#Crypto 360
Bitcoin Ordinals are the equivalent of non-fungible tokens (NFTs) being minted on the Bitcoin network.
➔ Bitcoin Ordinals are the equivalent of NFTs on the Bitcoin blockchain network. The data usually represents art such as images, music, etc.
➔ Bitcoin Ordinals are digital assets that are inscribed on a Satoshi which is the lowest denomination of a Bitcoin.
➔ So far, over 68 million Bitcoin Ordinals have been inscribed since November 2023.
Over 31.4 million Bitcoin (BTC) Ordinals have been inscribed since November 2023. This means that over 45% of all the Bitcoin Ordinals inscribed so far have been inscribed within the last seven months. Dune Analytics further reports that over 68.2 million Bitcoin Ordinals have been created so far, showing the new asset class's adoption pace.
Image: Total Ordinals inscriptions during Dec 2022 - July 2024, by Dune Analytics
In fact, the trading volume of Bitcoin Ordinals reached $51.14 million on 3rd March 2024, the highest since 18th December 2023. Note that this excitement was riding on the wave of the ongoing bull run that began in the anticipation of Bitcoin spot exchange-traded funds (ETFs). It gained further momentum after the introduction of ETFs in the US market.
The popularity of Ordinals can be gauged by the fact that the world’s leading auctioneer Sotheby’s added BitcoinShrooms, artist Shroomtoshi’s work on the Bitcoin Ordinals, up for auction in December 2023. Over the last few months, a number of Bitcoin Ordinals marketplaces have come up, as the excitment for the emerging assets has piqued the interest of the broader crypto and art communities.
In simple words, Bitcoin Ordinals are the equivalent of non-fungible tokens (NFTs) being minted on the Bitcoin network. But if you ask around, nobody is really sure what Bitcoin Ordinals are.
Bitcoin Ordinals are the equivalent of NFTs on the Bitcoin blockchain network. This is only an analogy as Ordinals are more than mere NFTs. Let’s quickly understand Bitcoin Ordinals in detail.
Bitcoin Ordinals are virtual assets that are inscribed on a Satoshi which is the lowest denomination of a Bitcoin. The data usually represents art such as images, music, etc. For beginners, one Bitcoin is equal to 100 million satoshis; one Satoshi is worth 0.00000001 BTC.
• Ordinals represents the order in which a Satoshi is mined on the Bitcoin network.
• Ordinals allows for extra data, other than the serial number of the order, to be added to a Satoshi.
• Users add content such as a painting or a musical composition to a Satoshi.
• This process of writing is called inscribing; the extra data, a work of art, is called an inscription.
• This way, users can create immutable and rare virtual assets, with characteristics that are similar to those of NFTs, on the Bitcoin blockchain network.
Bitcoin Ordinals are robust and resilient against cyber-attacks due to its reliance on the Bitcoin ecosystem. Since the Bitcoin ledger is large, the opportunity for creating unique and rare Ordinals is immense.
As mentioned above, Ordinals and NFTs are not completely similar.
• While both Ordinals and NFTs are tokens representing art, the data related to art is stored differently in both cases. While Ordinals save the inscribed data on the Bitcoin blockchain itself, NFTs generally have their data stored off-chain.
• While Ordinals are mined using the proof of work (PoW) consensus mechanism on the Bitcoin network, NFTs are mined using the proof of stake (PoS) mechanism on other networks such as Ethereum (ETH) or Solana (SOL). What is common to both Ordinals and NFTs is a sense of ownership regarding a unique data file. It’s like owning an original work of Frida Kahlo or M. F. Hussain.
Ordinals owe their existence to two updates on the Bitcoin network: the Segregated Witness (SegWit) in 2017, and the Taproot in 2021. The SegWit update segregated a Bitcoin transaction into two sections by adding a “witness data” section that could support arbitrary data. It created the space for additional data on a transaction on the network. The SegWit update increased the block size limit from 1 MB to 4 MB.
The Taproot update extended the limit of how much arbitrary data could be stored inside a Bitcoin transaction. The update aimed to improve the Bitcoin network’s privacy, scalability, and security. Note that none of these updates were meant to specifically make way for Ordinals as they exist now. These updates merely created a space for additional, arbitrary data that could be stored on a network.
But since there was more space for on-chain data storage, innovative developers found a way. Casey Rodarmor, a leading Bitcoinist and digital artist, theorised and popularised the Ordinal theory in 2022. In December 2022, Rodarmor created the first Ordinal, a pixel art of a skull.
Shortly after, Rodarmor launched the Ordinals Protocol on 21 January 2023. Rodarmor believes Ordinals are more than NFTs, naming them Digital Artifacts. Inscriptions quickly became popular among the members of the crypto community.
By 8 March 2023, 100,000 Inscriptions had already been created. On the same date, an anonymous developer, Domo, announced the launch of Ordinals-based BRC-20 protocol. Drawing upon the popular Ethereum-based standard ERC-20, Bitcoin Request for Comment (BRC-20) is a new entrant to the Bitcoin world.
BRC-20 tokens don’t exist on-chain but details about their creation and movement are inscribed into satoshis. Among the most popular Ordinals is the Bitcoin Shrooms Collection, a pioneer. Yuga Labs, the creator of the iconic Bored Ape Yacht Club (BAYC) NFT collection, also announced its first Bitcoin Ordinals collection in February 2023. Some of the most popular examples of Bitcoin Ordinals are:
• Taproot Wizards is a digital art collection in which each wizard was drawn onto a satoshi by a popular artist Udi Wertheimer.
• Ordinal Punks is an Ordinals collection that imitate the popular NFT collection “CryptoPunks”.
