What are Bitcoin Ordinals? Are you of the opinion that Bitcoin doesn’t have NFTs? Think again! Bitcoin Ordinals have unleashed a new age of on-chain Bitcoin NFTs, called inscriptions, that are causing ripples in the world of NFTs.
Continue reading to discover what Bitcoin Ordinals are, how they function, and how you can buy them.
What are Bitcoin Ordinals, exactly?
Ordinals, coined by Bitcoin developer Casey Rodarmor, is a phrase frequently used to describe a new kind of non-fungible token (NFT) that is exclusive to Bitcoin.
This new way of deploying NFTs on Bitcoin directly has been making headlines since its launch in January 2023. A Galaxy Research study predicts that these Bitcoin-native NFTs will have a market value of $4.5 billion by 2025.
Ordinal inscriptions allow for the creation of “digital artifacts,” which is the actual term for this new kind of NFT. However, these aren’t your average NFTs. Digital artifacts genuinely “live” on-chain and are arguably more complicated than “traditional” NFTs. Furthermore, they demonstrate that Bitcoin can be more than just digital gold and censorship-resistant digital currency.
While not everyone in the Bitcoin community is pleased that these NFTs are occupying block space, which will likely be required for Bitcoin to achieve global adoption as a form of currency, a lot of people are enthusiastic that Bitcoin has become more entertaining and dynamic since the launch of Ordinals NFTs.
How do Bitcoin Ordinal NFTs Work?
Let’s now delve into how Ordinal Theory has led to the creation of Bitcoin inscriptions, which can be utilized to record NFTs on the Bitcoin blockchain.
Ordinal Theory
Rodarmor has introduced ordinal theory, a methodology that allows individuals to keep track of and transfer individual satoshis. A satoshi (sat) is the smallest unit of Bitcoin, and it is equal to one hundred millionth of a bitcoin.
In Ordinal Theory, each sat from the inception of Bitcoin until now is given an ordinal number, starting from 0 in the sequence in which it was mined and transferred from transaction inputs to outputs. From a mathematical standpoint, these numbers are ordinal numbers, which indicate the exact position of something. These numbers are also known as ordinals, which is why the NFTs created using this method are called Ordinals NFTs.
Inscribing
This confusing part about inscribing sats is going to confuse and bamboozle you, so be prepared! It is said that through this inscribing process, one can affix a variety of digital content to a sat in order to create an inscription. To do so, one must employ a certain open-source software and also have access to a Bitcoin node. Is your brain already reeling from the complexity of it all?
Now, if you’re anything like me, you might be scratching your head and wondering what the heck the ordinal theory’s methodology has to do with all of this. Apparently, this methodology governs the numbering scheme for sats, but the serialization of sats doesn’t actually occur at the Bitcoin protocol level.
Nevertheless, the Ordinals transactions themselves are confirmed and recorded on the Bitcoin blockchain. Got all that? Good, because we’re just getting started.
It’s worth noting that Ordinals hasn’t done anything to alter the Bitcoin blockchain or create a new one in order to enable Bitcoin-native NFTs. However, the integration of Taproot is said to be helpful in facilitating the operation of Ordinals. So, what exactly are inscriptions, you may ask? Well, they are permanent digital artifacts that are native to Bitcoin and which can include text, images, or GIFs.
However, in order to qualify as a digital artifact, an NFT must be on-chain, unrestricted, and decentralized. If the data is stored off-chain via a cloud storage provider, it doesn’t meet these criteria.
Through the use of the ordinal theory, one can keep track of the movement and ownership of an inscribed sat and even send it to a normal Bitcoin address (as long as it’s Taproot-enabled). This makes buying and selling inscriptions a breeze. Moreover, the perceived value of an inscribed sat may fluctuate over time, making it a rare and valuable commodity.
In terms of data storage, the witness section of a Bitcoin transaction is where the content of an inscribed sat is held. This section was made possible by the Segregated Witness soft fork in 2017, which separated the structure of a Bitcoin transaction into a transaction and a witness part to improve data storage efficiency.
Taproot, another Bitcoin soft fork, further improved upon this by eliminating data storage caps in blocks when it went live in November 2021, allowing for inscriptions of up to 4 MB in size. However, some Bitcoin maximalists are concerned that inscribed content could compete with Bitcoin transactions for block space, potentially driving up transaction fees and leading people to turn to other blockchains instead.
Ordinal Rarity
The nature of Bitcoin Ordinals, which can be tracked and transferred, has made them a fascinating option for collectors due to their potential rarity, which is a significant factor in determining their desirability. For collectors who seek guidance on how to identify rare sats, there are several potentially influential factors to consider.
Bitcoin’s periodic events provide a natural system for rarity, with varying frequencies of occurrence. Examples include new block mining, which happens roughly every 10 minutes; difficulty adjustments that take place every 2016 blocks (around every two weeks); and halvings that occur after every 210,000 blocks (approximately every four years), resulting in a reduction in new sats created.
