Bitcoin Ordinals: Everything You Need to Know
If you think Bitcoin doesn’t have NFTs, think again! Bitcoin Ordinals have ushered in a new era of on-chain Bitcoin NFTs, called inscriptions, that are making waves in the world of NFTs.
Read on to discover what Bitcoin Ordinals are, how they work, and how you can buy them.
What exactly are Ordinals?
Ordinals, created by Bitcoin developer Casey Rodarmor, is a term widely used to describe a new type of non-fungible token (NFT) native to Bitcoin.
This new way of deploying NFTs on Bitcoin directly has been making headlines since launching in January 2023. A Galaxy Research report is now predicting that these Bitcoin-native NFTs will acquire a market size worth $4.5 billion by 2025.
Ordinal inscriptions enable the creation of “digital artifacts,” which is what this new type of NFT is actually called. But they aren’t your ordinary NFTs. Digital artifacts actually “live” on-chain and are arguably more complex than “traditional” NFTs. Moreover, they show that Bitcoin can be more than digital gold and censorship-resistant digital money.
While not everyone in the Bitcoin community is happy that these NFTs are taking up block space, which will arguably be needed for Bitcoin to attain global adoption as a form of money, a lot of people are excited that Bitcoin has become more fun and dynamic since the launch of Ordinals NFTs.
How Bitcoin Ordinals NFTs Work
Now, let’s take a look at how Ordinal Theory has led to the ability to create Bitcoin inscriptions, which can be used to record NFTs on the Bitcoin blockchain.
Ordinal Theory
Rodarmor has proposed ordinal theory, a methodology that allows people to track and transfer individual satoshis. A satoshi (sat) is 100 millionth of a bitcoin and is the smallest unit in existence.
In Ordinal Theory, each sat since the launch of Bitcoin until now is assigned an ordinal number beginning from 0 in the sequence in which it was mined and transferred from transaction inputs to outputs. The numbers used are ordinal numbers from a mathematical perspective — numbers that denote the precise position of something. Such numbers are also called ordinals, hence the name Ordinals NFTs.
Inscribing
Through a process called inscribing, you can attach images, GIFs, and text to a sat to create an inscription. You need the ord open-source software and a Bitcoin node to inscribe sats.
Ord implements the numbering scheme as per the ordinal theory’s methodology. That means the serializing of sats doesn’t actually happen at the Bitcoin protocol level, and the on-chain footprint doesn’t exist. Nonetheless, Ordinals transactions are confirmed and recorded on the Bitcoin blockchain.
Keep in mind that the Ordinals project hasn’t made any changes to Bitcoin or created a different blockchain to make Bitcoin-native NFTs possible. It is worth mentioning, though, that the integration of Taproot is beneficial for the operation of Ordinals.
Inscribed content is permanent and cannot be altered. Inscriptions are Bitcoin native digital artifacts, which the community has decided to refer to as NFTs.
However, digital artifacts are on-chain, unrestricted, and decentralized. Therefore, an NFT cannot qualify as a digital artifact if it doesn’t fit this description. That means most of the NFTs in the market aren’t digital artifacts since they store their data off-chain through cloud storage service providers, whom they have to trust (at their own risk) to keep the information safe.
Using Ordinal Theory, someone can identify and track the movement and ownership of an inscribed sat. They can also send it to a normal Bitcoin address as long as it’s Taproot-enabled. This makes inscriptions easy to buy and sell. The perceived value of inscribed sats may also change, giving the individual sat some form of rarity.
Storage of Data
The witness section of a Bitcoin transaction holds the content that someone inscribes to a single sat. This section exists thanks to the 2017 Segregated Witness (SegWit) soft fork that separated the structure of a Bitcoin transaction into a transaction as well as a witness part to enhance the efficiency of data storage.
Another Bitcoin soft fork, Taproot, improved on the SegWit upgrade by eliminating data storage caps in blocks when it went live in November 2021. This means that inscriptions of almost 4 MB in size are possible. This is the reason why many Bitcoin maximalists are against Ordinals because they don’t want inscribed content competing with Bitcoin transactions for block space.
Large blocks can raise transaction fees, and miners may, therefore, choose Ordinals transactions over standard payment transactions. Higher fees mean better incentives for miners. As a result, some Bitcoin community members worry that if Ordinals transactions price out regular Bitcoin transactions, people will have to pay miners more when they want their transactions to be prioritized. Alternatively, people may decide to move to other blockchains, which is not what a network that aims to be the future of money wants.
Ordinal Rarity
The trackable and transferable nature of Bitcoin Ordinals potentially makes them appealing collectibles, with rarity being a key factor in determining their desirability.
For Bitcoin Ordinals collectors looking for guidance on how to identify rare sats, here are a few potentially rarity-influencing factors to consider.
Bitcoin’s periodic events provide a natural system for rarity, with varying frequencies of occurrence. Examples include
- new block mining, which happens roughly every 10 minutes;
- difficulty adjustments that take place every 2016 blocks (around every two weeks);
- and halvings that occur after every 210,000 blocks (approximately every four years), resulting in a reduction in new sats created.
So, for example, Ordinal collectors may want to acquire the first satoshi - in the form of an Ordinal - after a halving event, as it could be considered more valuable than other satoshis. Therefore, Ordinal buyers building a collection of inscriptions may look for specific rare Ordinals to potentially increase the value of their collection.
