Ordinals? Inscriptions? Whats happening on BTC?
Historically, the first bitcoin blockchain based NFTs were created in 2014 by Counterparty. The core issue was what’s called OP_RETURN, a function that can be used to store arbitrary data in the blockchain. In 2014 Bitcoin only had a limit of 40 bytes which later became 80 bytes in 2016. However with the Segwitt upgrade in 2016 and later the Taproot upgrade in 2021 it became 85% cheaper to store data on the blockchain and in a single transaction. As a result, anyone can now store as much data on the Bitcoin Blockchain as they like with this function as long as they’re willing to pay for it and the total block size remains under 4MB.
Ordinal numbers are any number that defines an order in a set. As a result an ordinal non-fungible-token refers to an NFT that is assigned a unique ranking. In this case, the ordinal is the unspent transaction output (UTXO) for a specific Satoshi. What are UTXOs? It's the technical word for the amount of digital currency remaining after a transaction and it is used to give every satoshi a number on the order in which it was mined.
What Stands out about Ordinal NFT's
- Ordinals are native to the bitcoin blockchain so they do not require a new token to function. The NFTs are connected to individual Satoshis and the ordinal marks them as special transactions so that users can identify them. That's different from Ethereum, where NFTs are more natively supported and each one has its own token.
- The inscriptions (image, audio or HTML) of the NFT is actually minted on the blockchain. The individual Satoshis that the NFT is connected to holds the inscriptions. Rather than with Ethereum whereby the blockchain is simply linked to some image that’s stored on an external website. Overall, inscriptions stored on-chain enhance the credibility and legitimacy of the NFT.
Inscribed satoshis are still fungible with other satoshis on-chain, meaning that they can be spent the same as other satoshis. Right now, you can only inscribe a satoshi once, but Rodarmor (a developer) is working on an update that will allow users to re-inscribe previously inscribed satoshis.
How does this benefit Miners?
- Miners can now profit from rare Satoshis that they sell depending on the ordinal of the Satoshi.
- When the number of ordinal NFTs increases in circulation this will drive up congestion and transactions fees which is the main source of revenue for miners.
How can you create Ordinals?
The first step in the creation of Ordinals is users downloading Bitcoin core and syncing the node to the blockchain. After the sync is completed, the next step is to create an ordinals wallet and send some satoshis to the wallet in order to inscribe inscriptions within the satoshi.
New and improved methods of adding inscriptions to Bitcoin are currently being developed. To make the process of creating ordinal inscriptions more convenient for collectors, Gamma, a Bitcoin NFT marketplace, has introduced a paid service that enables users to add images and text seamlessly. Other projects, such as Oridalsbot from the Satoshibles NFT collection creators, also offer this service to users.
In conclusion, many Bitcoin maximalists debate that inscriptions will bloat, block space and crowd out more trivial economic transactions like normal transfers. However, ordinal NFTs on the Bitcoin blockchain are a unique and innovative way to verify the ownership and scarcity of one-of-a-kind digital items. With the added security and transparency provided by the Bitcoin blockchain, and the ability to easily buy, sell, and trade NFTs on various marketplaces, ordinal NFTs are a promising new development in the world of digital assets.