only involve sending calldata on-chain, which is much cheaper to do.
The big downside is that there’s a huge reliance on off-chain indexers. Yes, everyone can technically recreate the state of a token themselves, but it relies on indexers following the same set of protocol rules.
The EVM on the other hand, enforces these rules for us.
Inscriptions also feel like taking a step backwards. The EVM was designed to support smart contract logic, inscriptions instead move all the computation off-chain.
This leads to more fragmentation and trust in indexers. There’s also basically 0 composability with inscriptions.
So why are these being spammed?
It’s probably driven by the desire to be early and recreate some of the success of BRC-20 tokens on other chains. However, a lot of these txns are just the same user/bot spamming small mints over and over again.
People are able to spam these transaction because they’re extremely cheap compared to smart contract transactions.
This has led to Arbitrum being taken down, and leading to degraded experience on other chains like zkSync and Avalanche.
It remains to be seen when this craze will end.
You can look at some inscription data here:
https://dune.com/hildobby/inscriptions
https://dune.com/p_dot/ordinals-inscriptions-are-surging-in-all-evms