• Sat. Mar 2nd, 2024

What Are Bitcoin Ordinals And How Do They Work?

What Are Bitcoin Ordinals And How Do They Work?


The development of Bitcoin ordinals is an ingenious and innovative development for the world’s flagship crypto. It has already gained massive adoption from many blockchain enthusiasts and onlookers within a short period.

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Since the inception of nonfungible tokens (NFTs), many have started wondering about the correlation between the blockchain and a random digital item. In 2021, NFTs gained huge popularity generating more than two billion dollars in revenue and getting many use cases.

Nonetheless, the Bitcoin (BTC) network could not fully revolutionize the space because of the rigidity of its build. Other blockchain networks like Polygon (MATIC), Ethereum (ETH), and Cardano (ADA), among others, ideally accommodated the trading and minting of NFTs. Satoshi Nakamoto’s crypto originally focused on enhancing the anonymity, speed, and flexibility of financial transactions.

Bitcoin NFTs or Bitcoin Ordinals gain massive popularity

But, many users opposed Bitcoin’s concentration on transactional activities against Ethereum’s multi-functionality. Ethereum is a decentralized, open-source blockchain that has smart contracts.

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Related: The Unconventional Guide to Ethereum

After multiple agitations, Bitcoin got a few tweaking forks, hence increasing the diversity of the first blockchain. The forks include Bitcoin Diamond (BTCD), Classic, Bitcoin Cash ABC, SegWit, Bitcoin Gold, Taproot, Bitcoin Cash SV, and many more.

Bitcoin ordinals are a recent upgrade developed by Casey Rodarmor. It will enable users to inscribe texts into satoshis and metadata into images, JSON.

Satoshi is a fraction of a whole Bitcoin and there are 100 million satoshis in 1 BTC. The massive fork could be the origin of NFTs minting on the flagship crypto. Notably, Bitcoin ordinals work on a different mechanism from the conventional nonfungible token.

Bitcoin Ordinals Overview

Bitcoin ordinals are also known as Bitcoin NFTs. They are digital assets inscribed on the satoshi. As earlier mentioned, a satoshi is the lowest denomination of Bitcoin. Fundamentally, the digital artifacts are ‘sats’ that have been ordered and inscribed with some information. The pieces of information transformed a normal satoshi into a de-facto NFT.

Before the launch of the Bitcoin ordinals, other NFT attempts to launch on the Bitcoin blockchain include Counterparty (2014) and Stacks (2017). Bitcoin NFTs were launched in January 2023.

How Bitcoin Ordinals Work

Bitcoin ordinals were developed from contention among the Bitcoin community over the repetitious function of the blockchain. The absence of diversification in the Bitcoin blockchain resulted from its meager transaction size of 80 bytes that could only hold text messages.

The SegWit and Taproot upgrades turned everything around increasing Bitcoin transaction size to nearly 4MB. The upgrades support the refined arrangement of transactional data. Users identify the position of sitting based on four parameters:

  • The index of the block in halving epoch x/210,000.
  • The index of sat in the block.
  • The cycle number.
  • The index of the block within the difficulty adjustment period x/2016.

The arrangement suggests that a preceding sat is always rarer than the immediate successive sat. Thus, ordinals utilize remodeled codes as envelopes for data inscribed onto sats.

A Guide to the Bitcoin-Based Ordinals NFT

Ordinal Inscriptions

By Description, ordinal inscriptions are metadata of digital artifacts written on sats. They do not need any sidechain or a separate Token. Their direct presence on the blockchain is one of the contrasts between Bitcoin NFTs and Ethereum-based NFTs. The data packets are stored in taproot script-path spend scripts under the storage of 4MB.

Using a two-step process, anybody can readily generate an ordinal inscription. For starters, users need to create a taproot output with inscription content. Then, they can spend the output to show the inscription content on the blockchain.

The inscription content is stored in a kind of no-op that does not alter the script. Considering the ordinal theory, inscriptions can be transferred, recovered, and traded. Notably, the ordinal theory defines satoshis (sats) as the atomic unit that can be identified and even traded individually on the Bitcoin network.

