What are Bitcoin Ordinals?

What are Bitcoin Ordinals?

Bitcoin Ordinals are digital inscriptions tied to individual Satoshis, the smallest unit of Bitcoin. They permit users to assign unique, traceable data such as images, videos, and text to these units, making them one-of-a-kind digital assets just like traditional NFTs (non-fungible tokens).

Ordinals address a limitation of the blockchain: its lack of a native mechanism for attaching data to transactions. By inscribing metadata onto individual Satoshis, Ordinals create new use cases, including digital art, collectibles, information storage, and possibly crypto gaming assets.

Since their launch, Bitcoin Ordinals have seen increasing adoption with over 73 million inscriptions created to date and accumulated fees of $277 million. However, critics suggest that Bitcoin NFTs increase blockchain size, potentially hurting Bitcoin’s main financial purpose.

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How do Ordinal Inscriptions Work?

Ordinal inscriptions work by assigning distinct numbers to individual Satoshis, enabling them to carry data that turn them into digital assets.

This process, guided by Ordinals theory, leverages Bitcoin’s existing infrastructure, particularly the Taproot and SegWit upgrades, to embed metadata efficiently.

• Satoshi numbering system: Each Satoshi (0.00000001 BTC) is assigned a unique ordinal number for identification.
• Inscription process: Data is embedded directly into Bitcoin transactions, storing it permanently on the blockchain.
• Minting inscriptions: Users can inscribe Ordinals using Magic Eden’s Inscription Tool by uploading data and confirming the transaction. For dedicated minting processes, prepare a Taproot-compatible wallet and track your transaction via mempool explorers.
• Storage implications: The additional data increases blockchain size, raising concerns about long-term capacity.
• Key technical benefits: Ordinals ensure immutability and complete ownership, distinguishing them from traditional NFTs reliant on external storage.
• Challenges: High adoption could strain the Bitcoin network, leading to slower transactions and higher fees as seen on several occasions since their 2023 release.

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What is the Difference Between BRC20 and Ordinals?

You can think of BRC20 as a token system similar to Ethereum’s ERC-20, which powers fungible assets like Shiba Inu and Dogecoin (wrapped on Ethereum). Ordinals, however, are more like Ethereum’s NFTs collections (e.g. CryptoPunks or Bored Apes).

Their mechanisms also differ as BRC20 is running through scripts in transaction outputs for managing token transfers and minting. Ordinals embed immutable metadata directly onto individual Satoshis, giving them separate identities.

In general, BRC20 suits financial applications like trading and staking, Ordinals cater to creative fields, Both technologies add data demands to the blockchain, but in distinct ways: BRC20 increases transaction complexity, while Ordinals raise storage needs by attaching larger metadata payloads.

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How to Buy Bitcoin Ordinals

Buying Ordinals involves setting up a compatible wallet, finding a Bitcoin NFT marketplace, and following simple steps to complete your purchase. Here is a step-by-step guide:

1. Set up a Taproot-compatible wallet: Download and install a wallet that supports Taproot addresses, such as Xverse or Hiro.
2. Fund your wallet: Transfer Bitcoin into your wallet to cover the cost of the Ordinal and any transaction fees.
3. Choose a marketplace: Visit platforms like Ordinals Wallet or Magic Eden to browse available inscriptions. Tip: this might earn you eligibility for a future $ME token airdrop.
4. Select your Ordinal: Find an Ordinal inscription you wish to purchase and review its details.
5. Initiate the transaction: Follow the marketplace’s instructions to buy the Ordinal, ensuring you confirm the correct wallet address.
6. Secure your Ordinal: Once the transaction is complete, verify the inscription in your wallet and back up your wallet securely to prevent loss.

Alternatively, you can buy and store your Ordinals on a centralized exchange; however, if you do, you should be aware that OKX and Gate.io are currently the only two options with sufficient liquidity.

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Who Created Bitcoin Ordinals?

Bitcoin Ordinals were created by Casey Rodarmor, a software developer and Bitcoin advocate, in early 2023. Rodarmor utilized Bitcoin’s Taproot and SegWit upgrades to enable digital inscriptions, leveraging the blockchain’s unspent transaction output (UTXO) model for storing metadata.

Following this, he proposed Bitcoin Runes, a fungible token protocol designed as an alternative to the BRC-20 standard, aiming to optimize UTXO management and reduce network strain.

