Ever felt like there’s a missing puzzle piece in the vast realm of the Bitcoin blockchain?
That’s where Bitcoin Ordinals makes its entry and fills a crucial gap. Ordinals unlock the door to something previously unattainable—non-fungible tokens (NFTs) on Bitcoin.
Creating an Ordinal involves a series of steps that, when combined, bring forth an NFT with its own distinct characteristics.
The nuances of Ordinals lie in their ability to simplify what seemed complex before. The Bitcoin NFTs are estimated to reach a market size of $4.5 million by 2025.
Stay with us on this journey as we delve deeper into the world of Bitcoin Ordinals—understanding how they’re created, exploring their intricacies, and uncovering the potential they hold within the realm of NFTs on the Bitcoin blockchain.
Overview of Ordinals
Bitcoin Ordinals, or Ordinal NFTs, represent non-fungible tokens built and safeguarded on the Bitcoin network. Initially, crafting NFTs on Bitcoin was impractical due to its simple structure and lack of smart contract capabilities.
However, advancements in technologies like Ordinals inscription and other layer 2 solutions have transformed the scene, making Bitcoin NFTs viable.
Network Updates–The Birth of Ordinals
Two pivotal updates enabled the creation of Bitcoin Ordinals. In 2017, SegWit divided Bitcoin transactions into two parts, enhancing storage limits. Subsequently, the Taproot update strengthened transaction security and privacy, introduced data inscription, and expanded block size limits.
These updates laid the groundwork for Casey Radarmor to introduce the Bitcoin Ordinal protocol.
Understanding Ordinals Creation
Launched in January 2023, Ordinals function as a means to generate Bitcoin NFTs by adding extra data to each satoshi through the inscription process without relying on smart contracts.
Satoshis, the smallest units of Bitcoin, serve as the canvas for Ordinal Inscriptions, including images, videos, texts, and more.
Since its inception, Ordinals have experienced rapid growth. By late May 2023, over 950,000 Bitcoin inscriptions have occurred, with $43 million spent on inscription fees.
The working layout of Bitcoin NFTs
- Bitcoin NFTs crafted through inscriptions operate on the Ordinal theory, treating each satoshi as an individual unit tradable on the Bitcoin network.
- Each satoshi (the smallest unit of Bitcoin) is uniquely identified and serialized on the Bitcoin network.
- The Ordinal protocol assigns a distinct identity to each serialized satoshi, making them non-fungible or unique.
- Extra data or information, such as digital art or media, is directly inscribed onto these identified satoshis within Bitcoin blocks.
- The attached data is part of the Bitcoin blockchain itself, ensuring high security and immutability, as it can’t be altered.
- The rarity of these Bitcoin NFTs is linked to significant events within the Bitcoin network, adding value based on these occurrences.
- Besides the Ordinals protocol, layer-2 scaling solutions like Stacks, RSK, or Lightning Networks also facilitate the creation of Bitcoin NFTs by utilizing smart-contract functionalities on Bitcoin’s base layer.
How do Bitcoin Ordinals differ from traditional NFTs?
- Storage Location of Data
- Bitcoin Ordinals: Ordinals serialize each satoshi individually on the Bitcoin network, assigning unique identities to these units. It stores digital content directly on-chain within the Bitcoin blockchain.
- Traditional NFTs (like ERC-721): It employ smart contracts that usually hold metadata file links or a reference to the art off-chain, though some experiments incorporate on-chain storage.
- Rarity Determination and Pricing
- Bitcoin Ordinals: Ordinals’ rarity and pricing are determined by specific events within the Bitcoin blockchain network.
Rarity is linked to specific events within Bitcoin blocks, such as,
– First satoshi of a new block.
– First satoshi of an adjustment period (every two weeks).
– First satoshi of each halving epoch (next halving in 2024).
– First satoshi of the adjustment period occurs once every six halvings (approximately every 24 years).
- Traditional NFTs: Rarity and subsequent pricing often rely on the attributes of the artwork or limited supply set by creators or platforms and may not directly link to blockchain events.
- Activity Dynamics
- Bitcoin Ordinals: Activity may peak around significant Bitcoin events like the halving, with potential increased interest closer to the 2024 Bitcoin halving.
- Traditional NFTs: Activity patterns might differ, not necessarily tied to specific blockchain events like Bitcoin halvings.
- Operating Framework
- Bitcoin Ordinals: Ordinals function within the existing Bitcoin structure rather than living on a separate blockchain.
- Traditional NFTs: May exist on various blockchains, each with token standards and smart contract capabilities.
Creating and Mining Bitcoin Ordinals
Initially, mining Bitcoin ordinals was limited to Bitcoin node operators. They used a Bitcoin node coupled with the ord app, a command line wallet, to perform the inscription process by loading their wallets with sats to cover gas fees.
However, advancements introduced no-code applications like Gamma or the Ordinals Bot, simplifying the process. These applications allow users to upload content for inscription, facilitating a more user-friendly approach.
The tools surrounding Bitcoin ordinals are still in the early development stages. The genesis ordinals were inscribed only a few months ago, and as demand grows from users and followers, the ecosystem and tooling are expected to mature.
Step-by-step guide on buying and selling ordinals
- Firstly, you need to select a platform that facilitates the buying and selling Bitcoin ordinals, such as Ordinals Wallet, Hiro, or Xverse.
- Next is to create a wallet. You can visit the platform’s website (e.g., ordinalswallet.com) and click “Create Wallet.”
- Follow the prompts to set up your wallet. This usually involves securing a recovery phrase and setting a password for wallet access.
- And then, load your wallet with some sats (small units of Bitcoin).
- You can navigate to the “Collections” section within the platform. Here, you’ll find various ordinal collections available for purchase.
- Select the specific ordinals collection you’re interested in, browse through the available inscriptions, and proceed with the purchase.
- Similarly, for selling, you can go to the section that displays the Bitcoin ordinals you own within your wallet.
- Choose the ordinals you wish to sell from your collection and set up the selling details, such as the price and the selling terms.
- Finally, confirm the sale listing and your ordinals will be available for potential buyers to view and purchase.
Utility value
Bitcoin NFTs showcase a versatile utility, echoing the value seen in traditional NFTs, albeit within the unique confines of the Bitcoin blockchain. It extends to a range of domains, such as,
- Tokenizing in-game assets like cosmetics and avatars, rewarding players, etc.
- Art and Music
- Exclusive Merchandise
- Ticketing and Events
- Metaverse and Real Estate
Wrap-up Note
Bitcoin Ordinals bring a unique twist to the NFT space by carving their own path within the Bitcoin blockchain. However, the inscribed ordinals which stay on-chain come with considerations such as increased blockchain size and potential shifts in satoshi valuation.
Despite these challenges, this new narrative of Bitcoin grows a new realm of possibilities for developers and users to unlock the unexplored potential in the crypto ecosystem.
Amidst these innovations, our QuillAudits experts stand ready to guide you through every stage of your blockchain journey, ensuring robust security measures at every turn. Connect with our experts for direct consultation. https://www.quillaudits.com/free-smart-contract-audit-consultation
