What Are Bitcoin Ordinals? Bitcoin NFTs Explained
Bitcoin Ordinals are the newest and most hotly debated addition to the Bitcoin blockchain. For some, they represent an opportunity to integrate all kinds of new data into Bitcoin, an estimated $4.5 billion opportunity.
For others, Bitcoin Ordinals represent an inefficient addition that raises costs, weakens security, and runs contrary to the underlying ethos of Bitcoin.
The debate is ongoing, but Ordinals are here, and they are likely here to stay.
So get comfortable, and while you do, let’s lay some groundwork on what Bitcoin Ordinals NFT are, how they work, and whether they are good for the chain.
Table of Contents
What is Ordinal Bitcoin?
A Bitcoin Ordinal is a way for people to insert data, or an “inscription” of meta-data into the smallest units of a Bitcoin, called Satoshis. (SATs) This inscribed data can be images, text, sounds, or even games.
Unlike previous Bitcoin NFT projects like Stacks or Counterparty, these NFTs aren’t a layer two solution, these assets are actually inscribed into the Satoshi itself.
This development has been made possible by two updates to the Bitcoin system, the TapRoot and SegWit updates. More on these later.
Bitcoin Ordinals have increased the data-storing power of the Bitcoin chain, which could have huge implications for its future.
In a very short space of time, over 200k Bitcoin Ordinal NFTs have been minted and more than 600,000 Ordinals have been created. Leading to more rewards for miners, an increase in memory usage per block, and concerns over network speed and cost.
But what is a Bitcoin Ordinal really? For this, you need to take a look at their development.
Ordinal NFT: The Timeline
Bitcoin Ordinals can be traced back to two updates, the TapRoot Update in 2021 and the Segregated Witness, or “SegWit,” update in 2017.
Segregated Witness (SegWit)
Back in 2017, Bitcoin underwent a soft fork in its system called SegWit. The purpose of this fork was to change how transactions were carried out, by increasing each block’s capacity and speed.
The SegWit update allowed the Bitcoin system to bypass the data limits of each block and even tie in some arbitrary data, which became very important to Ordinals later on.
TapRoot was another large update released in 2021. This update furthers a lot of the developments of SegWit by grouping multiple transactions and signatures together into a more efficient system, to create greater speeds and higher data limits.
The TapRoot update is what really made Ordinals possible, as it allowed data to be stored, transmitted and importantly, categorized easily.
Bitcoin Ordinals NFT
NFT Ordinals were launched on January 20th, 2023, on the Bitcoin mainnet by Casey Rodarmor.
Ordinal refers to “ordinal theory,” in which each Satoshi is mathematically inscribed with digits that are trackable, ranked, and transferable amongst parties.
To briefly explain, Bitcoin is “fungible,” meaning that one Bitcoin is interchangeable with another.
The ordinal theory allows each SAT in a Bitcoin to be inscribed with meta-data. With ordinal theory, users are prescribing non-fungible order to each SAT mathematically, inscribing each with metadata and speculating on their value.
But without altering Bitcoin’s fungibility status.
Something worth noting is that Bitcoin Ordinals were not the intended purpose of either update. They are a by-product.
Both these updates increased the data-storing capacity of each Bitcoin block, with room for arbitrary data, thus creating a vessel for metadata. Then through ordinal theory, values can be ascribed to these vessels, making Bitcoin NFT ordinals possible.
Bitcoin NFTs: What is an Example of a Bitcoin Ordinal?
So now that we’ve covered what are Ordinals Bitcoin NFT, where can you get them? There are lots of Bitcoin Ordinal projects out there, such as Bitcoin Shrooms, Ordinal Apes, Taproot Wizards and Ordinal Loops.
But as Bitcoin Ordinals grow, we will likely see a wave of games, audio, and other forms of NFTs being etched into the Bitcoin blockchain.
What is the Difference between NFT and Bitcoin Ordinals?
NFTs on Bitcoin can be technically traced back to Rare Pepes in 2014. Ordinals however are a little different.
