Ordinals: the new NFTs on the block(chain) - a beginner's guide

Ordinals represent a groundbreaking innovation in the digital collectibles space, introducing a novel protocol that enables the creation of NFT-like assets directly on the Bitcoin blockchain. By leveraging ordinal theory, this protocol allows each satoshi—the smallest unit of Bitcoin—to be individually identified, ranked, and inscribed with unique data. This advancement has transformed the landscape of digital artifacts, creating new possibilities for collectors and developers alike while sparking significant debate within the Bitcoin community. The emergence of ordinal NFT technology has fundamentally reshaped how we understand digital ownership on Bitcoin's network.

TL;DR

Ordinal theory introduces a revolutionary numbering system that assigns unique identifiers to individual satoshis based on their mining and transfer order. This innovative approach enables precise tracking and identification of each unit of Bitcoin. The inscription process allows users to embed immutable data directly onto satoshis, effectively creating ordinal NFT assets similar to traditional NFTs but entirely within the Bitcoin blockchain ecosystem. A significant milestone arrived in mid-2023 with recursive inscriptions, which enabled users to overcome previous data limitations by connecting multiple data sources and deploying complex on-chain applications. The market has demonstrated sustained interest, with Bitcoin-based NFT tokens showing continued evolution and the potential to compete with Ethereum's established NFT marketplace in terms of innovation and buyer engagement. However, this innovation has created divisions within the Bitcoin community regarding its alignment with the network's original purpose and concerns about resource utilization.

What is ordinal theory?

Ordinal theory establishes a comprehensive framework for numbering and tracking individual satoshis through an ordinal numbering system. These numbers are systematically assigned based on the chronological order of mining and transaction transfers, utilizing various notational formats including integer, decimal, degree, and percentile representations. The theory's significance extends beyond mere tracking, as it introduces a sophisticated rarity classification system based on significant events in the Bitcoin network timeline, forming the foundation for ordinal NFT creation.

The rarity hierarchy is structured across six distinct levels. Common satoshis represent the vast majority, encompassing any satoshi that isn't the first in its block. Uncommon satoshis are the inaugural satoshi of each block, making them relatively scarce given the approximately 144 new blocks added daily. Rare satoshis mark the beginning of Bitcoin's difficulty adjustment periods, which occur every 2016 blocks or roughly every two weeks. Epic satoshis initiate each halving epoch, occurring approximately every four years at 210,000-block intervals. Legendary satoshis represent the first satoshi of each complete market cycle. The most exclusive category, Mythic satoshis, consists solely of the first satoshi from the Genesis block—the very first Bitcoin transaction ever recorded. This singular satoshi holds unique historical significance, having been inscribed with pixel art of a skull by Casey Rodarmor, the protocol's creator, in late 2022.

Degree notation serves as an efficient method for representing ordinal numbers, providing immediate visibility into a satoshi's rarity by incorporating information about block height, difficulty adjustment period, halving epoch, and cycle position.

How do ordinal inscriptions work?

Ordinal inscriptions enable users to permanently embed digital content—whether video, artwork, or text—directly onto the Bitcoin blockchain, creating unique digital artifacts analogous to NFTs but without requiring separate tokens or sidechains. The inscription process establishes an immutable, verifiable record that guarantees content authenticity and originality for all parties involved in transactions. These ordinal NFT inscriptions represent a paradigm shift in how digital assets can be created and stored on Bitcoin.

The technical foundation relies on ordinal theory's ordering principles, where each satoshi maintains a specific sequence and value. This structural framework enables the transfer of inscribed satoshis through standard Bitcoin transactions, though it requires careful transaction construction to maintain ordinal theory compliance. The content storage mechanism utilizes taproot script-path spend scripts, offering efficient and economical on-chain storage. This architecture allows inscribed content to be served like standard web pages and enables remixing with other inscriptions to generate new artifacts.

The inscription process follows a two-phase commit/reveal procedure. Initially, users create a taproot output that commits to a script containing the inscription content. Subsequently, they spend that output to reveal the content on the blockchain. Content serialization employs "envelopes"—specialized wrappers that package content and metadata for universal readability across the network.

