Bitcoin Ordinals are a groundbreaking protocol that enables the numbering, identification, and inscription of information onto individual satoshis—the smallest units of bitcoin. This process effectively transforms these satoshis into non-fungible tokens (NFTs) directly on the Bitcoin blockchain.
A satoshi, often abbreviated as "sat," represents the smallest divisible unit of bitcoin, equivalent to 0.00000001 BTC. Named after Bitcoin’s mysterious creator, Satoshi Nakamoto, there will ultimately be 2.1 quadrillion sats in existence once all 21 million bitcoin are mined. Traditionally, every satoshi is fungible, meaning each unit is identical and interchangeable with any other, much like traditional currencies or other cryptocurrency units such as ETH.
The Ordinals protocol changes this by assigning a unique identifier to each satoshi based on its mining order. This numbering system allows users to track and distinguish specific sats throughout their transaction history. When these identified satoshis are inscribed with arbitrary data—such as text, images, or other digital content—they become unique digital artifacts, similar to NFTs on other blockchains but without relying on smart contracts.
Understanding Digital Artifacts and Inscriptions
The primary purpose of the Ordinals system is to support what creator Casey Rodarmor describes as digital artifacts. These are digital assets that are:
- Immutable
- Ownable
- Permissionless
- Uncensorable
- Self-contained (not relying on off-chain data)
The act of adding data to a satoshi is known as inscription. This process became feasible due to key upgrades to Bitcoin’s protocol, namely Segregated Witness (SegWit) in 2017 and Taproot in 2021. These enhancements increased Bitcoin’s data capacity, enabling more robust and efficient inscription methods.
Inscriptions are tied to a special type of taproot code, allowing for larger data storage compared to previous methods. To create or interact with inscriptions, users need to run a full Bitcoin node and use a specialized ordinal-enabled wallet.
The Evolution of Data Storage and NFTs on Bitcoin
The concept of embedding data on Bitcoin isn’t new. The genesis block itself contained a hidden message: a headline from The Times newspaper dated January 3, 2009. This established a precedent for storing arbitrary information on the blockchain.
Significant milestones in the history of Bitcoin-based digital assets include:
- Namecoin (2011): A Bitcoin fork that introduced the first blockchain-based domain name service and hosted the first visual NFT, "Quantum," in 2014.
- Colored Coins (2012): A proposal by Meni Rosenfeld to "color" certain bitcoins, distinguishing them for representing alternative currencies or real-world assets.
- Counterparty (2014): A layer-2 protocol that utilized Bitcoin’s OP_MULTISIG feature to create tokens, leading to projects like Spells of Genesis and Rare Pepes.
The explosion of NFT popularity on Ethereum-based platforms like CryptoPunks and Bored Ape Yacht Club, combined with Bitcoin’s technical upgrades, created the perfect environment for Ordinals to emerge in early 2023.
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How the Ordinals Protocol Operates
Ordinal Numbering and Notation
The protocol assigns a unique number to each satoshi based on its mining order. This identifier, known as an Ordinal, can be expressed in several formats:
- Integer: The sequential number based on creation order.
- Decimal: The satoshi’s position within its block height.
- Percentile: Its position in the entire Bitcoin supply.
- Name: An alphabetical designation (a-z) that becomes shorter over time.
Ordinals can also be described using degrees, a four-part notation that details:
- Which cycle (approximately every six halvings) the sat belongs to
- The block’s production timing relative to the last halving
- The block’s production timing relative to the last difficulty adjustment
- The satoshi’s position within its block
This comprehensive identification system helps determine each satoshi’s rarity, adding collectible aspects to certain Ordinals.
The Inscription Process
Inscribing data onto a satoshi involves linking information to a taproot script-path spend script. This method provides greater data capacity compared to previous approaches for storing arbitrary information on Bitcoin.
The inscription process permanently associates the data with a specific satoshi, creating a digital artifact that can be tracked, traded, and owned while maintaining all the security and decentralization properties of the Bitcoin network.
