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What Are Bitcoin Ordinals? Everything You Need to Know About Bitcoin NFT

What Are Bitcoin Ordinals? Everything You Need to Know About Bitcoin NFT

This article gives an overview of Bitcoin Ordinals in layman terms and analyzes their advantages.


- Bitcoin Ordinals are a system that allows people to order, identify, and inscribe digital content on satoshi to create digital artifacts.

- As Ordinals were only introduced in January, the tools that can be used for its creation and trading are underdeveloped.

- Ordinals can open up various new use cases for Bitcoin, such as NFT and new token standard.

- Digital artifacts created by ordinals also have many advantages over other NFTs.

What Are Bitcoin Ordinals?

Bitcoin Ordinals are a way of attaching, or “inscribing” digital contents, such as images, videos, and more to individual satoshis on the Bitcoin blockchain. A satoshi, or sat for short, is the smallest unit of BTC, with 1 satoshi equal to 1/100,000,000 of a BTC.

Bitcoin Ordinals involve two key components: ordinals and inscriptions.

Ordinals refer to a system that orders satoshis in a unique way, creating the non-fungible property necessary for NFTs. In simple terms, ordinals assign a specific number to each satoshi, making it distinguishable from others. This numbering system ensures that each satoshi has a unique identifier.

Inscriptions, on the other hand, represent the actual content attached to satoshis. They can be images, text, videos, or any other data that users associate with an NFT. In other NFTs, this content is often referred to as metadata.

Unlike other kinds of NFTs, inscriptions are created as an immutable on-chain presence of digital content on the Bitcoin blockchain. They are integrated directly into the blockchain and do not require any separate layers or changes to the Bitcoin protocol. They can be accessed and traded using BTC itself.

The creator of Bitcoin Ordinals, Casey Rodarmor, prefers to call inscriptions “digital artifacts” instead of NFT, as he thinks the former is a more familiar and easily understood term, and inscriptions can have applications beyond just NFTs. However, since the concept of NFT is more familiar to the blockchain community, many keep calling inscriptions Bitcoin NFT.

Bitcoin Ordinals have gained immense popularity and led to increased usage, fees, and storage space on the Bitcoin network. Since January, a total of 11.8 million inscriptions have been created, taking up $44.5 million in fees. They have the potential to expand the utility of Bitcoin beyond being solely a "store of value" and contribute to its applications.

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The popularity of Ordinals led to a significant increase in network fee of Bitcoin (Source: BitInfoCharts)

For example, after the birth of Ordinals, developers have created BRC-20, a token standard on Bitcoin similar to ERC-20 on Ethereum. With BRC-20, people can make fungible tokens by inscribing a special kind of code called JSON to satoshis. This code describes important details about the tokens, like how many there are and what their names are. Nevertheless, Bitcoin is designed to have less programmability than Ethereum, so BRC-20 tokens can't do as many things.

So far, the most common use for Ordinals is for text inscriptions, followed by image inscriptions. Some attach audios, videos, video games, and codes (as in the case of BRC-20) to satoshis, but those use cases are not as popular.

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Most popular types of inscriptions overtime (Source: @dgtl_assets on Dune)

How Do Bitcoin Ordinals Work?

Ordinals were made possible by two updates to the Bitcoin Protocol: Segregated Witness (SegWit) in 2017 and Taproot in 2021. These updates expanded the amount of arbitrary data that could be stored on the blockchain, allowing for the inclusion of images, videos, and other media types. While these updates were not specifically intended for NFTs, they inadvertently provided the necessary infrastructure for ordinals and inscriptions to exist.

SegWit introduced a separate section called "witness data'' in Bitcoin transactions, which supported arbitrary data transmission. This allowed for larger amounts of data to be stored within Bitcoin's blocksize limit. It was the first step towards ordinal NFTs, as it expanded the limits of how much arbitrary data could be included in a transaction.

Taproot, implemented in 2021, further enhanced Bitcoin's privacy, scalability, and security. It made it easier to store arbitrary witness data and relaxed the limitations on the amount of arbitrary data that could be placed in a Bitcoin transaction. This upgrade paved the way for ordinals to work using Taproot script-path spend scripts.

To better understand how ordinals work, consider the example of tokenIDs in non-Bitcoin NFTs. TokenIDs provide uniqueness to each NFT, allowing users to differentiate them from one another. Similarly, ordinals assign a unique number to each satoshi based on the order in which they are mined, creating a distinctive identifier for every individual unit. The first satoshi ever minted becomes the first ordinal, and subsequent satoshis are assigned numbers based on the order of transactions. This numbering system is maintained through a first-in, first-out process during transfers.