Moreover, Ordinals could also hold value beyond just their rarity or name. This could be due to unique qualities of the number itself, such as having an integer square or cube root, or it could be linked to a significant event in Bitcoin’s history. For example, Bitcoin ordinals from block 477,120, which marked the activation of SegWit, or ordinal 2099999997689999°, the last ordinal that will ever be mined, could potentially carry significant value for collectors in the Bitcoin community.
Rodarmor refers to such ordinals as “exotic,” and their classification is subjective. Bitcoin Ordinals collectors are encouraged to explore exotics based on their own criteria and preferences.
Are Bitcoin Ordinal NFTs also available on other chains?
Bitcoin Ordinal NFTs are 100% native to the Bitcoin blockchain. They “live” on the Bitcoin blockchain, benefiting from its powerful proof-of-work security and high degree of decentralization.
However, Ordinals could work on the Ethereum blockchain as wrapped versions. Moreover, Ordinals could even work on blockchains that forked from Bitcoin.
Vaulting your Bitcoin Ordinal NFT inside an Emblem Vault makes it compatible with the Ethereum blockchain. As a result, you can trade the wrapped version of your Bitcoin Ordinal on a popular NFT marketplace like OpenSea that doesn’t (yet) support the Bitcoin blockchain.
Emblem Vault is a tokenized multi-asset wallet on the Ethereum blockchain that enables people to trade NFTs from other chains.
The vault contains the private keys to the Bitcoin wallet holding the Ordinal inscription. That means your Ordinal remains on the Bitcoin blockchain while the vault creates a new version of this NFT that’s compatible with Ethereum.
Developers have also played around with Ordinal Theory on other blockchains to piggyback off the success of Bitcoin Ordinals. However, looking at the current developments in the Ordinals NFT market, it seems that the fact that they “live” on the world’s most secure and decentralized blockchain - the Bitcoin network - is what makes crypto collective enthusiasts so excited about them.
Are Ordinals just Bitcoin NFTs?
Ordinal Theory denotes each sat with a number, and inscriptions enable anyone to attach value to a specific satoshi. This enables the creation of crypto collectibles, which Ordinals creator Rodarmor dubbed digital artifacts directly on the Bitcoin blockchain, opening up a market for Bitcoin NFTs.
However, ordinals could also be used to create security tokens or stablecoins on the Bitcoin blockchain as different types of assets (not just NFTs) could be inscribed on individual satoshis thanks to Ordinal Theory.
How to buy Bitcoin Ordinals NFTs
Now, let’s take a look at how you can get your hands on Bitcoin Ordinal NFTs.
Research projects creating Ordinals NFTs
More and more projects are creating ordinal NFTs, so start by looking for these projects. Some popular projects you can explore are Ordinal Punks, Ord Rocks, Timechain Collectibles, TwelveFold, and Taproot Wizards. Examine their collections, Discord discussions, and prices to determine which project speaks to you.
Get a wallet
Once you have found a creation you want to own, get a Taproot-enabled Bitcoin wallet if you don’t have one already.
Find a marketplace
At the time of writing, Bitcoin Ordinals were not trading on many platforms since they are relatively new to the market. However, you can find trading activity on the Discord servers of the individual Bitcoin NFT projects.
To facilitate trading, projects with Ordinals collections have organized trading on their Discord servers, allowing buyers and sellers to trade easily. They also have systems in place that permit sellers to create their ask prices and for buyers to place their bids.
For instance, this Ordinal Punks’ Google Sheet lists various ask prices and bids from traders. Make sure to also follow the trading rules provided by the NFT project to avoid getting scammed.
Furthermore, some Ordinal inscriptions are trading on OpenSea, thanks to Emblem Vault. But buyers have to ensure that the BTC address in the vault is the same as the Bitcoin address recorded on the Ordinals website.
Some projects are selling their collections through auctions. In this case, note the auction dates and prepare for your involvement in advance. Bored Ape Yacht Club (BAYC) creators Yuga Labs, for example, held an auction for its Bitcoin Ordinals NFT collection - called TwelveFold - that sold $16.5 million worth of Bitcoin NFTs within 24 hours, with the highest bidder paying $161,000 in BTC.
Buy an Inscription
Go ahead and purchase your favorite inscription on a project’s Discord server or via an auction. Only complete the transaction if you believe in the NFT project, the inscription value, and the fairness of the price.
Can you buy Ordinals with Trust Wallet?
Trust Wallet doesn’t currently support Ordinals NFTs. That means you cannot buy, sell, or store Bitcoin Ordinals using Trust Wallet. However, this may change in the future should Ordinals become an integral part of the wider web3 ecosystem.
Used by over 60 million people worldwide, Trust Wallet mobile is an easy-to-use, true multi-chain self-custody wallet, which allows you to store and manage over 9 million crypto assets including NFTs across 70 blockchains. Trust Wallet gives you the ability to natively buy, swap, and stake your favorite cryptos without having to leave the app, as well as connect to thousands of Web3 dApps safely with the in-built dApp browser.
What’s next for Ordinals?
If over 370,000 inscriptions created in less than two months is anything to go by, we may see the number of inscriptions increase beyond the one million mark very soon. Increased interest could also mean that more NFT marketplaces will start to support the Ordinals trading, which will likely create a thriving market for crypto collectibles on Bitcoin.
Furthermore, Ordinals could receive added functions and features in the future. For instance, Rodarmor writes it could be possible to give future inscriptions human-readable names. We may also see Bitcoin hard forks embracing Ordinals in the future as they compete with Bitcoin to become the better, go-to NFT platforms.