Bitcoin Ordinals are digital assets that are issued and stored on the Bitcoin blockchain. Each Ordinal has an identifier that allows it to be a unique or non-fungible asset. Bitcoin Ordinals are digital artifacts that are issued and stored on Bitcoin. Documents, images, artwork, and other media can all be Ordinals.
The History of Bitcoin Ordinals
In January 2023, Casey Rodarmor released the Ordinal Theory and marketed it as a new, innovative system that systematically inscribes pictures, images, and other data onto the satoshis of a blockchain without an additional sidechain or protocol layer. Under this new system, Bitcoin-based NFTs under the BRC-20 token standard could be fully conceptualized, and it’s all possible thanks to two important innovations:
Segregated Witness (SegWit): An update implemented in 2017, SegWit is a soft fork (a backward-compatible change) that modifies the block structure in which the witness data is separated from the base block. This means that transactions no longer needed to include witness data as there was now a separate data section at the end of the block where that data could be placed. This meant that more data could be included in a transaction since the witness data section now supports the inclusion of any additional arbitrary data.
Taproot: A 2021 update, Taproot is a soft fork and one of the most significant upgrades it provided was Schnorr signatures. Schnorr signatures prioritized the process of signing off transactions to be much more efficient, and one of the benefits it provided was key aggregation. Key aggregation is when multiple public keys are combined into one, causing digital signatures to be processed much quicker and more securely.
A recent innovation called recursive inscription allowed users to breach the block size limit and directly attach large amounts of data onto the Bitcoin blockchain. Rather than using data from new data sets, recursive inscriptions allow people to collect data from previously existing inscriptions and use it to make new, future ones.
The launch of the Ordinal Theory has led to the creation and popularity of Bitcoin NFTs like Taproot Wizards, Bitcoin Bandits, and Bitcoin Frogs.
What is Ordinal Theory?
Ordinal Theory is a system in which unique serial numbers (also called “Ordinal” numbers) are assigned to each satoshi on a blockchain. The exact number a satoshi receives depends on when each one was created on the blockchain, thereby giving each satoshi its unique identity.
By doing this, users can attach arbitrary data to each satoshi’s number, allowing them to attach images, artwork, text, and any other media to each satoshi, thereby causing this embedded data to become what many consider to be Bitcoin-based NFTs.
How Do Bitcoin Ordinals Work?
As outlined in the Ordinal Theory section, Bitcoin Ordinals and inscriptions work when Ordinal numbers are assigned to each satoshi on a blockchain. The exact serial number a satoshi receives depends on the order in which each satoshi was created (i.e. the first one gets an Ordinal number of #1).
Once an Ordinal number has been assigned, users can inscribe data like pictures, text, artwork, and other media onto the satoshi by attaching it to the satoshi’s unique serial number. The inscribed data becomes a Bitcoin NFT unique to that satoshi’s specific Ordinal number.
What Are Ordinal Inscriptions?
Ordinal Inscriptions are the extra data attached to a satoshi’s unique Ordinal number, which can be a picture, text, or any other media.
The inscribed data essentially become similar to Bitcoin-native NFTs that can be purchased, collected, and traded without needing to make any changes to the Bitcoin system or create an extra protocol layer. Each Ordinal inscription is attached to its unique, corresponding satoshi and stored in blocks.
Differences Between Bitcoin Ordinals and Traditional NFTs
Bitcoin Ordinals and traditional NFTs differ in various ways.
Bitcoin Ordinals generally work as such:
Bitcoin Ordinals can only be added to and minted on the Bitcoin blockchain’s existing network.
The content created from Ordinal inscription is stored on the Bitcoin blockchain.
Along with factors similar to NFTs, traits like whether an Ordinal was inscribed during an important moment in Bitcoin’s history determine an Ordinal’s worth.
Whereas traditional NFTs typically:
Are added to blockchains like Ethereum. In Ethereum, NFTs are minted using the ERC-721 token standard.
Are represented as metadata that direct them to an off-chain storage location.
Factors like unique design and limited supply determine how valuable a traditional NFT is.
What are the Advantages of Bitcoin Ordinals?
Greater compatibility with the Bitcoin Network: Bitcoin Ordinals are much easier for Bitcoin users to sell because Ordinals are much more compatible with Bitcoin wallets and the overall Bitcoin network.
