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MicroStrategy Orange Could Bring More Than One Billion People Into Financial System ‐ Why Do Bitcoin Maximalists Hate It?

Last Updated May 3, 2024 9:17 AM
Teuta Franjkovic
Last Updated May 3, 2024 9:17 AM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • MicroStrategy launched Orange to create a decentralized identity service on Bitcoin for over one billion unbanked people.
  • Michael Saylor’s company’s use of Ordinals for DIDs has divided opinions with some seeing it as an attack on the network.
  • As Bitcoin’s price dips, Michael Saylor’s unwavering promotion of Bitcoin is seen by some as “toxic positivity”.

MicroStrategy (MSTR), the largest corporate owner of Bitcoin, has announced its initiative to create a decentralized identity service using Ordinals inscriptions that could help over one billion unbanked people.

The company’s decision to use Ordinal-based inscriptions for creating decentralized identities has ignited debate within the Bitcoin community, particularly among its more traditional supporters.

MicroStrategy Starts Orange: BTC Identity for a Decentralized Future

Earlier this year, MicroStrategy rebranded itself as a Bitcoin development company focusing on enhancing the Bitcoin network.

The initiative, dubbed MicroStrategy Orange, represents a practical application of this new focus.

During the Bitcoin For Corporations conference , founder and CEO Michael Saylor outlined the objectives of MicroStrategy Orange. He said the service provided “trustless, tamper-proof, and long-lasting” decentralized identities anchored in the Bitcoin blockchain.

Saylor said :

“Our vision is to provide an internet native, decentralized digital identity backed by Bitcoin. It is fault tolerant, it is censorship resistant, it does use the most advanced cryptography.”

The service allows people to create decentralized identifiers (DIDs). It features pseudonymity, similar to how Bitcoin transactions remain unlinked to real-world identities. It also uses the Bitcoin’s Ordinals Protocol, which allows the encoding of information on individual satoshis, the smallest unit of bitcoin, equivalent to one hundred-millionth of a BTC.

The plan could help put some of the more than one billion unbanked people worldwide into the financial system.

MicroStrategy has already developed an application utilizing this service, titled “Orange For Outlook”. This puts digital signatures into emails, allowing recipients to confirm the identity of the sender.

Currently, MicroStrategy holds 214,400 BTC, worth about $10 billion, representing more than 1% of Bitcoin’s maximum supply.

MicroStrategy Sparks Debate: Bitcoin DIDs on Ordinals Divisive

MicroStrategy Orange uses Ordinals inscriptions on Bitcoin to store data for decentralized identifiers (DIDs). By storing arbitrary data in the witness section of a Bitcoin transaction, this approach has helped the trading of NFTs and tokens on the Bitcoin network, occasionally leading to spikes in network transaction fees.

Tony Giorgio, co-founder of Mutiny Wallet, criticized the approach  on Twitter. He claimed “DIDs go nowhere, ever” and also accused Saylor of using the Bitcoin blockchain as a personal and corporate data store.

Similarly, Daniel Buchner, a decentralized identity expert at Block, argued  that while the concept of decentralized identity is commendable, Saylor’s method “needlessly bloats Bitcoin”.

Despite these criticisms, supporters of the Ordinals protocol welcomed MicroStrategy’s announcement. They believe it adds legitimacy to a protocol that has been predominantly used for creating speculative NFTs and meme tokens.

Fred Krueger tweeted : “Makes sense. Don’t hate on Ordinals. Lots of applications for Bitcoin as a data layer.”

Michael Saylor did not immediately respond to a request for comment.

MicroStrategy’s Bitcoin DIDs: Luke Dashjr Calls it an “Attack,” Sparks Controversy

The decision by MicroStrategy to implement Ordinal-based inscriptions for decentralized identities has sparked controversy . Luke Dashjr, a prominent Bitcoin developer, has been especially critical , going as far as to label the move an “attack” on the network.

Dashjr has consistently opposed Ordinals, arguing that they stray from Bitcoin’s foundational principles and clutter the blockchain with unnecessary data.

Echoing these concerns, Bob Burnett, CEO of Barefoot Mining—a Bitcoin mining company—also voiced skepticism  about Saylor’s strategy.

 

Saylor’s “Toxic Positivity” Under Scrutiny

Currently, Bitcoin is trading  between $58,000 and $59,000, a noticeable decline from last month’s record high of over $73,000.

Amid this backdrop, Saylor continues to vigorously promote Bitcoin, even as its price retreats and some large Bitcoin holders—often referred to as “whales”—seem to be selling off their holdings.

This situation has led to some observers noting a sense of “toxic positivity” within the Bitcoin community, especially among staunch supporters and enthusiasts like Saylor. Comments from various users highlight this sentiment. Their remarks range from mocking the optimism, to pointing out the recent price drop, and warnings about the market’s instability.

Additionally, Saylor’s recent sale of over 1,900 shares of MicroStrategy, as reported in a United States Securities and Exchange Commission (SEC) filing , has sparked criticism. Parts of the community think Saylor is sending mixed signals about his confidence in Bitcoin’s future.

Despite the market turbulence, there are other prominent figures in the Bitcoin space who remain unfazed  by market sentiment. For example, Samson Mow, chief strategy officer at Blockstream, recently said an “apex hodler” was someone who is unaffected by market fluctuations.

Orange Protocol: Biometric-Free DIDs on Bitcoin’s Blockchain

MicroStrategy’s new Orange Protocol diverges significantly from approaches like Worldcoin‘s by not utilizing biometric data. Instead, it focuses on creating decentralized identities (DIDs)  that help verification processes without centralized oversight. This system uses Ordinals.

Specifically, the Orange Protocol  uses the Bitcoin blockchain’s “witness” section, part of the Segregated Witness (SegWit) structure. SegWit was introduced to optimize the size and cost of Bitcoin transactions by segregating the witness from the transaction data.

By putting identity data into the witness section, the protocol not only keeps the integrity of data but also secures the ID information, making it immutable and resistant to tampering. This means identities are securely anchored in the blockchain, providing a reliable and decentralized verification system.

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