In the ever-evolving world of blockchain, more and more innovative products are being developed, pushing the boundaries of what can even be achieved with digital assets. Bitcoin Ordinals have been by far one of the latest, most unputdownable and debated products of these recent years. These unique IDs pegged to sats (satoshis, Bitcoin’s smallest units) are an entirely new way of storing and transferring crypto assets, unlocking vast opportunities for creating and collecting digital artworks, texts, and videos. In this article, we will explore what exactly Bitcoin Ordinals are, the way they work, their distinctions from regular NFTs, as well as discuss their pros and cons.
What are Bitcoin Ordinals?
Bitcoin NFTs — aka Bitcoin ordinals or just digital artifacts — are a way to inscribe digital content on the Bitcoin blockchain.
The Bitcoin ordinals protocol was launched back in January 2023 by Casey Rodarmor. Say, it allows inscribing art onto the Bitcoin blockchain. As opposed to non-fungible tokens (NFTs) on Ethereum and other blockchains, Rodarmor was seeking to create an immutable on-chain presence of a piece of art, text or video. The genesis block is considered a pixel art of a skull that Rodarmor inscribed on Dec. 14, 2022.
In fact, ordinal theory here is focused on satoshis, providing them with individual IDs and letting them be trackable, transferred and imbued with meaning. The ordinals hype really kicked off in February 2023, six weeks after the genesis ordinal was created.
The number of inscriptions doubled every week over the course of few weeks. However, the number could have been much higher if the infrastructure to inscribe and trade ordinals had been better planned and executed.
Ordinal Theory and Inscriptions
In the context of Bitcoin, Ordinal Theory is a proposed methodology for identifying each satoshi via a serial number and tracking them in the Bitcoin total supply, from first minting through their entire lifespan of transactions. This is achieved through a process called “inscribing.” So, ordinal “inscriptions” are digital assets, similar to NFTs, inscribed on a satoshi in the Bitcoin network. This procedure has been made possible thanks to Taproot, a huge upgrade on the Bitcoin blockchain, launched on November 14, 2021. Due to this, ordinal inscriptions do not require a sidechain or separate token.
Not only does the ordinal theory allow individual satoshis to be tracked and transferred, but it also creates the possibility of collecting them. Based on the total supply of BTC, the ranks to denote the rarity of different satoshis are as follows:
- Common: any satoshi other than the first one of its block (2.1 quadrillion total supply).
- Uncommon: the first satoshi of each block (6,929,999 total supply).
- Rare: the first satoshi of each difficulty adjustment period (3437 total supply).
- Epic: the first satoshi after each halving (32 total supply).
- Legendary: the first satoshi of each cycle* (5 total supply).
- Mythic: the first satoshi of the genesis block (1 total supply).
*Note: A cycle represents the period between conjunctions, which occur when a halving and a difficulty adjustment coincide. Technically, this happens every 6 halvings, but the first conjunction is expected to occur in 2032.
How to mine Bitcoin ordinals?
Mining, minting or inscribing Bitcoin ordinals are the terms that are usually used to refer to this process. From a technical perspective, unlike minting NFTs on Ethereum — which is a relatively matured process — mining Bitcoin ordinals is a complex process and lacks user-friendly tools.
Early on, Bitcoin ordinals could only be mined by those who ran their own Bitcoin node. For tech-savvy users, a Bitcoin node with the ord app, a command line wallet, would be the path to mining ordinals. Node operators would load their wallets with some sats to pay for the gas fees and perform an inscribing process on their ordinals.
However, no-code ordinal mining apps like the Gamma or the Ordinals Bot are aimed for users to upload the desired content to further inscribe it and create their Bitcoin ordinal. That takes users through a payment process using a QR code and its straightforward enough for the less technically gifted.
The tools around Bitcoin ordinals are still at an extremely early development stage. It has only been a few months since the genesis ordinals were inscribed. Amid high demand from ordinary users, the ecosystem and existing tools should start maturing with a more user-friendly UI.
Ordinals vs. traditional NFTs
Ordinals are different from traditional NFTs in some technical way. There are several features that make the pricing for ordinals a different exercise.
Bitcoin NFTs, as mentioned before, help identify satoshis uniquely and have content or art stored on-chain. Ethereum’s ERC-721 standard, which is used to create NFTs, typically holds the metadata or a pointer to the art, which is held off-chain. Some Ethereum-based NFTs are experimenting with on-chain storage, but they are more of an exception.
The other key difference with Bitcoin ordinals is the way rarity is derived and how evaluating NFTs would work. With traditional Ethereum-based NFTs, the attributes of the art typically define the rarity of the NFT and, subsequently, its price. Take NFTs like Ethereum Name Service (ENS) – here limited supply drives the value.
However, with Bitcoin ordinals, pricing would be defined by key moments that a Bitcoin block would represent. The first 1,000 or 10,000 ordinals inscribed might still be treasured by collectors. Don’t be surprised if the genesis Bitcoin ordinal is sold for a few million dollars in a couple of years. Yet some sats would be considered more precious than others. Another key difference between Bitcoin Ordinals and regular NFTs is that they are stored directly on the Bitcoin blockchain, rather than off-chain, in metadata. Moreover, ordinals allow for continuous and unalterable data archives right on the blockchain, whereas traditional NFTs may be vulnerable to data loss or modification by external factors.
Ordinals pros and cons
Pros:
- Immutable data storage. Bitcoin’s blockchain provides uninterrupted data storage, making ordinals an ideal medium for creating digital archives.
- Greater reliability and safety. Storing data directly on the Bitcoin blockchain ensures high security, as it is not at risk of data loss or corruption.
- Ease of use. Creating and transferring ordinals is done through standard bitcoin transactions, thus streamlining the process.
Cons:
- Limited functionality. In contrast to some other blockchains, the Bitcoin one has limited data storage and transfer capabilities, which may be a hurdle.
- High transaction fees. Due to high transaction fees on the Bitcoin blockchain, it can be quite pricey to create and transfer ordinals.
Conclusion
Bitcoin ordinals are a groundbreaking approach to storing and transferring digital data on the Bitcoin blockchain. Ordinals provide permanent data storage, high trustworthiness and security, all of which add up to an attractive tool for creating and collecting digital assets. That said, they also have their limitations, such as limited functionality and high transaction fees. To wrap up, in the coming years Bitcoin Ordinals could impact the development of digital artworks and data storage quite significantly.