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What Are Bitcoin Ordinals?


Rob Behnke

August 30th, 2023

Non-fungible tokens (NFTs) have been taking the world by storm in recent years. An NFT is a token with a unique value that can’t be exchanged 1:1 with another token of the same type. NFTs’ uniqueness has resulted in them being used to track ownership of various assets, ranging from digital images to property and luxury assets.

Most NFTs are created on smart contract platforms, such as Ethereum. On these platforms, it’s possible to create a token contract that defines the new token and the various functions that can be performed with it, such as buying, selling, or trading NFTs

However, the ability to create NFTs is not limited to smart contract platforms. Bitcoin ordinals are a type of NFT that can be created on the Bitcoin blockchain using Bitcoin inscriptions.

Why Are They Called Ordinals?

Bitcoins are not NFTs. In fact, Bitcoin — and many other common cryptocurrencies like Ether — are fungible tokens. One Bitcoin — or a fraction of a Bitcoin— can be exchanged for any other Bitcoin (or equal fraction thereof).

Bitcoin also isn’t a smart contract platform. While Bitcoin has scripting capabilities, it wasn’t designed to support token contracts like Ethereum and other smart contract platforms.

So how can Bitcoin have NFTs? Bitcoin developer Casey Rodarmor proposed using ordinals to track NFTs on the Bitcoin blockchain.

In a nutshell, every Bitcoin or satoshi — the smallest fraction of a Bitcoin worth one 100-millionth of a Bitcoin— is created as part of the Bitcoin mining process. As a result, it is possible to assign an ordinal number to each satoshi in the order that it was mined. This ordinal acts as a unique ID number for that particular satoshi.

With this ordinal numbering, a satoshi is transformed from a fungible asset — indistinguishable from any other satoshi — to a non-fungible one. This makes it possible to use satoshis to track NFTs on the Bitcoin blockchain.

Inscribing Bitcoin Ordinals

Ordinal theory makes a satoshi into an NFT capable of tracking ownership of a particular asset. The process of tying a particular digital asset to a satoshi is called inscription.

During the inscription process, an image, text, or other piece of data is attached to a satoshi. This inscription is then recorded as a transaction on the Bitcoin blockchain, permanently tying that data or digital asset to the satoshi.

This process of connecting digital assets to satoshis makes Bitcoin Ordinals work differently than the NFTs hosted on smart contract platforms. Most NFTs encode a link to an asset held off-chain, such as an image hosted in cloud storage or on the IPFS. Bitcoin Ordinals, on the other hand, store the digital asset directly on the blockchain, embedded in a Bitcoin transaction.

The Downsides of Bitcoin Ordinals

Bitcoin ordinals make it possible to implement NFTs or “digital assets” on the Bitcoin blockchain. However, it isn’t a perfect solution to the problem of supporting NFTs on Bitcoin. 

Some of the main downsides or critiques of Bitcoin Ordinals include:

  • On-Chain Storage: Bitcoin ordinals store the data of a digital asset on-chain in the witness statement. While this provides better protection against modification than NFTs (which just store a pointer to the data), it also eats up space in transactions and on Bitcoin’s digital ledger.

  • Higher Transaction Fees: On-chain digital asset storage means that Bitcoin Ordinals transactions have higher transaction fees than other assets, making them more appealing to miners. This can drive up the price of using Bitcoin for other users, potentially driving them to other blockchains.

  • Digital-Only Assets: Bitcoin ordinals are designed to store digital assets by embedding the data directly on-chain. This may limit their applicability compared to NFTs, which are designed to store a reference to an asset (which could include non-digital assets).

  • Available Supply: Bitcoin has a fixed maximum supply built into the protocol, which limits the number of satoshis that can be used for Bitcoin Ordinals. NFTs on smart contract platforms are created as new tokens by smart contracts, providing a theoretically unlimited supply.

Using Bitcoin Ordinals Securely

Bitcoin Ordinals are a means of implementing NFTs or digital assets on the blockchain by using satoshis. This makes it possible to implement NFT collections, stablecoins, or other non-Bitcoin NFTs and tokens on the Bitcoin blockchain.

However, Bitcoin Ordinals only defines a means of tracking digital asset ownership on the blockchain, not how it can be used. Any protocol using Bitcoin Ordinals to implement NFTs on the Bitcoin blockchain must also be carefully designed and implemented to ensure its security. 

For more information on how to securely use Bitcoin Ordinals with your project, get in touch.