More secure data storage: When Bitcoin Ordinals are created, they are stored directly on the blockchain. This makes them immutable because they are permanently embedded into the Bitcoin blockchain. Traditional NFTs are much more prone to revision because they are placed in off-chain storage locations.
Greater security: Bitcoin Ordinals are stored on and integrated into the Bitcoin blockchain. This allows Bitcoin users to take full advantage of the network’s security model to keep their Ordinals protected and decentralized.
Cons of Bitcoin Ordinals
High transaction fees: Bitcoin Ordinals are much more expensive than traditional NFTs because the inclusion of these large files of data onto the Bitcoin blockchain can cause transaction sizes to skyrocket, which thereby causes transaction fees to increase as well.
Slow network and congestion: Bitcoin Ordinals are large, complex data files that require an exorbitant amount of resources to create, store, and manage. This slows down the rest of the Bitcoin network, forcing other transactions within the network to take longer to complete (and thereby causing users to pay higher fees).
Limited size and complexity: Unlike blockchains like Ethereum, Bitcoin was not originally designed to handle assets as large and complex as NFTs. Therefore, the amount of data inscribed into a satoshi is restricted because of the network’s limited size and space.
How to Use Leather with Your Bitcoin Ordinals
For many cryptocurrency users, Leather is considered the best option for Bitcoin Ordinal ownership and trading. These are the services it can provide:
Mint Ordinals
Minting ordinals involves inscribing unique data like text, images, pictures, and other media onto individual satoshis on the Bitcoin blockchain. Minting directly on the Bitcoin blockchain allows users to verify that they have full, authentic ownership over their Ordinals.
Buy and Trade Ordinals
Through its intuitive user experience and robust features, Leather also allows users to participate in the Ordinals market by buying and trading Bitcoin NFTs with complete ease.
Send and Receive Ordinals
Using their taproot address, Leather wallet owners can send and receive Bitcoin ordinals to each other with total ease and no outside involvement.
Connect to Marketplaces
Leather provides an intuitive interface and robust marketplace integration that gives users seamless access to Ordinals-enabled marketplaces. This allows users to easily explore, discover, and engage with Ordinals-based assets.
Impact of Ordinals on the Bitcoin Ecosystem
Bitcoin users are divided on whether the impact that Ordinals have made on the Bitcoin Ecosystem is a positive or negative one. Those who believe they are positive believe that Ordinals:
Have advantages over traditional NFTs: Unlike the metadata for NFTs, which are stored in off-chain locations, Bitcoin Ordinal metadata is embedded and integrated into the Bitcoin blockchain, giving them full access to the network’s security model. Therefore, Ordinals have a level of security, decentralization, and immutability that traditional NFTs lack.
Increase Bitcoin's applicability and sustainability: Some users have argued that Ordinals will help the Bitcoin Network become more sustainable over time by expanding its scope. By expanding the scope of activities done on Bitcoin (in this case Bitcoin Ordinals), there will be more transaction fees and thus more incentive for miners to mine the network.
However, those who believe the impact is negative argue that:
Ordinals will slow down Bitcoin network: Ordinals are large, complex data files that use up a lot of space and resources; this often causes the entire Bitcoin network to slow down, meaning that other transactions within the system will take much longer to complete.
Ordinals increase transaction fees: The creation and storage of Ordinals slows down other Bitcoin transactions, meaning that users will have to pay higher transaction fees. Users have argued that the amount of space Ordinals take up and the increased demand for block space will make Bitcoin transactions more expensive.
Considerations When Buying Bitcoin NFTs or Ordinals
Differences between Bitcoin Ordinals and traditional NFTs: It's important to remember the differences between Bitcoin Ordinals and Traditional NFTs. Bitcoin Ordinals and Traditional NFTs have differences regarding immutability, security levels, fee, how they're stored, and even their rarity and value.
Potentially less liquidity and interest: Considering that the market for Bitcoin Ordinals is less active overall than the market for traditional NFTs, there could be less liquidity and interest overall in buying and selling Bitcoin Ordinals compared to traditional NFTs on certain marketplaces. However, Ordinals are still popular on a good number of marketplaces, including Gamma.io and Magic Eden.