Introduction to Bitcoin Ordinals

Since the inception of non-fungible tokens (NFTs), many have begun to wonder about the connection between a random digital element and the blockchain. By 2021, NFTs gained immense popularity, generating over two billion dollars in revenue and finding a variety of uses. However, the Bitcoin (BTC) network could not cause anything due to the rigidity of the building. Other blockchain networks such as Ethereum (ETH), Polygon (MATIC) and Cardano (ADA), included the minting and trading of NFTs, among others. Satoshi Nakamoto’s cryptocurrency originally focused on improving the speed, anonymity and flexibility of financial transactions. However, many users opposed Bitcoin’s concentration on transactional activities against the multi-functionality of Ethereum, a decentralized, open-source blockchain with smart contracts.

After several agitations, Bitcoin received several fine-tuning forks, thereby increasing the diversity of the blockchain. These forks include SegWit, Bitcoin Gold, Bitcoin Diamond (BTCD), Classic, Bitcoin Cash ABC, Bitcoin Cash SV, Taproot and many others. Bitcoin ordinals, a recent upgrade developed by Casey Rodarmor, will allow users to enter metadata in images, JSON and texts in satoshis. Satoshi is a fraction of a whole Bitcoin; there are 100 million satoshis in 1 BTC. This significant fork could be the birth of NFTs that mark the world’s first cryptocurrency. Interestingly, Bitcoin ordinals work on a different mechanism than the conventional NFT. Below we will discuss how.

Bitcoin Ordinals Defined

Bitcoin ordinals, alternatively called Bitcoin NFTs, are digital assets written in satoshi. As previously mentioned, a satoshi is the lowest denomination of Bitcoin. Basically, these digital artefacts are “rates” that have been ordered and inscribed with some information. These bits of information transformed a regular satoshi into a de-facto NFT. Prior to the rise of Bitcoin ordinals, other NFT attempts on the Bitcoin blockchain include Counterparty (2014) and Stacks (2017). Bitcoin NFTs were introduced in January 2023.

How Do Bitcoin Ordinals Work?

Bitcoin ordinals arose from contention among the Bitcoin community over the monotonicity of the blockchain. The lack of diversity in the Bitcoin blockchain was caused by its meager transaction size of 80 bytes that could barely contain text messages. The upgrade implemented through SegWit and Taproot turned things around by increasing the Bitcoin transaction size to almost 4MB. These upgrades allow for a refined arrangement of transaction data.

Users can identify the sitting position according to four parameters:

• The index of set in the block.
• The index of the block in the difficulty adjustment period x/2016.
• The index of the block in halving epoch x/210,000.
• The cycle number.

This arrangement means that a preceding set is less frequent than the immediately following set. In technical terms, ordinal uses rebuilt codes as an envelope for data entered at rate.

Ordinary inscriptions

Ordinary inscriptions are metadata of digital artefacts written at rate; they do not require a sidechain or a separate token. The direct presence on the blockchain is one of the contrasts between Bitcoin NFTs and Ethereum-based NFTs. This data is stored in taproot script-path spend script under storage of 4MB.

Through a two-step process, anyone can generate an ordinary inscription. To begin with, users should create a taproot output with inscription content. After that, they can use the output to reveal the inscription content on the blockchain. The content of the inscription is shrouded in a type of no-op that does not change the script. Considering the ordinal theory, inscriptions can be transferred, traded and recovered. Ordinal theory defines satoshis (rates) as the atomic unit that can be identified and traded individually on the Bitcoin network.

Inscriptions can be purchased on Ordinal Punk’s website. Users can explore the ordinal’s Discord channel. Gamma.io, the leading marketplace on Stacks, plans to unveil a paid marketplace where users can generate and exchange captions (text or images). Oridalsbot, a product designed by the creators of Satoshible’s NFT collection, also performs similar services. Some wallets like Xverse, Hiro wallet and Sparrow wallet are currently launching support for Bitcoin NFT. A specialized wallet such as Ordwallet can receive words, create inscriptions and prevent accidental spending by freezing individual bets. To run an Ordwallet, users require a full Bitcoin node and 500 GB of disk space.

