Bitcoin Ordinals are a protocol introduced by Casey Rodarmor in January 2023, which enables data to be inscribed on Bitcoin’s blockchain by embedding content in transaction witnesses. This technology allows for the creation of unique digital artifacts, such as non-fungible tokens (NFTs), digital collectibles, and other assets, tracked using Ordinal Theory to assign an order to individual satoshis on the Bitcoin blockchain.
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By allowing data inscription onto Bitcoin, Ordinals facilitate the creation of digital assets on the timechain that is most secure, immutable, and decentralized. This extends Bitcoin’s functionality to include digital art, collectibles, gaming assets, and more, leveraging the blockchain’s robust security and decentralized nature.
History of Bitcoin Ordinals
The development of Bitcoin Ordinals was influenced by several key advancements in the Bitcoin network. The Segregated Witness (SegWit) upgrade in 2017 separated signature data from transaction data, increasing the capacity of each block and paving the way for more complex transactions. The Taproot upgrade in 2021 further enhanced Bitcoin’s scripting capabilities and privacy features, making it easier to encode complex data into transactions. Building on these upgrades.
Bitcoin Ordinals, it should be noted, share some similarities with colored coins, a concept from Bitcoin’s early history. Both mechanisms aim to enhance Bitcoin’s nonmonetary utility by allowing additional information to be associated with individual Bitcoin UTXOs, enabling the creation of assets beyond currency.
Ordinal Theory
Ordinal Theory is a concept that assigns unique serial numbers, known as ordinal numbers, to individual satoshis, the smallest units of bitcoin. This allows for the tracking and transferring of individual satoshis. These ordinal numbers are based on the order in which the satoshis are mined and are transferred through transactions in a first-in-first-out manner. This system relies on the inherent order within the Bitcoin network — the order of mining and the sequence of transaction inputs and outputs, hence the name “ordinals.”
Ordinals can be represented in several ways:
- Integer Notation: A straightforward numerical representation based on the order of mining, e.g., 2099994106992659.
- Decimal Notation: Combines the block height and the offset of the satoshi within the block, e.g., 3891094.16797.
- Degree Notation: Uses a degree-like format to indicate the block height and position, e.g., 3°111094′214″16797‴.
- Percentile Notation: Expresses the satoshi’s position as a percentage of Bitcoin’s total supply, e.g., 99.99971949060254%.
- Name: An encoding using characters a through z to create a more human-readable identifier.
One of the key components of Ordinal Theory is that it does not require any changes to Bitcoin’s existing protocol, no new tokens, and no additional blockchains. It operates entirely within the current Bitcoin framework. This makes it immediately usable and highly compatible with the existing Bitcoin ecosystem.
The application of ordinal numbers enables the attachment of arbitrary assets — such as NFTs, security tokens, accounts, or stablecoins — to specific satoshis, using these numbers as stable identifiers. This opens up a wide range of possibilities for creating and managing digital assets on the Bitcoin blockchain.
Ordinal Theory is supported by an open-source project, which includes a Bitcoin Improvement Proposal (BIP) describing the ordinal scheme, an index tracking the location of all satoshis, a wallet for ordinal-aware transactions, a block explorer for viewing ordinals, and tools for inscribing digital artifacts onto satoshis. This comprehensive suite of tools facilitates the use of ordinals in various applications, from creating digital art to managing complex financial instruments.
You can read more about Ordinal Theory on Ordinals.com.
How Bitcoin Ordinals Work
The Ordinals protocol assigns a unique serial number, or ordinal, to each satoshi based on its position in the blockchain. This ordinal can then be inscribed with additional data, such as text, images, or other digital content. The inscription process involves creating a Bitcoin transaction with an OP_RETURN output, which allows users to embed data into the blockchain. Once inscribed, the data becomes a permanent part of the Bitcoin blockchain, inheriting its security and immutability.
The process is basically as follows:
- Assignment: Each satoshi is assigned a unique ordinal number based on its order of creation.