Thus, for example, Ordinal collectors might seek to acquire the first satoshi in the form of an Ordinal after a halving event, as it could be considered more valuable than other satoshis. Therefore, buyers building a collection of inscriptions might look for specific rare Ordinals to increase the value of their collection.
Additionally, Ordinals may hold value beyond just their rarity or name. This could be due to unique qualities of the number itself, such as having an integer square or cube root, or it could be linked to a significant event in Bitcoin’s history. For example, Bitcoin ordinals from block 477,120, which marked the activation of SegWit, or ordinal 2099999997689999°, the last ordinal that will ever be mined, could potentially carry significant value for collectors in the Bitcoin community.
Rodarmor refers to such ordinals as “exotic,” and their classification is subjective. Bitcoin Ordinals collectors are encouraged to explore exotics based on their own criteria and preferences.
Are Bitcoin Ordinal NFTs available on other chains as well? Bitcoin Ordinal NFTs are 100% native to the Bitcoin blockchain. They “live” on the Bitcoin blockchain, benefitting from its powerful proof-of-work security and high degree of decentralization.
However, Ordinals could work on the Ethereum blockchain as wrapped versions. Furthermore, Ordinals could even work on blockchains that forked from Bitcoin.
Vaulting your Bitcoin Ordinal NFT inside an Emblem Vault makes it compatible with the Ethereum blockchain. As a result, you can trade the wrapped version of your Bitcoin Ordinal on a popular NFT marketplace like OpenSea that doesn’t (yet) support the Bitcoin blockchain.
Emblem Vault is a tokenized multi-asset wallet on the Ethereum blockchain that enables people to trade NFTs from other chains. The vault contains the private keys to the Bitcoin wallet holding the Ordinal inscription. That means your Ordinal remains on the Bitcoin blockchain while the vault creates a new version of this NFT that’s compatible with Ethereum.
Developers have also played around with Ordinal Theory on other blockchains to piggyback off the success of Bitcoin Ordinals. However, looking at the current developments in the Ordinals NFT market, it seems that the fact that they “live” on the world’s most secure and decentralized blockchain – the Bitcoin network – is what makes crypto collective enthusiasts so excited about them.
Are Ordinals just Bitcoin NFTs?
The Ordinal Theory assigns a number to each satoshi, allowing for inscriptions that bestow value on a specific satoshi. This innovation opens the door to the creation of crypto collectibles, or digital artifacts, directly on the Bitcoin blockchain. These collectibles are known as Bitcoin NFTs, and they constitute a market that has captured the attention of many in the crypto community.
However, the applications of the Ordinal Theory do not end there. It can also be utilized to create security tokens or stablecoins on the Bitcoin blockchain. This is because individual satoshis can be inscribed with different types of assets, not just NFTs.
To get your hands on Bitcoin Ordinal NFTs, begin by exploring the many projects that are creating them. Popular projects such as Ordinal Punks, Ord Rocks, Timechain Collectibles, TwelveFold, and Taproot Wizards offer collections that you can examine to see which project speaks to you. Study their Discord discussions, collections, and prices to determine which project aligns with your preferences.
Once you have identified a collection you want to own, get a Taproot-enabled Bitcoin wallet if you do not have one already. The next step is to find a marketplace, but at present, Bitcoin Ordinals are not traded on many platforms due to their relative novelty. However, you can find trading activity on the Discord servers of the individual Bitcoin NFT projects.
To facilitate trading, the projects with Ordinal collections have organized trading on their Discord servers. This permits buyers and sellers to trade with ease. They have systems in place that enable sellers to create their ask prices, and for buyers to place their bids. For example, Ordinal Punks’ Google Sheet lists various ask prices and bids from traders. It is crucial to follow the trading rules provided by the NFT project to avoid getting scammed.
Some Ordinal inscriptions are trading on OpenSea, thanks to Emblem Vault. However, buyers must ensure that the BTC address in the vault is the same as the Bitcoin address recorded on the Ordinals website. Some projects also sell their collections through auctions, and you must be aware of the auction dates and prepare for your involvement in advance. For instance, Bored Ape Yacht Club (BAYC) creators Yuga Labs held an auction for its Bitcoin Ordinals NFT collection – called TwelveFold – that sold $16.5 million worth of Bitcoin NFTs within 24 hours, with the highest bidder paying $161,000 in BTC.
Buy an Inscription
Purchase your desired inscription on a project’s Discord server or via auction with confidence, but only proceed with the transaction if you believe in the NFT project, the value of the inscription, and the fairness of the price.
What’s next for Ordinals?
If over 370,000 inscriptions created in less than two months is anything to go by, we may see the number of inscriptions increase beyond the one million mark very soon. Increased interest could also mean that more NFT marketplaces will start to support the Ordinals trading, which will likely create a thriving market for crypto collectibles on Bitcoin.
Furthermore, Ordinals could receive added functions and features in the future. For instance, Rodarmor writes it could be possible to give future inscriptions human-readable names. We may also see Bitcoin hard forks embracing Ordinals in the future as they compete with Bitcoin to become the better, go-to NFT platforms.