• TwelveFolds is an Ordinals collection that was created by Yuga Labs using generative artificial intelligence (AI).
We can see in the journey of Bitcoin Ordinals a desire to create a kind of NFTs that are truly decentralised in that they actually exist on a blockchain network. NFTs on other blockchains, on the other hand, exist off-chain.
It is not that Ordinals have been completely embraced by the Bitcoin community. In fact, purists have dismissed it as “bug.”
The Bitcoin network is primarily looked upon as a financial ecosystem. The existence of Ordinals dilutes this primary characteristic of the network, with many critics calling it “spam.” Bitcoin Core Developer Luke Dashjr is among the most caustic critics of Bitcoin Ordinals. He claimed that Inscriptions are exploiting a vulnerability in Bitcoin Core to spam the network.
Image: Luke Dashjr post on X (previously Twitter)
During the last week of 2023, the Bitcoin Ordinals website suffered a DDoS (distributed denial of service) spam attack. The DDoS is a spam attack on a website or a network that disrupts its normal traffic by suffocating it with an unsustainable internet traffic. When Rodarmor took to Twitter to notify his readership about the same, Dashjr was quick to jump in.
Image: Luke Dashjr commenting on X (previously Twitter)
Dashjr mocked the attack, saying he was “just pointing out the hypocrisy” even if he didn't endorse the attack. Many saw it as ironical that a network seen as “spam” by them was itself getting spammed. In fact, Dashjr had proposed a “datacarriersize” pull request in September 2023 itself. The proposal asked that all varieties of data-bearing transactions be capped, eliciting intense responses over the next few months.
In early January 2023, Andrew Chow finally ended the thread as the “controversial” request led to a “stalemate” discussion. The general understanding about the Bitcoin ecosystem is that it was built as a decentralised financial system to counter the hegemony of the centralised structure of traditional financial system. Bitcoin enthusiasts look at their system as democratic and egalitarian.
Ordinals, much like NFTs, are hyped because of their exclusivity. Bitcoin purists believe it goes against the anti-elitist ethos of the ecosystem. Critics see Ordinals as antithetical to the Bitcoin network which dilute the economic power of Bitcoin as digital gold. As more and more Inscriptions get added to the network, the allure of the network will vanish, they believe. Ordinals enthusiasts claim that Inscriptions are very much part of the financial system as they are being created to cater to the demands of the users who are willing to pay.
Enthusiasts also argue that Ordinals are readying the Bitcoin network for mass adoption. Purists should work on strengthening the network in face of this future instead of gatekeeping the Bitcoin ecosystem.
• Bitcoin Ordinals are the equivalent of NFTs on the Bitcoin blockchain. However, Ordinals are more than mere NFTs.
• Bitcoin Ordinals are virtual assets that are inscribed on a Satoshi which is the lowest denomination of a Bitcoin, thereby providing an opportunity for digital artists.
• More than 61.8 million Bitcoin Ordinals have been created so far. Over 40% of all the Bitcoin Ordinals have been inscribed within the last 4.5 months.
• Ordinals have courted controversy among Bitcoin purists as they believe that the asset, due to its ownership feature, goes against the anti-elitist ethos of the network.
The question we are concerned with is the status of Ordinals as an asset class. At this point of time, it would be wrong to dismiss Ordinals as a passing fad. But at the same time, believing them to be the biggest thing to happen to the crypto world would be a bit too much.
Ordinals have certainly shot up the transaction fee and other related metrics of the Bitcoin ecosystem. The mining community seems to love them. However, purists have criticised its exclusivist tendency as being in direct violation of what they believe to be the democratic foundation of the Bitcoin ecosystem.
Nonetheless, the fandom around Ordinals doesn’t seem to stop. BitDelta traders are recommended to follow the trends around Ordinals as they can even influence BTC’s price movement.
Bitcoin Ordinals are digital assets that are inscribed on a satoshi which is the lowest denomination of a Bitcoin. Ordinals are the equivalent of NFTs on the Bitcoin blockchain, representing art such as images, music, etc.
Casey Rodarmor, a leading Bitcoinist and digital artist, is the man behind the Ordinals theory. Rodarmor created the first Ordinal in December 2022 and launched the Ordinals Protocol in January 2023.
The purpose of Ordinals is to empower creators in making art in a truly decentralised manner in that the file exists on-chain, not off-chain.
Bitcoin Ordinals help creators make art in the form of attached unique data in a more decentralised manner than NFTs. This feature makes Bitcoin Ordinals valuable to creators and traders alike.
Over 68 million Ordinals have been inscribed since late October 2023.
Two main differences between Ordinals and NFTs are:
• While Ordinals save the inscribed data on the Bitcoin blockchain itself, NFTs have their data stored off-chain.
• While Ordinals are mined using the PoW consensus mechanism on the Bitcoin network, NFTs are mined using the PoS mechanism on other networks such as Ethereum or Solana.
Both Ordinals and NFTs provide the means of expressing art. What is common to both Ordinals and NFTs is a sense of ownership regarding a unique data file.
The block size limit for Bitcoin Ordinals is 4 MB.
Ordinals have invited criticism from several proponents of the Bitcoin ecosystem for violating the structure of the network’s decentralised financial system and going against the anti-elitist ethos of the ecosystem.
Yes, the creation and trading volume of Ordinals can influence the price movement of Bitcoin, but the impact is rather modest for now.
This article is for informational purposes only and not intended as investment or financial advice. It contains opinions and speculations that are subject to change without notice.
The author and publisher disclaim any liability for decisions made based on the content of this article. Readers are advised to conduct their own research and consult a financial advisor before making investment decisions.
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