- Inscription: Data is inscribed onto the satoshi using the OP_RETURN opcode in a Bitcoin transaction.
- Transfer: The inscribed satoshi can be transferred between users like any other Bitcoin transaction.
How to Mint an Ordinal
To mint an ordinal, follow these steps:
- Acquire Bitcoin: Ensure you have some bitcoin in a wallet that supports Ordinals, such as Unisat or Ledger Wallets.
- Choose a Platform: Use a platform that supports Ordinal inscriptions, such as specific wallets or online services.
- Create Inscription: Prepare the data you want to inscribe (e.g., text, image, audio) and create a Bitcoin transaction that includes this data in the OP_RETURN field.
- Submit Transaction: Submit the transaction to the Bitcoin network. Once confirmed, your data is inscribed onto the selected satoshi, and the ordinal is minted.
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How to Sell or Trade Ordinals
- List on Marketplace: Use an Ordinals-compatible marketplace to list your inscribed satoshis.
- Set Price: Determine the price for your ordinal based on rarity, content, and market demand.
- Transfer Ownership: When a buyer purchases your ordinal, initiate a Bitcoin transaction to transfer the inscribed satoshi to the buyer’s wallet.
- Receive Payment: Complete the transaction and receive payment in bitcoin or another agreed-upon currency.
Ordinals vs NFTs
While both Ordinals and NFTs allow for the creation of unique digital assets, there are key differences:
- Blockchain: Ordinals are created on the Bitcoin blockchain, whereas most NFTs are created on inferior blockchains like Ethereum or Solana.
- Data Storage: Ordinals inscribe data directly onto the blockchain, ensuring permanence and security. Traditional NFTs often store data off-chain, with only a reference link (URL) on the blockchain.
- Security: Ordinals benefit from Bitcoin’s robust security features, making them less susceptible to tampering compared to some NFTs on less secure blockchains.
Ordinals are Controversial
Ordinals have sparked debate within the Bitcoin community. Critics argue that inscribing data onto satoshis is basically spam, as they clog the blockchain with non-transactional data, increasing transaction fees and congestion. Supporters believe that Ordinals enhance Bitcoin’s utility and unlock new use cases, which in turn will attract new users and developers back to Bitcoin.
Practical Applications
The versatility of Bitcoin Ordinals opens up a myriad of practical applications across various domains. By inscribing data directly onto individual satoshis, Bitcoin Ordinals enable the creation of unique digital assets that are securely stored on the blockchain.
Digital Art: Artists can create unique digital artworks inscribed onto individual satoshis, creating a new form of NFTs on the Bitcoin blockchain. Unlike traditional NFTs, which often point to external URLs, Bitcoin Ordinals ensure that the digital content is securely stored on the blockchain itself.
Collectibles: Collectors can inscribe unique metadata onto satoshis, creating digital collectibles with verifiable ownership and provenance. The rarity of the satoshi, based on when and how it was mined, can add additional value to these collectibles.
Gaming: Game developers can use ordinals to create in-game assets and items that are securely stored and traded on the Bitcoin blockchain. This provides a new layer of security and permanence for digital assets within the gaming industry.
Personal Data: Users can inscribe personal data such as important documents, images, or even audio files onto satoshis. This data is then securely stored on the Bitcoin blockchain, ensuring it is immutable and accessible without relying on third-party services.
Attributes and Recursions: Advanced uses of ordinals include attributes, where specific traits or icons are associated with a satoshi, and recursions, which allow for creating more complex digital artifacts by referencing previous inscriptions. This can lead to innovative projects such as dynamic digital art and large-scale collaborative pieces.
Closing thoughts
Ordinals have certainly upended blockchain art by enabling a novel method of storing information on Bitcoin. This innovation enhances Bitcoin’s utility and has contributed to the number of non-zero Bitcoin addresses reaching an all-time high. We are bearing witness to a pivotal moment in Bitcoin history where creativity and technological advancement are driving network activity beyond traditional investment and monetary transfer use cases. Whether Ordinals will continue to grow or remain prominent remains to be seen.