It's important to note that ordinals don't violate BTC’s fungibility. The Bitcoin blockchain itself doesn't recognize this ordering system, but a community of developers has acknowledged its significance and created tools that take advantage of ordinals to expand on Bitcoin’s use cases.

Regarding metadata, non-Bitcoin blockchains allow arbitrary data to be attached to NFTs to represent various digital assets. In the case of ordinals, metadata is held within the witness data of a Bitcoin transaction. This data, referred to as inscriptions, is "inscribed" within a specific part of the transaction and is typically associated with a particular satoshi.

Ordinals are the tool that allows users to create, see, and keep track of the extra information connected to each sat on the Bitcoin blockchain. The special thing about ordinals is that they don't create new tokens, but instead work with the existing satoshis. This means that the inscribed sats can be sent and spent just like any other sat, so it can be said that sats somehow maintain their fungibility while having non-fungibility.

How to Create Bitcoin Ordinals?

At the beginning, only those who are in possession of a Bitcoin full node and a special wallet that can manipulate satoshis could create an inscription. Now, there are tools available to automate this process, such as Gamma or the Ordinals Bot, making it easier for non-technical users and reducing associated risks.

To create an inscription, users need to send a transaction involving an individual satoshi to a Taproot-compatible wallet and attach the desired metadata as part of the transaction. The users need to ensure the desired satoshi is not used as a network fee.

It's worth noting that the tools and ecosystem around Bitcoin Ordinals are still in their infancy. The very first ordinals were only inscribed a few months ago. As more non-tech users show interest and demand increases, the ecosystem and tools will likely evolve to become more user-friendly.

How to Transfer and Trade Bitcoin Ordinals?

As Bitcoin Ordinals are relatively new, the tools for transferring and trading inscriptions are not mature yet, like those used for creating Bitcoin Ordinals. However, there are a few steps you can take to own an inscription for yourself if you are interested.

First, research and explore projects that create digital artifacts, such as Ordinal Punks, Ord Rocks, and Taproot Wizards. Since Bitcoin Ordinals are new, they may not be available for trading on public platforms. That’s why you need to join the Discord servers of the projects you’re keen on. These projects organize trading on their servers, allowing buyers and sellers to easily trade. They have systems in place for sellers to set their prices and for buyers to place bids. Look into their collections, join their Discords, do your research, and check the prices. DYOR.

Some inscriptions are also available on OpenSea through Emblem Vault. To avoid scams, make sure that the BTC address in the vault matches the Bitcoin address recorded on the Ordinals website.

Next, make sure you have a Taproot-enabled Bitcoin wallet. Ledger, Trezor, Bitcoin Core, and Zeus are some wallets that support Taproot.

Once you find an inscription you want to buy, you can purchase it on the project's Discord server or through an auction. Only complete the transaction after you have done your due diligence.

What Are the Advantages of Bitcoin Ordinals?

Before ordinals, there have been other projects such as RGB and Taro that attempt to integrate other digital assets into the Bitcoin blockchain. These projects are basically second-layers to the Bitcoin blockchain. They may offer more features than Ordinals, but are more complicated to use. Inscriptions rely on the relatively simple and conservative Bitcoin blockchain, while other NFTs work on the complex network and virtual machine. This simple nature of inscriptions makes them more secure and less prone to user vulnerabilities.

However, it’s worth noting that satoshi inscriptions use a data model similar to the web, allowing them to support any content type that web browsers can handle without requiring changes to the underlying protocol. This provides flexibility for evolving content types.

Moreover, RGB, Taro, and even Ethereum NFTs often store content off-chain, which can be on platforms like IPFS or Arweave that may not guarantee long-term availability. Meanwhile, the contents of inscriptions are always stored on the Bitcoin blockchain itself, making it more durable and less likely to be lost.

Also, inscriptions are always immutable, meaning they cannot be modified or deleted by anyone after they are created. In contrast, common NFTs are mutable, which means that their content can be changed or removed by the owner of the NFT contract.

Furthermore, ordinals and inscriptions need BTC for minting, transferring, and storage, making them inherently scarcer and potentially more valuable. NFTs from other chains can be minted in unlimited quantities with a single transaction, making them less scarce.

Last but not least, ordinals and inscriptions do not claim to support on-chain royalties, as it can be challenging to enforce. Ethereum NFTs have faced confusion and challenges with on-chain royalties, causing negativity within the ecosystem.

What Are Bitcoin Ordinals? Everything You Need to Know About Bitcoin NFT image 2Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.