Ordinals Versus Traditional NFTs
While Ordinals function similarly to NFTs on other blockchains, they differ in several important ways:
- No Smart Contracts: Ordinals don’t require smart contracts to function, relying instead on Bitcoin’s native capabilities.
- Native Assets: Inscribed satoshis are genuine bitcoin units, not separate tokens created on top of the blockchain.
- Maintained Fungibility: Technically, inscribed satoshis can still be spent like regular bitcoin, though most users treat them as collectibles.
Think of Ordinals theory as a specialized lens through which to view the Bitcoin blockchain—one that reveals additional information and properties attached to individual satoshis.
BRC-20: Fungible Tokens on Bitcoin
In addition to non-fungible Ordinals, the protocol enables the creation of fungible tokens through the BRC-20 standard. This token standard works by inscribing JSON code onto satoshis, describing token attributes such as:
- Total supply
- Maximum minting capacity
- Unique ticker symbol
Despite its name referencing Ethereum’s ERC-20 standard, BRC-20 tokens don’t offer the same smart contract capabilities due to Bitcoin’s intentionally limited programmability. However, they do provide a method for creating and managing tokenized assets on Bitcoin using Ordinal-enabled wallets.
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Practical Applications of Bitcoin Ordinals
The Ordinals ecosystem has experienced rapid growth since its inception. The first ordinal was inscribed on a satoshi from 2014, and by April 2023, over 1 million Ordinals had been created, generating more than 172 Bitcoin in transaction fees (approximately $5 million at the time).
Current use cases include:
- Cross-chain NFT migration: Many popular NFT collections from Ethereum and other chains have been ported to Bitcoin as Ordinals, including Bitcoin Punks, Ordinal Punks, and BTC DeGods.
- Original collections: Unique projects like Bitcoin Rocks and Pixel Pepes (a homage to Rare Pepes) have emerged as Bitcoin-native collections.
- Generative art: Established players like Yuga Labs (creator of Bored Ape Yacht Club) have launched generative art projects using Ordinals.
While early adoption has focused largely on recreating existing NFT projects on Bitcoin, unique applications continue to emerge as the technology evolves.
Frequently Asked Questions
What exactly is a Bitcoin Ordinal?
A Bitcoin Ordinal is a specific satoshi (the smallest unit of bitcoin) that has been assigned a unique identifier based on when it was mined. When inscribed with data, it gains characteristics similar to NFTs on other blockchains.
How do Ordinals differ from traditional NFTs?
Unlike most NFTs that rely on smart contracts on platforms like Ethereum, Ordinals are native to the Bitcoin blockchain. They don't create new tokens but instead add metadata to existing satoshis, maintaining Bitcoin's security and decentralization.
What do I need to create or interact with Ordinals?
You'll need to run a full Bitcoin node and use a special ordinal-enabled wallet. This requirement ensures full verification of the blockchain and compatibility with the Ordinals protocol.
Can inscribed satoshis still be spent as regular bitcoin?
Technically yes, since the inscription doesn't change the fundamental nature of the satoshi. However, most users treat inscribed satoshis as collectibles rather than spending them as regular currency.
What types of content can be inscribed on Ordinals?
You can inscribe various digital content including images, text, JSON code (for BRC-20 tokens), and other data formats. The content is permanently stored on the Bitcoin blockchain.
Are Ordinals and BRC-20 tokens the same thing?
No. Ordinals typically refer to non-fungible digital artifacts, while BRC-20 is a standard for creating fungible tokens using the same inscription technology.
Key Takeaways: Bitcoin Ordinals Essentials
- Bitcoin Ordinals enable the identification and tracking of individual satoshis through a numbering system based on mining order.
- Inscribing data onto these numbered satoshis creates digital artifacts with functionality similar to NFTs but without smart contracts.
- The technology builds upon Bitcoin's historical capacity for storing arbitrary data while introducing new efficiency and capabilities.
- Ordinals represent both a continuation of Bitcoin's innovative spirit and a new frontier for digital collectibles on the world's most secure blockchain.
- The ecosystem continues to evolve with both non-fungible Ordinals and fungible BRC-20 tokens expanding Bitcoin's utility beyond simple currency.