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Leading Bitcoin Ordinals Projects

Ordinals have inspired numerous projects, highlighting their impact on the NFT space. Here are five leading examples:

• Bitcoin Puppets: An Ordinals/Runes hybrid collection with simple, playful designs and a high floor price of $18,000, appealing to premium collectors.
• NodeMonkes: Pixelated designs with strong community appeal, generating $10 million in trading volume and 775 sales in the past 30 days.
• Runestone: Medieval-themed inscriptions that have seen over 8,000 sales, offering affordability with a $847.4 floor price.
• Ordinal Maxi Biz (OMB): 2D art with a niche following and a floor price of $14,400.
• Quantum Cats: Animated collectibles with dazzling designs and a high-end floor price of $19,900, aimed at art-focused collectors.

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Are Ordinals Good or Bad for Bitcoin?

The rise of Bitcoin Ordinals has introduced debates about their economic potential and impact on the network. While some argue that Ordinals bring commercial opportunities through NFT marketplaces and creative innovation, others worry about their long-term implications for Bitcoin’s role.

The biggest concern about Ordinals is the on-chain spam from increasing blockchain size, which could strain network efficiency. Higher transaction fees caused by Ordinals might also make Bitcoin less accessible to everyday users and small-scale transactions.

The community remains divided, with maximalists criticizing Ordinals as a distraction from Bitcoin’s primary purpose. On the other hand, innovators believe Ordinals represent an evolution of Bitcoin’s use cases, fostering broader adoption and creativity.

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Ordinals vs Other NFTs

Even though ordinals were popular when they first appeared, they have since faded in favor of new and even traditional protocols. Comparing Ordinals to other NFTs can reveal important differences in technology, use cases, and adoption patterns.

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Ordinals vs Ethereum NFTs

Bitcoin and Ethereum approach NFTs with different technical philosophies. Bitcoin Ordinals inscribe data directly onto the blockchain, prioritizing security and immutability, while Ethereum capitalizes on smart contracts to enable programmability and features like royalties.

• Market Size: Ethereum NFT trading volumes exceeded $44 billion, while Bitcoin NFT adoption remains slightly under $5 billion as of 2024.
• Fees: Ethereum gas fees for NFTs range from $10–$50, while Bitcoin inscriptions typically cost $1–$5 under normal conditions.
• Ecosystem: Ethereum has over 100 NFT marketplaces, compared to Bitcoin’s ~10 trustworthy ones.

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Ordinals vs Atomicals

Atomicals introduce the ARC-20 token standard, enabling fungible tokens and smart contract-like functionalities on Bitcoin. In contrast, Ordinals specialize in unique, non-fungible inscriptions tied to individual Satoshis.

• Adoption: Fewer than 2 million Atomicals assets have been created, whereas Ordinals inscriptions exceed 40 million since Aromical's release on Bitcoin's #808080 block.
• Flexibility: Atomicals support multiple asset types, while Ordinals are primarily focused on NFTs.
• Infrastructure: Atomicals require more complex infrastructure and have limited wallet and exchange support compared to Ordinals.

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Ordinals vs Runes

Runes provide a fungible token protocol on Bitcoin, offering an efficient approach to UTXO management. They have gained serious traction, with Runes transactions accounting for over 81% of Bitcoin network activity on certain days in 2024.

• Market Size: Runes dominate on-chain activity, with growing adoption in financial tokenization, while Ordinals remain focused on non-fungible use cases.
• Scalability: Runes produce less blockchain bloat compared to Ordinals’ metadata-heavy inscriptions.
• Use Cases: Runes target fungible financial assets, while Ordinals emphasize digital art and collectibles.
• Adoption: Runes are in the early stages with expanding infrastructure, whereas Ordinals have a well-established presence.

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Bottom Line

Bitcoin Ordinals provide a completely new way to encode data directly into the Bitcoin blockchain, allowing for the creation of unique digital assets without external dependencies.

By integrating creative and technical advancements, they expand Bitcoin's capabilities beyond currency, influencing art, gaming, and metadata applications, making it a top DeFi contender to Ethereum.

The Ordinals innovation has provoked both adoption and controversy, as users explore its potential while debating its impact on Bitcoin's reliability and core ethos.