When people think of NFTs, they will often look at Ethereum, Solana, or Layer-2 networks. However, few realize it is possible to use non-fungible tokens with the bitcoin network. It is not through a traditional approach, and Taproot may be to “blame” for this side effect.

Bitcoin, NFTs, and OP_RETURN

Those familiar with the Bitcoin network may recall how Omni, Counterparty, and Veriblock created a heated debate regarding OP_RETURN. The transaction output is provably unspendable, although it has its use for burning BTC. In addition, developers and users can leverage OP_RETURN to store arbitrary data on the blockchain. Technically, it would allow for building decentralized applications, although it never gained traction. Many worried about how the arbitrary data could inflate bitcoin transaction fees. 

Although the discussion regarding OP_RETURN has quieted down – for the most part – a new battle has emerged. Following the activation of Taproot on the Bitcoin network, a new “threat” became apparent. Taproot activated on November 12, 2021, and provides three major protocol upgrades. It was largely welcomed as a way to scale network transactions. However, it also affected the size limit of OP_RETURN in a negative manner.

Rather than the old size limit, Taproot enables almost limitless data storage on Bitcoin. The one requirement is whether the transaction fits in a network block. None of that may seem alarming, although there are growing concerns over the…