Furthermore, the inscriptions can be traded on the Ordibal Punks website. Contextually, users can explore the Ordinals’ Discord channel. The biggest marketplace on Stacks, Gamma.io, plans to unleash a paid marketplace where users generate and trade inscriptions (images or text).

Ordinalsbot, a product that is designed by the developers of the Satoshibles NFT collection, also executes similar services. Some wallets like Hiro Wallet, Xverse, and Sparrow Wallet are now introducing support for Bitcoin NFT.

Related: Bored Ape Yacht Club to be Released as a Bitcoin NFT Collection

A specialized wallet like Ordwallet can create inscriptions, receive ordinals, and prevent any accidental spending by freezing individual sats. To operate an Ordwallet users need a full Bitcoin node and 500 GB of disk space.

Bitcoin Ordinals Versus Traditional NFTs

Bitcoin ordinals resemble the traditional NFTs, intersecting in the ability to integrate digital items. Technically, there are several differences between these two digital assets. Bitcoin ordinals are found on-chain since all raw data are directly written on the blockchain.

On the flip side, NFTs are minted separately as a new token that may have references to files on the other blockchains.

Bitcoin has a hard cap of 21M total supply and a 4MB limit. These limits could hinder the amount of Bitcoin NFT mint in case all space was consumed as ordinals. Nonfungible tokens and other blockchains are highly flexible and have expansive minting space.

The Bitcoin space distinctly differs from Ethereum and has no smart contracts, decentralized exchange, or readily accessible wallets. It has a poor UI limiting trading of ordinal to just over-the-counter. Nonetheless, ordinal trading has attracted the attention of many users.

The rarity of a traditional NFT is mainly determined by the attributes of the artwork, which invariably impacts the asset’s price. For the Bitcoin ordinals, rarity may be subject to the order of minting. Collectors can have a flare for the first 1000 sats mint. It is likely that Casey Rodarmor’s inscription of “tiny pixel art” with a picture of a skull, known as Genesis Block, might be worth millions of dollars in the coming years.

Ultimately, traditional NFT can regulate the type of content generated, unlike Bitcoin, a permissionless space where the inscription on sats can never be censored. It means that the users can readily generate permanent illegal and copyrighted content.

Related: Investing in NFTs

Use Cases

Bitcoin ordinals use cases are scanty currently. Limited block size limits their functionality against NFT-diversified use cases. For instance, inscribing a game into a Bitcoin Ordinal is unfeasible because of the 4MB transaction size.

Nonetheless, future exploration of these ordinals could revolve around fashion, music, supply chain, artworks, metaverse, and luxury products.

Within a short period, several Bitcoin NFT collections have come up. Amidst the many, here are several popular Bitcoin NFT collections:

  • Taproot Wizard
  • Ordinal Punks
  • Bitcoin Rock
  • Timechain Collection
  • Ordinal Loops

NFTs on Bitcoin - How ordinals are shaking up the nonfungible token landscape

Pros And Cons

Some of the important benefits that accompany the introduction of Bitcoin ordinals are expected to make the platform better. The digital artifacts will increase Bitcoin use cases, the total number of users, and the adoption rate. Ordinal creator campaign states:

“Come for fun, rich art, stay for the decentralized digital money.”

Unlike Ethereum NFTs, ordinal transactions are highly decentralized, immutable, transparent, and well-secured. The assets are directly tethered to the blockchain with significantly cheaper transactional fees that cost $50 to 1M bytes.

Copyright and privacy violation might cause a major threat to Bitcoin ordinals, hence enabling the growth of malware. Currently, there is no defined regulatory mechanism on the open network. For most Bitcoin core developers, the introduction of Bitcoin ordinals has already deviated from the original mission.

The Takeaway

Bitcoin ordinals creation is an innovative and thoughtful development for the world’s flagship crypto. It gained massive adoption from multiple blockchain enthusiasts and onlookers in a short time.

Nonetheless, it has to be treated carefully, since exploitation is bound to happen. Expectantly, it will grow and maximize the utility of the Bitcoin network shortly.

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Kevin Moore - E-Crypto News Editor

Kevin Moore - E-Crypto News Editor

Kevin Moore is the main author and editor for E-Crypto News.