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6 min read 
There’s been a lot of buzz surrounding Bitcoin Ordinals lately. But just what are they? Let’s take a closer look.
What is a Bitcoin Ordinal?
Bitcoin Ordinals are a new way to turn the smallest denomination of a Bitcoin, a satoshi (0.00000001 BTC), into a one-of-a-kind digital asset.
Bitcoin Ordinals are essentially a means of creating Bitcoin-based non-fungible tokens (NFTs) by directly attaching, or “inscribing” data such as images, music, videos, and games onto a satoshi on the Bitcoin blockchain.
A brief history of Bitcoin NFTs
Efforts to enable additional digital asset functionality on Bitcoin preceded ordinals by some years, with projects such as Colored Coins, Counterparty, and Mastercoin (now OMNI) all attempting to create ‘Bitcoin 2.0’ protocol layers that never quite took off.
The Colored Coins protocol was a precursor to NFTs and Ordinals. They served to represent and maintain real-world assets on the Bitcoin blockchain, and had ‘imaginative colouring’ applied to their metadata to set them apart from other Bitcoins.
In July 2011, Bitcoin creator Satoshi Nakamoto created Namecoin, a decentralized name registration service, through a fork of Bitcoin. But it wasn’t until 2014 that users discovered they could add metadata to their registered names, including profile images. Now known as Twitter Eggs, these are some of the earliest on-chain collectibles.
Blockchain trading card game Spell of Genesis would launch on the Bitcoin blockchain in 2015 and is the first tokenized gaming set of its kind. This marked a huge milestone in the user-centric development of Web3 tech and gaming overall.
Soon Ethereum-based NFTs would take hold of the market, and the Bitcoin blockchain would resume its role as the home of the premier cryptocurrency until 2023.
The history of Bitcoin Ordinals
Ordinal Theory was introduced in January 2023 by Casey Rodarmor, who posited a system for systematically ordering satoshis and inscribing data onto them. For the first time, it was possible to create Bitcoin-native assets without needing a secondary protocol layer.
Though the protocol was able to fully conceptualize Bitcoin-based NFTs and other types of digital assets under the BRC20 token standard, it was thanks to two very important Bitcoin updates that made it possible.
Firstly, the 2017 Segregated Witness (SegWit) update would result in a soft fork of the Bitcoin blockchain, and cleverly allowed for transactions to have a “witness data” section that could support the addition of arbitrary data. This would expand data limits that could be included in a transaction.
The second upgrade, Taproot, was implemented in November 2021. The update introduced an easier system for storing arbitrary witness data, and allowed for data to be added to a transaction up to the blocksize limit of 4MB, opening new opportunities for on-chain media.
Not long after Ordinal Theory was introduced, Ordinals project Taproot Wizards was released. The project officially launched in February 2023 with a collection of 2121 collectible wizards.
Following this, Ordinals began to gain significant attention with established projects, causing the likes OnChainMonkey, DeGods, and Bored Ape Yacht Club creators Yuga Labs, to join the Bitcoin network.
The latest innovation to take hold within ordinals is “recursive inscriptions”, which introduced the BRC69 token standard that breaks free from the 4MB data limit. It does so by recycling data from existing inscriptions instead of new data sets, and then leverages that data to create new unique inscriptions. This innovation brings forth the potential for many new use cases.
How do Bitcoin Ordinals work?
It is important to note the difference between “ordinals” and “inscriptions” as they both refer to Bitcoin-based NFTs.
- Ordinals
This is a system for ordering satoshis that creates their unique “non-fungible” property.
- Inscriptions
Inscriptions are the data that has been written onto the satoshi, i.e. the contents of the NFT.
- Ordinal numbers/TokenID
In short, satoshis are numbered in the order they were mined. This order is preserved when they are transferred from transaction inputs to outputs using a first-in-first-out methodology.
Bitcoin Ordinals are uniquely identified using four specifications:
- Index of sat in the block
- Index of block in difficulty adjustment period
- Index of block in halving epoch
- Cycle, numbered starting from 0.
These periodic events, namely new blocks being mined, Bitcoin halvings, block difficulty adjustments, and “conjunctions” which happen after every six halvings or approximately 24 years.
As per the Ordinals documentation, this results in the following rarities:
- Common: Any sat that is not the first sat of its block
- Uncommon: The first sat of each block
- Rare: The first sat of each difficulty adjustment period
- Epic: The first sat of each halving epoch
- Legendary: The first sat of each cycle
- Mythic: The first sat of the genesis block.
Inscriptions as Metadata
Outside of the Bitcoin blockchain, metadata is an optional attachment of data to an NFT, which can be used to represent art, profile pictures, financial assets, etc. Ordinals lack a designated metadata spot, so instead this metadata is held, or inscribed, in the witness data of the transaction.
How to Inscribe an Ordinal
At the moment, inscription is a slightly complex process, which you can read in full here.
In short, aside from the technical setup required, a user needs to send a single satoshi to a Taproot-compatible wallet with their chosen metadata as part of the transaction. This transaction needs to be sent in a manner that does not spend the soon-to-be-inscribed satoshi as a transaction fee.
Ordinals vs NFTs: Key differences
There are numerous distinct differences between the two as a result of how they are created, stored, represented, and traded.
There are numerous differences between the two, which is largely due to the technologies they leverage. The foundations they are built upon influence how they are created and stored.
Storage
- Ordinals
By inscribing data onto satoshis, Ordinals are always stored directly on the Bitcoin blockchain, ensuring they are always secure and decentralized, with no surprises that could threaten their permanence.
It is possible to accidentally spend an inscribed satoshi. This issue primarily stems from the wallet containing the Ordinal being unable to distinguish it from a regular satoshi, meaning that the user can’t select which Bitcoin sats they spend when making a transaction.
- NFTs
Traditional NFTs leverage smart contracts for the minting process, which then needs to be deployed to the desired blockchain network. This means that should a network/dApp fail in one way or another, those NFTs could become inaccessible.
NFTs are usually represented as metadata or URLs that connect to their respective storage locations, which is usually off-chain. For example, NFTs minted via crypto exchange FTX are gone due to their off-chain servers being overtaken following their bankruptcy.
Value
At their most basic, the rarity of an Ordinal is determined by a few factors, namely the creation date, its inscription number, and the content it holds. With limited art collections, video games, and other innovations now entering the market, value can also be ascribed to Ordinals through limited releases, attributes, traits.
Popularity
Now a year on from their debut, Ordinals are becoming very popular amongst innovators and collectors alike. As per the latest data available on Dune, there are a total of more than 55 million inscriptions made since 2022.
There are many projects such as Stacks and others who are now attempting to build a robust Web3 ecosystem to rival that of Ethereum. Decentralized finance (DeFi) functionality, dApps, and other innovations are all coming to the Bitcoin blockchain.
Throughout 2024, we’ll see these innovations rigorously tested and improved upon. The sky’s the limit for Bitcoin Ordinals.
Frequently Asked Questions
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01.
What are Bitcoin Ordinals?
Ordinals are the Bitcoin Network equivalent of NFTs. They are minted or ‘inscribed’ on the smallest denomination of a Bitcoin, a satoshi, all of which have a unique serial number. They contain data, art, videos, games, and other digital content.
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02.
How to buy Bitcoin Ordinals?
You can purchase them on a Bitcoin Ordinals marketplace such as OKX, UniSat, Magic Eden, and Gamma.
