Key Takeaways
- Bitcoin Ordinals unlock new use cases for Bitcoin by enabling users to attach unique data directly to individual satoshis, turning them into digital collectibles.
- Ordinals rely on ordinal theory, which assigns sequential numbers to satoshis, allowing their tracking and transformation into unique digital assets.
- They differ from traditional NFTs by storing all data on-chain, leveraging Bitcoin’s permanence and decentralization.
- Challenges of Bitcoin Ordinals include scalability, on-chain storage, higher costs for users, and the lack of programmability.
Bitcoin has long been the cornerstone of cryptocurrency, known for its security and decentralized nature. According to the Bitcoin whitepaper, Bitcoin’s functionality is peer-to-peer transfers of value akin to traditional monetary transactions. But all of that has changed.
Enter Bitcoin Ordinals, a new concept that enables users to attach unique data directly to individual satoshis (the smallest unit of Bitcoin). As a result, this innovation has opened new doors for creativity, digital ownership, and utility on the Bitcoin blockchain.
In this article, we’ll explore what Bitcoin Ordinals are, how they work, and their implications for the crypto world.
What Are Bitcoin Ordinals?
Bitcoin Ordinals represent a novel way to expand Bitcoin’s use cases by allowing data to be attached to satoshis. In addition, with each Bitcoin containing 100,000,000 satoshis, there’s plenty of space to work with. Furthermore, these unique inscriptions can include text, images, or even entire digital assets. The idea is that users can assign a specific ordinal number to each satoshi, effectively transforming it into a digital collectible.
This innovation was made possible through advances in Bitcoin’s technology, such as the Taproot upgrade. Taproot enhanced the network’s capacity to handle complex scripts. Bitcoin Ordinals have gained popularity for their ability to create a form of “Bitcoin-native NFTs” although they are distinct from traditional NFTs in many ways. We’ll look at a comparison between the two further down.
Ordinal Theory – the Genesis of Ordinals
The concept of ordinals is rooted in the ordinal theory, introduced by Casey Rodarmor in early 2023. This system assigns sequential numbers to satoshis as they are mined, giving each one a unique identifier. For example, the first satoshi ever mined in Bitcoin’s genesis block is labeled as ordinal number 0, while subsequent satoshis are numbered in order.
The ordinal theory enables users to track individual satoshis and associate them with additional data, such as text or images. Consequently, by leveraging Bitcoin’s security and decentralization, ordinals create a new way to utilize the network beyond economic transactions.
How do Bitcoin Ordinals Work?
The functionality of Bitcoin Ordinals revolves around two key components: ordinal numbers and on-chain data. Together, these elements enable the inscription of data directly onto the Bitcoin blockchain.
Ordinal Numbers
Ordinal numbers serve as the foundation for Bitcoin Ordinals. These numbers are assigned to every satoshi based on its position in the sequence of mined Bitcoin. At the same time, by assigning unique identifiers to satoshis, ordinal numbers allow users to track, trade, or inscribe data onto specific units of Bitcoin.
As a result, this system ensures that each satoshi can be uniquely identified, making it possible to attach metadata and transform it into a one-of-a-kind digital asset. Moreover, ordinal numbers do not alter Bitcoin’s fundamental mechanics or security.
On-chain Data
Bitcoin Ordinals store their associated data directly on the blockchain. This is in contrast to most NFT collections, which rely on off-chain storage solutions. In other words, Ordinals ensure that all metadata is permanently embedded within Bitcoin’s immutable ledger. This guarantees a higher degree of durability and security but also introduces challenges related to blockchain size and scalability.
For example, inscribing a high-resolution image as an ordinal will increase the size of the blockchain, raising concerns about the long-term sustainability of Ordinals. Nevertheless, the on-chain storage model enhances transparency and accessibility, as anyone can verify the data without relying on external servers.
How To Mint an Ordinal (Inscribe an Ordinal)
Creating a Bitcoin Ordinal is known as “inscribing” and it involves attaching data to a specific satoshi. Here’s a step-by-step guide on how to inscribe your first satoshi:
- Set Up a Compatible Wallet: Start by downloading a Bitcoin wallet that supports ordinals, such as Ordinals Wallet or Sparrow Wallet.
- Acquire Bitcoin: After that, ensure you have enough Bitcoin to cover transaction fees for the inscription process.
- Choose an Inscription Service: Platforms like Gamma or Ordinals Bot make it easy to create Ordinals since they handle the technical aspects of inscribing data.
- Select Your Data: Decide what you want to inscribe, this could be an image, text, or other digital content. Then ensure it complies with the platform’s file size and format limitations.
- Pay the Fee: Afterwards, submit your data along with the required Bitcoin transaction fee to complete the inscription process.
