Bitcoin NFTs? Ordinal inscriptions explained (find, buy and more)
Bitcoin Ordinals have taken over Web3 — at least, that’s how it seems. The space has been buzzing since software engineer Casey Rodarmor launched the protocol on January 21, with some excited about the new upgrade and others curse Ordinals off completely. Despite all the notoriety, fewer than 130,000 Ordinals exist at the time of writing.
So why are Ordinals so rare? The vast majority of people simply don’t yet know how to buy them, let alone make them. With higher barriers to entry, that means potential opportunities abound. But that also means higher risk. If you’re ready to take the plunge and embrace the potential of Ordinals, we’re here to guide you on how to find, purchase and store them safely. First, it is important to understand some critical points about Ordinals that the average NFT enthusiast may not know.
What are Ordinals?
Each Bitcoin is divided into 100,000,000 units called satoshis (or sats). The new Ordinals protocol allows people operating Bitcoin nodes to enter each set of data, creating something called an Ordinal. This data on Bitcoin can include smart contracts, which in turn enable NFTs. Roughly speaking, Ordinals are NFTs you can put directly on the Bitcoin blockchain.
But it is not exact Right. That’s the brief understanding, but there are some important differences between NFTs and Ordinals.
How are Ordinals different from NFTs?
NFTs on Ethereum (or an Ethereum Virtual Machine blockchain) often point to off-chain data on the Interplanetary File System (IPFS) – a decentralized file storage system, sort of like Blockchain’s hard drive – that can be changed using dynamic metadata. To illustrate, some NFT projects update the metadata of individual NFTs to improve image quality. They can even ask holders to click the ‘update metadata’ button on OpenSea to get the new, higher quality image.
This ability to change an NFT’s metadata refers to a shortcoming Rodarmor tried to improve when he created the new protocol. In Rodarmor’s view, NFTs are “incomplete” because many require off-chain data. On the other hand, Ordinals are “complete” in that all the data is written directly onto the chain. That’s why Rodarmor refers to them as digital artifacts, not Bitcoin NFTs. Also, NFTs often have royalties attached to creators, while digital artifacts do not. According to Rodarmor, an Ordinal is “intended to reflect what NFTs should be, sometimes are, and what inscriptions always are, in their nature.”
All this to say that Ordinals on Bitcoin may not just signal a cultural change for Bitcoin – they may actually be a technical improvement on NFTs. With that as a backdrop, here’s how to buy, receive and store your first Ordinals.
The Environmental Impact of Bitcoin Ordinals
The energy consumption of large blockchains is simply enormous in scale, and Bitcoin is the largest blockchain in the world by market capitalization. Also, Bitcoin uses a proof-of-work (PoW) consensus mechanism to validate transactions and add them to the blockchain, which is an extremely energy-intensive process. Due to its size and PoW consensus mechanism, Bitcoin is leagues above other blockchains when it comes to energy needs.
In August 2022, a US government report estimated that Bitcoin accounted for 60-77 percent of global electricity use for cryptoassets. How much energy does this mean? It is difficult to determine exactly, but reports from Digiconomist indicate that the combined energy use of Bitcoin and Ethereum (prior to the historic Ethereum merger in September 2022) was over 317 TWh of energy annually, putting the chains somewhere between Italy and the UK in terms of applies to consumed electrical energy.
Yes, that’s a lot of energy. But the context is important.
Many companies and industries use more energy than land. Blockchain is far from unique in this regard. Ultimately, Bitcoin’s energy needs rank near the lower end of fairly small mining industries like copper and zinc. Bitcoin’s total annual energy consumption is also less than what the world’s residential air conditioners require and less than the energy needs of the world’s data centers (looking at you, Apple, Google and Amazon).
And before you say that artists should go back to selling their art on t-shirts for a living, note that, according to Ngan Le at Princeton, “the fashion industry is currently responsible for more annual carbon emissions than all international flights and shipping combined.”
Of course, this does not mean that blockchain and NFTs do not affect the environment. But the fiery criticism is often exaggerated and lacks the necessary context.
The most remarkable Ordinals inscriptions
The rise of Ordinals did not take long. Just weeks after they were published, fascinating collections and eye-popping sales took shape, with some individual pieces selling for hundreds of thousands of dollars. Ordinal Punks is one of the most notable projects to emerge in these early days. A tribute to CryptoPunks, Ordinal Punks is a set of 100 Bitcoin NFTs minted within the first 650 inscriptions on the Bitcoin chain – the highest numbered inscription in the collection taking place #642.
