Digital artifacts are non-fungible digital assets that are native to Bitcoin. They can take many forms, but each one is immutable, permissionless, complete and decentralized.
Key Takeaways
Digital artifacts revolutionized Bitcoin in 2023 with the introduction of a new system for inscribing and storing data directly on-chain called Ordinals. They have since transformed the way builders and Bitcoin enthusiasts view use cases within the protocol, creating possibilities for further innovation.
But despite their immense growth in popularity, many still don’t know the subtle differences between digital artifacts and non-fungible tokens (NFTs). The significance of digital artifacts lies in their decentralization, permanence and opportunity.
What are Bitcoin Ordinals?
Bitcoin Ordinals are a method of inscribing data onto a uniquely numbered satoshi. You can inscribe anything from text to images or HTML, and that data will be stored directly on Bitcoin. This is possible because of what’s known as Ordinal Theory, an idea posited in early 2023 by Casey Rodarmor. His framework suggested that each satoshi could be numbered and identified, allowing users to track movement and transaction history.
By inscribing directly onto the satoshi, the Ordinal would be tied to that specific satoshi, which allows the inscriptions to be traded, bought and sold.
What are Digital Artifacts?
Digital artifacts – much like tangible relics, such as old coins or documents – have distinct characteristics. As their name suggests, they are made up of data instead of physical matter. In order to qualify as a digital artifact, it must have several specific attributes. They must be:
Ownable
Complete
Permissionless
Uncensorable
Immutable
Data alone, or things like off-chain NFTs, are not necessarily true digital artifacts. To meet this standard, an artifact should be self-contained, decentralized and unencumbered by royalties. They should also be resistant to alterations and immutable.
Why are “Bitcoin NFTs” called digital artifacts?
Bitcoin NFTs are called digital artifacts because they are inscribed directly on-chain and are “complete.” They don’t rely on smart contracts the way Ethereum-based NFTs do, and the immutable nature of the artifact means it cannot be deleted or altered by others. Essentially, Bitcoin NFTs meet the criteria to be true digital artifacts in a way that not all NFTs do.
Types of Digital Artifacts on Bitcoin
Digital artifacts on Bitcoin can take many forms. They can include everything from memes and images to audio files or text, because anything you can inscribe onto an ordinal can be a Bitcoin digital artifact. Some of the most common types of digital artifacts include NFTs and smart contracts.
Non-Fungible Tokens (NFTs)
NFTs are among the most common digital artifacts. In the Bitcoin community, this term is often used interchangeably with Ordinal inscriptions. Many popular Ordinal collections have been developed over the last few years, with both art-focused and utility-focused projects.
Colored Coins
Colored coins are a way to associate metadata with specific BTC, giving them additional qualities beyond their financial value. Though the concept has fallen out of popularity, it pioneered a way to tokenize real assets on-chain.
Proof of ownership
Ultimately, the beauty of a digital artifact is in its ability to demonstrate proof of ownership. Their ownership and history is embedded within an immutable blockchain, providing the ultimate authenticity.
Why are Digital Artifacts Significant?
For a long time, scalability posed serious challenges in building and expanding use cases within Bitcoin. The protocol’s focus on security and the limitations of the block size on Layer 1 impeded some of the developments of other blockchains. Digital artifacts have disrupted that narrative. They display many benefits that decentralization advocates have long promoted, including:
Security: Off-chain storage has long been a complaint of decentralization proponents, because traditional NFTs are partly centralized and subject to alteration. Digital artifacts do not have that vulnerability.
Trustless: Because digital artifacts do not operate via smart contracts or store their data elsewhere, they do not require you to trust a third-party. You have control of your assets.
Innovative: The introduction of Ordinals revealed to the builder community that new use cases were still possible and opened the door for things like BRC-20 and recursive inscriptions. This has led to many other developments within the ecosystem.
Digital Artifacts vs. NFTs
As Casey Rodarmor put it in his blog post on Ordinal inscriptions, “Digital artifacts are NFTs, but not all NFTs are digital artifacts.” Though there are many similarities, the two are not interchangeable.
Uniqueness and ownership: Both digital artifacts and NFTs are unique, and the ownership and transaction history can be verified.
Complete and immutable: Bitcoin NFTs and other digital artifacts are complete and cannot be altered. NFTs, on the other hand, are not “complete” and can potentially be modified by others or lost.
Stored on-chain: Digital artifacts are inscribed directly on Bitcoin, giving them an additional layer of security. Most NFTs on other protocols tend to store their data off-chain.
Marketplace availability: Both digital artifacts and NFTs can be bought, sold, and traded across different platforms and marketplaces.
Permissionless: Digital artifacts are inherently permissionless, meaning ownership and transferability are decentralized and trustless whereas NFTs are run by smart contracts and store their data off-chain. In this case, the ownership is partly centralized and not trustless.
Challenges and Limitations of Digital Artifacts
Although digital artifacts have taken a major step in overcoming scalability issues within Bitcoin, there are still limitations to their expansion. This concern centers on the potential for network congestion, as Ordinal transactions compete with traditional BTC transactions for the same limited block space.
There are also debates within the Bitcoin community as to whether digital artifacts are a positive addition to the ecosystem or counteract its original purpose. While these debates can be a healthy exercise, the fact remains that not all Bitcoin users view them as a positive.
Future of Digital Artifacts on Bitcoin
Bitcoin digital artifacts are still in their early days. The explosion of Ordinal inscriptions and digital artifacts within the protocol over the last several years has reinvigorated the builder community and remedied some of the security challenges that the off-chain NFTs of other protocols face. The innovative nature of digital artifacts being inscribed on-chain has proven to builders that Bitcoin’s speed and size limitations are not roadblocks to future developments.
Store And Manage Your Digital Artifacts With Leather
The Leather Bitcoin wallet can be used to securely store and manage your digital artifacts. With your wallet, you can buy, receive, or send tokens and other assets. You can also connect your wallet to Web3 applications that allow you to mint your own NFTs or inscribe Ordinals. Digital artifacts stored on Leather are secured and safe.