In the past, NFTs on Bitcoin’s blockchain were built onto the infrastructure of the Bitcoin chain, and similar to many of Ethereum’s NFTs, the actual NFT data is elsewhere.
Instead of being built onto the structures of the chain or creating a parallel chain that is paired with data, Ordinals are inscribed into the raw data of the chain itself.
How do I Buy Ordinal Bitcoins?
Xverse, Bilaxy, and Gamma are the three most popular Ordinals Finance trading platforms available.
Buying Ordinals is the same as buying NFTs or crypto on many platforms. Simply link your TapRoot-compatible wallet to a platform that sells Ordinals and buy, sell, or trade!
How Many Bitcoin Ordinals are there?
Right now the number of minted BTC Ordinals NFTs is around 200k, but the overall number of Ordinals is probably north of 640,000 and is on the rise.
Each Ordinal Bitcoin NFT is tied to an individual SAT found in a single Bitcoin. Each Bitcoin has 100,000,000 SATs. So while the number is low now, there is a lot of room for change.
But not everybody is happy about that change.
What are the Risks of Bitcoin Ordinals?
The real impact of Ordinals is yet to be seen, but skeptics have been quick to point out that Ordinals run the risk of increasing the volatility of the Bitcoin chain, driving up costs, and undermining its stability.
Adding data packets to SATs will impact the value of an integral and fundamental part of the Bitcoin blockchain. These individual SATs are the building blocks of the system, and by adding speculative assets like NFTs, some fear that you are adding highly speculative and volatile elements to a keystone of the system.
To be clear, the effects of this are theoretical for now, but it stands to reason that they could impact the chain in some unexpected ways.
Are Ordinals Good for Bitcoin?
People who see Bitcoin as a pure investment are delighted about Ordinals because they create a lot of wealth for the chain. And the early reports are promising.
Miner’s rewards have been up, Bitcoin adoption has increased, and generally, usage has improved, all of which can be reasonably tied to the release of Ordinal BTC.
However, these are early results, and the technology could well expose the chain to software weaknesses, exploits, and unanticipated bugs. For one, SATs are often used as fees automatically, which if inscribed with NFT metadata could lead to the destruction of valuable digital property.
And that’s just one technical concern, some people have issues of an ideological nature.
Bitcoin maximalists see Ordinals as sullying the ethos of Bitcoin, as outlined by Satoshi Nakamoto.
Satoshi’s work had a decidedly libertarian flavor, and he (or they) rejected ideas that contradicted this vision. It’s a matter of record that a somewhat similar idea to Ordinals was rejected by Satoshi during development, called BitDNS, for ideological reasons, even though it was known to be a value creator.
Ultimately, ordinals are here, and though the early results are promising, it’s simply too early to state whether or not ordinals are good for Bitcoin.
In this section, we are going to address some of the most frequently asked questions when it comes to Bitcoin NFTs and BTC Ordinals.
Are there Bitcoin based NFTs?
Interestingly, there have been Bitcoin NFTs since around 2014, with the original Rare Pepe Collection still being bought and sold today.
Bitcoin NFTs ordinals are a new way for the Bitcoin blockchain to have NFTs as a BTC inscription directly into the chain.
Why is Bitcoin not used in NFT?
The standard for NFT trading has long been Ethereum, as the Ethereum architecture was better able to handle the requirements of NFT trading. Things like the EVM and Smart Contracts allowed for more complex NFT trading to take place, and as such, ETH became the de facto standard.
NFT Ordinals, however, could change that.
Can You Spend NFTs?
NFTs are not currency, but they are digital assets. As assets, they can be bought, traded, and sold, and the proceeds of those actions can be spent.
So in the purest sense of the word, they cannot be “spent,” but can be used to acquire currency or crypto that most definitely can be spent.
Bitcoin NFT Explained
Bitcoin NFTs come in lots of different shapes and sizes, with Ordinals being the newest and trendiest iteration to date.
In the past, Bitcoin NFTs were either a little different from their Ethereum counterparts or built or “wrapped” into the Ethereum system. Ordinals BTC NFT are within the Bitcoin blockchain through a system of Bitcoin inscriptions.