This post explains Bitcoin Ordinals, a protocol that introduced non-fungible tokens (NFTs) to the Bitcoin (BTC) network.
Limited “use cases” is a major reason why there has been a continued creation of alternatives to the number one crypto — Bitcoin (BTC).
This began to change with the emergence of Bitcoin DeFi protocols such as Wrapped Bitcoin (WBTC), Stacks (STX), Rootstock (RBTC), etc.
And now with Bitcoin Ordinals, developer activity on the world’s oldest blockchain network has seen recent spikes.
Keep reading to learn more about the Bitcoin Ordinals protocol and how it can benefit you.
What Is the Bitcoin Ordinals Protocol?
Ordinals Protocol is the latest innovation on the Bitcoin network that allows developers and artists to create and store digital artifacts directly on the Bitcoin blockchain. Casey Rodarmor launched the Ordinals Protocol on January 21, 2023.
How does Bitcoin Ordinals Protocol work?
You already know that the smallest denomination of BTC is a satoshi or a Sat. 1 unit of BTC equals 100,000,000 sats.
Now, the Ordinals Protocol allows users to send and receive sats that carry optional extra data. This data can be text, JPEGs, audio, or videos.
When such data is added to a satoshi, it is called Inscription and the end product is considered a Bitcoin NFT or an Ordinal.
Interestingly, since the launch of the Ordinals Protocol, nearly 100,000 inscribed satoshis have been minted, including a collection of Ordinal Punks and Ordinal Penguins. Yes, these are Bitcoin offshoots of popular NFT collections. So cool!
Furthermore, Ordinals are created from the “witness section” of Bitcoin transactions that were introduced after the Taproot soft fork in 2021. This is where the JPEGs, audio files, or videos are inscribed into the individual sats.
Additionally, the 2017 Segwit update, a soft fork that increased block sizes from 1MB to 4MB, makes it possible for the Bitcoin network to support digital artifacts.
So, how do you get started?
How do I mint an Ordinal NFT?
There are two main ways to mint an Ordinal NFT;
a. Start up a full Bitcoin node and run Ord on the node. Then you can start inscribing satoshis into a wallet you control to make Ordinal NFTs.
Too technical? Try;
b. Use a no-code inscription tool like Gamma to inscribe an Ordinal NFT.
You’ll need a supporting wallet for this option and here are the steps to follow;
i. Download the Xverse wallet, connect to Gamma.io, and select your inscription type.
ii. Opt to inscribe an image or text directly onto the Bitcoin blockchain. Then upload your inscription by choosing the preferred file from your device.
iii. Next, you choose your transaction fee based on the network congestion: normal, high, or custom fees.
NB: the higher the fee is, the more likely your transcription will be created sooner.
iv. Now, enter your ordinal recipient address to receive your Bitcoin NFT.
In your Xverse wallet, navigate to the NFT tab and press the receive button for Ordinal NFTs. Copy the taproot recipient address and insert it in the BTC wallet recipient address field in Gamma.
v. Lastly, agree to the terms of service and pay the inscription fee by sending the requested BTC amount to the wallet address.
Once the transaction is confirmed, you’ll get a link to see your inscription on http://Ordinals.com and details of the transaction.
Still technical? Watch this video.
But will Ordinal NFTs offer the same value as traditional NFTs?
Are Bitcoin Ordinals Real NFTs?
Bitcoin Ordinals are NFTs but they differ from traditional NFTs in a few ways.
Firstly, most NFTs are created and tracked through a smart contract although the assets that these smart contracts represent are often hosted elsewhere.
For example, some NFT platforms make use of the decentralized storage system, IPFS, to store the NFT artworks/audio files/videos.
But Ordinals are inscribed into the satoshi and therefore, these Bitcoin-NFTs are stored on-chain. They are validated in blocks along with other transactions and stored in the network’s distributed ledger.
Again, traditional NFTs usually have metadata that allows creators to change the appearance and characteristics of an NFT.
On the other hand, ordinals are stored on-chain so their data is immutable and cannot be changed.
Another difference is that Ordinals do not provide creators with the option to receive royalties on subsequent sales the way traditional NFTs do.
Since Ordinals are immutable and complete digital artifacts hosted on-chain. They reflect what NFTs should be.
But will Ordinals benefit Bitcoin (BTC)?
Ordinals’ Impact on the Bitcoin Network
Impressively, the introduction of Ordinals has sent Bitcoin (BTC) metrics skyrocketing.
For example, the number of non-zero Bitcoin addresses hit a record of 44 million after the launch of the Ordinals protocol.
Additionally, Bitcoin’s block sizes have increased, touching an all-time high of 2.5MB on February 12, 2023. In the past, the average Bitcoin block size was around 0.7 MB to 1.5 MB.
Also, the introduction of Ordinals means the Bitcoin network will be used for non-monetary purposes for the first time in its history. This will increase the transaction volumes and bring more revenue for miners.
Data from Glassnode shows that miners have collected nearly $600,000 in transaction fees from Ordinals in the last two months alone. It then means that miners will still be in business when block rewards dwindle or no longer exist in the future.
Surprisingly, not everyone is impressed with these digital artifacts. In a recent tweet, Adam Black, the CEO of Blockstream, called Ordinals a frivolous waster of block space. Some other folks blamed Ordinals for the increase in transaction fees.
Not forgetting the issue of power consumption. Bitcoin (BTC) is known for its astronomical energy usage and the influx of Ordinals is not helping, as Alex de Vries, a prominent data scientist, reminds us on LinkedIn.
Nevertheless, Bitcoin Oridinals could lead to further innovation and more practical use cases in the future.
Ordinals bring added utility to the Bitcoin blockchain. While many NFT enthusiasts are excited to see this technology, some crypto analysts believe Ordinals may slow Bitcoin’s attempts at boosting network scalability.
But what do you think? Let me know your thoughts in the comments section right away. Please share this post with your friends too.