What are Bitcoin Ordinals?
Bitcoin ordinals have gained a lot of interest over the past few months. But what is an Ordinal? In short, an ordinal is an inscription in the Bitcoin blockchain that will make it forever accessible and unchanged. An inscription can be anything: an image, a text, or a video. It is similar to an NFT but for the Bitcoin network. It is also different in that instead of being minted, the digital file is inscribed to a satoshi, the smallest unit of Bitcoin. 1 Bitcoin is equal to 100 million satoshis. Inscribing an ordinal on the Bitcoin blockchain is made possible by the SegWit and Taproot updates.
Ordinals were launched on the Bitcoin blockchain by developer Casey Rodarmor in January 2023. Although there are already attempts to make NFT on the Bitcoin main net, these attempts are usually made on Layer-2 networks (L2) on top of Bitcoin. Examples of these L2 are Counterparty and Stacks, each with its own NFT architecture. On the other hand, Ordinals are attached to individual satoshis rather than a Layer 2 protocol. It does this by using the so-called Ordinal theory.
What is the Ordinal theory?
The Ordinal theory is a system of ordering satoshis that makes them non-fungible. By numbering each satoshi, there will be a unique ID for every single satoshi on the Bitcoin blockchain. At its core, an ordinal is a satoshi uniquely numbered based on the order in which they are mined. The Bitcoin protocol itself does not recognize this ordering of satoshis. Rather, the ordinal community has decided to value this numbering mechanism collectively.
What are NFTs?
NFTs, or Non-Fungible Tokens, are unique digital identifiers recorded in the blockchain network. Think of NFTs as a certificate of authenticity for digital products. The interest in NFTs soared during the crypto boom in 2021. Some of the most famous NFTs include collections like Bored Ape Yacht Club and the NFTs of artist Beeple. These collections are on the Ethereum blockchain.
How are Bitcoin Ordinals different from traditional NFT
Ordinals are different from the typical Ethereum-blockchain NFTs in some ways. Here are some of the key differences:
Bitcoin Ordinals are much more limited than the Ethereum or Solana NFTs. The size of data that can be inscribed in a block is lower, and the cost to create an inscription is higher than the traditional NFTs.
Smart contract compatibility
The Bitcoin blockchain is not smart-contract compatible. Hence, developers won’t be able to build smart contracts-powered applications, also known as decentralized applications. Smart contracts are written in programming languages like Solidity.
Are Bitcoin Ordinals a new use case for Bitcoin?
Although it is still early to tell, many prominent figures are skeptical about the future of Ordinal. For example, some argue that inscriptions are a waste because they consume space that can be used for financial transactions. Another concern is fungibility; inscribing a satoshi would mean that not all satoshi have equal value, making it non-fungible. Because of these reasons, some people from the Bitcoin community oppose ordinals.