Bitcoin Ordinals vs Traditional NFTs

Bitcoin ordinals look relatively similar to traditional NFTs, intersecting in the ability to incorporate digital objects. From a more technical point of view, there are several differences between the two digital assets. Bitcoin ordinals can be found on-chain as all raw data is written directly on the blockchain. On the other hand, NFTs are minted separately as a new token that may have references to files on other blockchains.

Bitcoin currently has a hard cap of 21M total supply and a limit of 4MB. This statistic could hinder the amount of Bitcoin NFT coin if all space was used as ordinals. NFTs on other blockchains have a more flexible and expansive coin range. The Bitcoin space is uniquely different from Ethereum and has no smart contracts, decentralized exchange or easily accessible wallets. It has a poor user interface that limits trading of ordinary to over-the-counter. Ordinal trading has in any case received attention from many users.

The rarity of a traditional NFT is determined solely by the characteristics of the artwork, which always affects the asset’s price. For Bitcoin ordinals, rarity can depend on the minting order. Collectors can choose to have a torch for the first 1000 sets. It’s possible Casey Rodarmor’s “tiny pixel art” inscription of a skull, popularly known as the Genesis Block, could be worth millions of dollars in the next few years.

Finally, traditional NFT can regulate what kind of content is generated, unlike Bitcoin, a permissionless sphere where the inscription on rate cannot be censored. This means that users can freely generate permanently illegal and copyrighted content.

Bitcoin Ordinals’ Use Cases

The use cases of Bitcoin verbatim are very few at the moment. Their limited block size will significantly limit their functionality against NFT diversified use cases. For example, it is quite impossible to enter a game in a Bitcoin Ordinal due to the transaction size of 4 MB. Future exploration of Bitcoin Ordinals may revolve around the following: music, fashion, metaverse, supply chain, luxury products, and artwork.

Most Popular Bitcoin NFT Collections

In a short period of time, several Bitcoin NFT collections have appeared. Among the many, here are some popular Bitcoin NFT collections:

• Ordinal Punks – a collection of 100 NFTs minted within the first 650 inscriptions on the Bitcoin blockchain. It has a minimum bid price of 3.7 BTC and a maximum bid price of 50 BTC.
• Taproot Wizard – a creation of Udi Wertheimer consisting of an ordinary collection of hand-drawn NFT wizards.
• Bitcoin Rock – a collection of 100 limited supply NFTs with the aesthetic and spirit of Ether Rock, one of the first NFT collections on the Ethereum blockchain.
• Timechain Collection – a limited set of 21 ordinals depicting various forms of timepieces. These clocks vary in rarity such as pocket watches, old sundials, wristwatches, wall clocks, cyberpunk alarm clocks, clock towers, monolith and grandfather clocks.
• Ordinal Loops – this NFT is popularly known as Object 0; it is a rotating mathematical torus and is one of only seven similar animations in the first collection from Ordinal Loops. It was auctioned for 7,156 BTC ($156,500).

Advantages and challenges

Here are some key benefits that come with the introduction of Bitcoin ordinals. These digital artifacts will increase the use of Bitcoin, the number of users and the rate of adoption. Ordinal’s creator campaign says: “Come for the fun, rich art, stay for the decentralized digital money.” Unlike Ethereum NFT, ordinary transactions are more decentralized, immutable, well secured and transparent. Assets are directly linked to the blockchain with relatively cheaper transaction fees costing $50 for 1 million bytes.

Copyright and privacy violations can pose a serious threat to Bitcoin ordinals, thereby enabling the growth of malware. Currently, there is no regulatory mechanism on the open network. For many Bitcoin core developers, the introduction of Bitcoin ordinals has deviated from the original economic mission.

Conclusion

The creation of Bitcoin ordinals is a thoughtful and innovative development for the world’s first cryptocurrency. It has gained massive adoption from several blockchain enthusiasts and onlookers in a short span of time. Nevertheless, it must be treated with caution, since exploitation is bound to happen. Hopefully, it will expand and maximize the utility of the Bitcoin network soon.