Bitcoin Ordinals: Bringing the "fun" back to nonfungible
While much of the crypto space's attention in the past year has been focused on high-profile legal issues, regulations, and the recently-completed halving, another potentially huge development has also been coming into its own recently: Bitcoin Ordinals. "Bitcoin NFTs", as they're often described, is a fair enough overview of Ordinals, but it's also one that leaves out some of the biggest things that make them unique and potentially useful. That's why we're here to dive deeper into how Bitcoin Ordinals stand out and to share what you need to know about them as you continue to navigate the crypto space.
Satoshis and order
Before we start defining what Bitcoin Ordinals are or aren't, let's go for a quick refresher on what makes up a Bitcoin. Bitcoins are the units that hold value and are traded on the Bitcoin network. Crucially, you don't need to buy, sell, or trade full bitcoins: each one can be divided down to eight decimal points. These smallest subdivisions are called satoshis, or sats; at the time of writing, 0.00000001 BTC—one satoshi—is worth 0.00057 euros.Bitcoins are "made" by mining: specialized computers compete to be the first to correctly confirm a block of bitcoin transactions and add them to the blockchain, a worldwide ledger that anyone can check but no one can change. When a miner succeeds in adding a block, they're rewarded, appropriately enough, with a block reward (currently 3.125 BTC) of newly created bitcoins.
The sats that make up these new bitcoins are each assigned a unique number—essentially a serial number—based on the order they were created in. To greatly oversimplify, the first-ever satoshi would be encoded the number 1, the second satoshi the number 2, and the 10 billionth satoshi would have the number 10,000,000,000. These are called ordinals. Since they're an actual part of the code of each satoshi, they help the Bitcoin network keep track of where each sat is and who owns it as they move throughout the blockchain.
Bitcoin NFTs
Now we can take a closer look at the Bitcoin NFT description. As we've described in a previous article, NFT stands for "nonfungible token". These are completely unique tokens that represent another completely unique asset—whether a customized picture of an ape, a tweet, or your own pair of shoes. Users then buy, sell, and trade these tokens, and with them the ownership of whatever asset they represent. That's what nonfungible means: you can't just swap one token or asset for another since none of them are identical and each may vary in value.
For the most part, NFTs are built on blockchain platforms like Ethereum and Solana, since their flexibility make them perfect for adapting to long lists of highly unique assets. This flexibility, however, comes with the tradeoff of making it easier for hackers or scammers to get their project off the ground.
Things like paper money, coins, gold, or shares in a company, on the other hand, are fungible: you can swap one euro for another euro and you'll have the same amount of cash in hand. Bitcoin, as digital gold, is also fungible: one satoshi spends the same as any other. This fungibility, along with its time on the market and its security features, is part of what makes Bitcoin such a heavy favorite: like euros or dollars, it's widely accepted and easily exchanged for more niche currencies or goods.
Except it's not quite that straightforward. Remember the ordinal, the serial number, that comes with each satoshi? Thanks to that, they're not entirely identical. You can think of this kind of like a dollar bill with wrinkles, tears, or a stamp: they may all spend the same, but they all differ slightly in specifics that are actually, unchangeably part of the dollar bill itself.
These differences in specifics are exactly what Casey Rodarmor decided to focus on and emphasize when he rolled out the Ordinal protocol, essentially a Bitcoin upgrade, in early 2023. The Ordinal protocol essentially bridges the gap between the flexible but imperfect NFTs most of us have heard of and the secure, widely used, and reliable Bitcoin network. In this sense, we might call Bitcoin Ordinals MFTs: mostly fungible tokens.
So what can you do with Ordinals?
As we established above, Bitcoin Ordinals are similar to NFTs but better since they're part of the blockchain. And like existing NFTs, a specific Ordinal has to correspond to or represent a specific something else—it has to provide some utility. For ordinals, these something elses are called "digital artifacts", which appear mainly as "inscriptions"—uploading data onto a specific sat. This data can do a range of things:
- Publish snippets of code, images, audio, or stylesheets
- Maintain Javascript-based generative art collections
- Collect generative profile pictures where accessories and attributes are inscribed as individual images and then combined collage-style
- Remix the content of existing inscriptions.
What's important to keep in mind when it comes to things like publishing and reusing images, though, is that when they're inscribed to a sat, they're inscribed directly onto the blockchain as well. This means that the image, code, or anything else doesn't rely on additional sites to function. Many NFT users found out the hard way why this "completeness" is important: when some NFT marketplaces were shut down after the initial boom, customers were left with tokens, but no art. This can't happen with Ordinals.
Runes
Runes are another project being run by the team behind Ordinals. While they are in some ways related, they're much more complex and deserve their own deep dive. For now, they're a way to make Bitcoin-based fungible tokens using less computing resources, making them better suited to projects that need to mass-produce basic specialized tokens.
How to start working with Bitcoin Ordinals
The nice thing about Bitcoin Ordinals is that they're based on Bitcoin: you can transact and store them on many standard wallets that support Taproot addresses, just like normal Bitcoin. (Unfortunately, while our good buddies at Trezor allow you to receive Ordinal sats on their wallet, you can't see what they display on a Trezor, at least not yet.) Making your inscription also requires a mining fee, just as you would pay when making a standard BTC transaction.
After that, though, working with Bitcoin Ordinals isn't the most straightforward thing at the moment: doing so safely generally requires a Bitcoin full node and some coding knowledge. Some services are beginning to allow you to inscribe your sats relatively easily, though they can be somewhat limited and we here at Invity don't vouch for their trustworthiness. If you're really committed to getting your hands on your very own Ordinals, here's a relatively user-friendly guide from Forbes. Just remember standard online safety and to keep your keys private!
The future of Bitcoin Ordinals
Like the first wave of NFTs, Bitcoin Ordinals have been met with mixed reactions. Some praise the way they help Bitcoin to keep up with the times, adding flexibility to compete with or even do away with the sketchiness of the current NFT market. Many of the same people also point out that Ordinals add some fun back to a financial market that has, let's face it, gotten increasingly serious over the years. The comments in this video featuring Casey Rodarmor, for example, are quite supportive.
On the other hand, OG bitcoiners claim that Ordinals are a step away from Bitcoin's basic mission of providing financial freedom; some even go so far as to claim that the new protocol threatens the security and sovereignty of Bitcoin and its users.
Whatever side you come down on, Ordinals are certainly being used by their supporters—or just the cryptocurious—already. In a little over a year and a half, Ordinal-related Bitcoin transactions like runes have at times made up the majority of transactions on the Bitcoin network. Some even claim that this is the start of true Bitcoin DeFi, suggesting that the oldest crypto has once again outcompeted other blockchains.
Only time will tell if the Bitcoin community as a whole will accept Ordinals or if they'll ever reach the same level of popularity of ETH-based NFTs in 2021 and 2022.
The best way to be prepared for whatever happens with Bitcoin Ordinals is to get used to buying, selling, and moving Bitcoin safely. And the best way to do that is to start building up Bitcoin savings in the Invity mobile app, where you can stack sats in your sleep!