Ordinal inscriptions are essentially NFTs on the Bitcoin but with a few caveats. The amount of inscriptions using ordinals on bitcoin has skyrocketed in the past few weeks. You can consider ordinals to be like serial numbers for tiny units of bitcoin called satoshis. Ordinals simply help keep track of each satoshi's unique identity, which makes it easier for them to move around. When satoshis are created, they’re numbered in the order they are mined, and when they are transferred from one transaction to another in the same order.
Defining Satoshis: The smallest denomination of the cryptocurrency Bitcoin, named after Bitcoin’s founder Satoshi Nakamoto. Each Bitcoin is equivalent to a staggering 100,000,000 sats.
The name “Ordinals” stems from the word “order” because both the numbering and transfer schemes rely on an ordered system, where the order in which satoshis are mined and transferred follows the sequence of transaction inputs and outputs.
The ordinals protocol has enabled users the ability to send and receive sats that have the added benefit of optional, supplementary data. This data can include text, JPEGs, audio files, or videos. This information or data can then be inscribed to a satoshi, resulting in what is known as a Bitcoin NFT or ordinal. While Bitcoin ordinals are akin to NFTs, there are some stark differences between these two creations. For example, most NFTs emerge from smart contracts, with the assets being hosted elsewhere.
Usually, NFTs are stored in decentralized storage systems like IPFS that contain these files, videos, and artworks. In contrast, ordinals are directly inscribed into the satoshi and are therefore saved on-chain. This in principle means that these Bitcoin NFTs are validated alongside other transactions in blocks that are stored within the network’s distributed ledger. Conventional NFTs are issued with metadata that affords creators the ability to alter the qualities and traits of an NFT. For example, certain NFT initiatives could allow users to update their metadata to furnish their NFTs with superior-quality images.
What’s the difference between ordinal inscriptions versus NFTs? The Crypto Times put it best, “Ordinal inscriptions are NFTs on Bitcoin that store data on-chain.”
In a way, ordinals and NFTs can be described interchangeably. It’s important to clarify that the founder of ordinals has said something along the lines of “ordinals are what we should want NFTs to aspire to become.” While they share some similarities, there are some notable differences between them. An ordinal inscription denotes exclusive digital artifacts stored on the Bitcoin blockchain, upheld by various platforms such as the Ordinals wallet. In contrast, NFTs more generally happen to be digital ownership certificates that enable collectors to verify possession of digital content.
The key difference to keep in mind here is that ordinals do not offer creators the ability to earn royalties on future sales, which is a major upside that traditional NFTs currently offer.
The creator of ordinals is Casey Rodarmor, according to him, ordinals are a flexible convention that users can choose to adopt. He emphasizes that it is not an integral feature in the Bitcoin system, rather it is a tool that empowers users to create unique histories for individual satoshis, imbue them with value, and even assign them names. Fundamentally, it allows users to view the blockchain through the lens of individual satoshis and track this movement from one Unspent Transaction Output (UTXO) to the next.
Ordinals boast that due to their on-chain storage, the data is immutable and cannot be altered. Furthermore, they lack the royalty option for creators that is available in NFTs. And so, ordinals represent wholly unchangeable digital artifacts that are residing completely on-chain. The creator of the ordinals protocol, Casey Rodarmor, views ordinals as the avant-garde version of what an NFT should represent or symbolize. Ordinals have already begun instigating a movement in the Bitcoin sphere because its greater functionality has allowed for more reach of the globe’s most significant digital currency.
One of the first and most significant ordinal digital artifacts was Mike Winkelmann’s (a.k.a Beeple) $69 million NFT that was put on public display back in March 2021 at the NYC Dreamverse event. Which was eventually sold at this price at the famous 255-year-old Auction House known as Christie’s. Initially, Beeple created this piece using Adobe After Effects and Adobe illustrator during the early stages of this project. Then, he progressed to using more sophisticated tools like MAXON Cinema 4D and OTOY Octane Render to augment his digital art. It’s an affirmation of the validity of Winklemann’s highly valued artwork and Bitcoin ordinals technological application.
The digital artwork entitled “Everydays - The First 5000 Days” comprises a collection of images posted by Beeple online since 2007
Following the introduction of ordinals, it has been responsible for a sharp increase in Bitcoin transactions. It also revived debates surrounding the contentious issue of Bitcoin scaling within the cryptocurrency community. According to Dune Analytics, over 197,000 singular inscriptions, referring to individual tokens on the ordinals platform have been completed so far. This rapid success of ordinals has become clear to investors and enthusiasts that the time is now to capitalize on the growing popularity of cryptocurrencies.
Here’s a breakdown showing gains in ordinals popularity:
Here’s a breakdown of the ordinals inscriptions by type:
The types of inscriptions users are choosing (source: Chainlink blog)
All of the NFTs contained in the Bitcoin network has migrated mainly to the Liquid Side Chain, necessitating a wallet that would be compatible with this chain. The bulk of NFTs are tokens formed using a smart contract, which is reliant on a Turing complete scripting language that is not supported by the base chain of Bitcoin. Bitcoin has been prevented from being considered in the rise of NFT trends for a while and was kept from breaking into the mainstream cryptocurrency market.
Since sats can be sent to any address at any time, even those with some public history, they have to be seen as fungible with other sats without a history. In some ways, people may view the ordinal satoshi to be indistinguishable from a standard one to the bitcoin blockchain, as people have their own opinions and biases associated with this. As an example, if an ordinal contains personal information that an individual wishes to keep private, the corresponding satoshi could be viewed as tainted, compromising fungibility within the network.
Looking to the future, ordinals represent a new way of imbuing individual satoshis with unique identities and histories that make them more valuable and traceable. While ordinals have similarities to NFTs, they have the added benefit of on-chain storage, ensuring data immutability, and lacking royalty options for creations. Which could bring about a new wave of creativity in the world of Bitcoin and digital art. Ordinals simply could revolutionize the way we conceptualize ownership and the value of individual units for Bitcoin.