Then there’s Taproot Wizards. Starting with Inscription #652, this project is an Ordinal collection of hand-drawn NFT wizards created by the Web3 developer Udi Wertheimer. Why is this project so remarkable? It is said to be the largest block and transaction in Bitcoin’s history, coming in at a staggering 4MB.
On the other side of the coin is the Ethereum-based collection OnChainMonkey (OCM). With Inscription 20.219, the team created 10,000 Ordinals in a single inscription, making it one of the first 10,000 collections on Bitcoin. The OCM team notes that the size of the inscription is less than 20,000 bytes, making their method a scalable model for other collections to use to create NFTs on Bitcoin without clogging the network.
Nevertheless, Ordinals inscriptions are still in their infancy. As the Ordinals market matures, we are likely to see a number of other innovative collections emerge. Want to stay updated? Go here for a running list of the most innovative Bitcoin NFT artists and projects to see.
How to buy and trade Ordinals
Step 1: Get the right wallet
Until recently, there was no designated wallet interface (ala MetaMask) for those who wanted a place to store and transfer their Bitcoin Ordinals inscriptions. However, the lack of Web3 infrastructure has quickly begun to change, with three wallets recently announcing Bitcoin Ordinals-supported functionality: Ordinals Wallet, Xverse, and Hiro Wallet. While the range of functionality of these wallets is limited (with more features on the way, according to their developers), they’re a good place to start if you don’t want to deal with the logistics of setting up a separate Bitcoin wallet on your own.
If you’re not a fan of the options above, you can also set up a Bitcoin wallet that allows enough customization to receive Ordinal Inscriptions. Sparrow fits that bill, so here’s how to make it happen.
- To get started, go to Sparrow Wallet.
- Click the download link associated with your computer’s operating system.
Step 2: Set up your wallet(s)
Sparrow wallet is a desktop application that requires a handful of steps to make it compatible with Ordinals. Once you’ve downloaded Sparrow, follow this detailed tutorial on Github to create an Ordinal-compatible wallet. If you follow this guide, you should not send BTC to or from this Ordinals wallet. This wallet is for receiving Ordinals only. If you send BTC from this new Ordinals wallet, you may accidentally send both BTC and Ordinal(s).
Now that you’ve set up your wallet, you have three options to get an Ordinal:
- Run a node and enter an Ordinal yourself.
- Find an Ordinal owner and buy directly from them.
- Use a service to enter an Ordinal without running your own node.
We will not go into the technical details of running a Bitcoin node. If you’re already running your own node, we can reasonably suggest that you can figure this out yourself. Let’s focus on the other two options, remembering that this is all very new and risky. There are no major Ordinals marketplaces yet, so a lot of trust and caution is required to proceed.
Step 3a: Find Ordinals to buy
The Ordinals market is purely OTC (meaning over-the-counter or peer-to-peer) trading right now.
- To find Ordinal projects, join the Ordinal Discord channel.
- Go to the link-your-project channel and see what projects are out there.
- In that channel, collection creators connect their Discords where you can buy Ordinals.
An important note: Buying Ordinals OTC will require you to break almost every rule you’ve ever heard about not getting scammed in Web3: you might have to connect with people on Discord, send money before receiving an Ordinal, do direct transactions with other people, etc. We cannot stress enough how much caution is required here. Remember, only risk what you can afford to lose.
Step 3b: Use a service to enter an Ordinal for you
If you want to create your own Ordinal but don’t want to run a Bitcoin node, several services have already emerged to enter Ordinals for you.
These services will ask you to provide the BTC address where you wish to receive your Ordinal. You will use your address from the new Ordinal wallet you created in Sparrow. They will also give you the number of stakes you owe for the transaction plus a service fee, as well as an address to send BTC to. The transactions can range from less than $50 in BTC to several hundred dollars, depending on your file size.
If you send BTC, and this trust-heavy transaction goes according to plan, you won’t receive your Ordinal in your wallet in seconds or minutes. It may take hours or days.
Boring, risky and full of potential
As you can see, if you want to be early in the Ordinals market – like “out of bed before the rooster crows” early – you have to put together a web of tedious tasks to make it happen. But that opportunity might be worth it. Just be careful and learn what you can before venturing forward. Ready to dive deeper? We recommend going directly to the source: Rodarmor’s Ordinal Theory Handbook.