- Verify Your Ordinal: Once the transaction is confirmed, you can view and manage your inscribed ordinal through your wallet or a blockchain explorer.
Bitcoin Ordinals vs NFTs
Bitcoin Ordinals are often compared to NFTs and that’s no surprise. Both represent unique digital assets. However, their differences lie in the underlying technology and storage methods.
| Feature |
Ordinals |
NFTs |
|---|---|---|
| Network | Exclusively built on Bitcoin |
Ethereum and other blockchains |
| Storage |
Data is entirely on-chain |
Metadata is typically off-chain |
| Creation | Involves attaching metadata directly to satoshis | Uses smart contracts to link tokens with metadata |
| Durability | Guaranteed by Bitcoin’s immutability and decentralization | Dependent on smart contracts and off-chain storage solutions |
While ordinals and NFTs offer unique digital ownership, ordinals emphasize on-chain permanence, making them ideal for applications with a long-term vision.
5 Most Valuable Bitcoin Ordinals
Bitcoin Ordinals have already demonstrated their potential value. Here are some of the most noteworthy examples:
- Inscription #0: Known as the first-ever ordinal, it holds historical significance as the genesis of the ordinal movement. Casey Rodarmor created it as a test back in December 2022.
- Taproot Wizards: Web3 developer Udi Wertheimer created Taproot Wizards to pay homage to the Taproot upgrade of Bitcoin. Taproot Wizards were among the first Ordinals collections and made history on Bitcoin with the largest (4MB) block in the network’s history.
- Ordinal Punks: A tribute to the CryptoPunks on Ethereum, Ordinal Punks blend Bitcoin’s ordinals with Ethereum’s NFT culture. Unlike the original collection on Ethereum which had thousands of NFTs, the Ordinal Punks are only 100. The floor price at the time of writing is 1.85 BTC (~$192,000).
- Bitcoin Rocks: This collection is a reference to another historical NFT collection on Ethereum. Similarly to the punks, Bitcoin Rocks features 100 rock NFTs. The current floor price is 3 BTC (~$300,000).
- Bitcoin Shrooms: Bitcoin Shrooms are one of the earliest Ordinals collections, predating both the Rocks and Wizards. The team behind the project is unknown and there are only 224 of them on the market. The current floor price sits at 1.18 BTC (~$122,000).
Advantages of Bitcoin Ordinals
As we’ve mentioned, Bitcoin Ordinals share some similarities to the NFTs on Ethereum. However, they offer several compelling benefits:
- Permanence: All data is stored directly on Bitcoin’s blockchain, ensuring it cannot be altered or deleted.
- Security: Leverages Bitcoin’s robust security and decentralization.
- Transparency: On-chain storage allows for full public verification of data.
- Accessibility: Any Bitcoin wallet can manage ordinals with the appropriate features.
- Innovation: Expands Bitcoin’s use cases beyond currency and transactions.
What Are the Negatives of Bitcoin Ordinals?
Despite their advantages, Bitcoin Ordinals come with some notable drawbacks. Many of them have to do with the technical aspects of the inscriptions:
- Blockchain Bloat: Inscribing large amounts of data can increase the blockchain’s size, potentially impacting scalability.
- High Costs: On-chain storage and transaction fees make ordinals less accessible for casual users.
- Limited Functionality: Unlike NFTs on Ethereum, ordinals lack programmability and smart contract integration.
- Energy Impact: Increased computational demands may exacerbate Bitcoin’s environmental concerns.
Closing Thoughts
Bitcoin Ordinals represent a transformative step in blockchain innovation, enabling new forms of digital ownership and creative expression. Furthermore, by combining Bitcoin’s security with the ability to inscribe unique data, ordinals highlight the untapped potential of the world’s first cryptocurrency. Lastly, they expand the use cases of the Bitcoin network and turn it into an attractive new frontier for digital collectors.
FAQ
What are Bitcoin ordinals?
Bitcoin Ordinals are a way to attach unique data, such as text or images, to individual satoshis on the Bitcoin blockchain. Consequently, this transforms the smallest units of Bitcoin into unique digital collectibles with on-chain data storage.
How do Bitcoin ordinals differ from NFTs?
Bitcoin Ordinals store all their data directly on the Bitcoin blockchain, ensuring permanence and censorship resistance. NFTs, on the other hand, often rely on off-chain storage solutions and use smart contracts to link metadata to tokens.
Can anyone create a Bitcoin ordinal?
Yes, anyone with a Bitcoin wallet that supports ordinals and enough funds for transaction fees can create a Bitcoin Ordinal. The process involves attaching metadata to a satoshi through a process called inscribing.