How do I create an ordinal inscription?

Creating ordinal inscriptions is accessible to users across all technical skill levels through various pathways. Beginners without coding experience can utilize platforms like OrdinalBots, which handles all technical programming aspects, allowing users to focus solely on creative content development for their ordinal NFT creations. Intermediate users comfortable with coding can explore the Ordinals API available on GitHub, where Hiro provides developer-friendly APIs specifically designed for Bitcoin, supported by an active developer community.

Advanced users with strong coding proficiency can implement inscriptions through a detailed technical process. This involves selecting content for inscription, creating an envelope using appropriate coding tools to wrap content and metadata, and generating a taproot output using compatible Bitcoin wallet software. The process requires careful transaction construction following ordinal theory rules, broadcasting the taproot output to make the inscription live, and spending the output to reveal the content on-chain. Upon completion, the inscription becomes permanently stored using taproot script-path spend scripts, ensuring immutability and preventing alteration or deletion.

The launch of recursive inscriptions

Mid-2023 marked a transformative advancement with the introduction of recursive inscriptions, addressing critical challenges related to transaction fees and block space limitations. This innovation empowers sophisticated on-chain software development within the Bitcoin ecosystem through daisy-chaining techniques that interconnect data across multiple sources, expanding the capabilities of ordinal NFT technology significantly.

While traditional inscriptions were constrained to 4MB of data storage, recursive inscriptions transcend this limitation by enabling developers to establish interconnected networks of data sources. By extracting and integrating data from existing inscriptions into new ones, this technology breaks through the rigid 4MB barrier. Developers can now execute fully on-chain software by linking data through sequential calls, dramatically expanding the possibilities for application complexity.

Recursive inscriptions significantly enhance interoperability within the Bitcoin network, though their relative novelty necessitates thorough understanding before implementation. This technology represents a crucial step toward more sophisticated on-chain applications while maintaining Bitcoin's security and decentralization principles.

Could Bitcoin surpass Ethereum NFTs in market dominance?

The competitive landscape between Bitcoin and Ethereum NFT ecosystems continues to evolve. While Ethereum has historically maintained its leading position in total NFT sales volume, Bitcoin has demonstrated impressive growth and performance metrics during various periods. The rise of Bitcoin ordinals and ordinal NFT technology has captured significant traction within the buyer and seller community, establishing a credible competitive force in the NFT marketplace.

The achievement of significant inscription milestones represents substantial progress for the protocol's development team. This success prompted the establishment of the Open Ordinals Institute, a California-based non-profit organization dedicated to funding core protocol developers, including the project's lead maintainer, the anonymous developer Raph. This institutional support demonstrates the growing legitimacy and long-term commitment to ordinals development.

The emergence of Bitcoin as a viable NFT platform continues to influence market dynamics, as ordinal NFT adoption and transaction volume demonstrate sustained growth and community engagement.

Bitcoin DeFi Projects

Bitcoin's sustained development trajectory has elevated inscriptions and ordinals into prominent positions within the ecosystem. The potential application of these technologies within Bitcoin DeFi projects has generated optimistic speculation among community members. Historical developments in Bitcoin DeFi, including the Lightning Network and wrapped Bitcoin solutions, have established precedents for innovation. The integration of ordinal NFT inscriptions into the DeFi space represents a natural evolution, potentially unlocking new financial use cases and expanding Bitcoin's utility beyond its traditional role as a store of value and medium of exchange.

A divided bitcoin community

The Bitcoin community remains fundamentally divided regarding ordinals' role and impact. Supporters embrace the protocol as an expansion of Bitcoin's financial use cases, viewing ordinal NFT technology as a positive evolution that enhances network utility without compromising core principles. This faction sees ordinals as a natural progression that leverages Bitcoin's security and decentralization for new applications.

Conversely, skeptics contend that ordinals diverge from Satoshi Nakamoto's original vision of Bitcoin as a peer-to-peer cash system. Critics express concerns about the rarity structure consuming valuable blockchain space and driving up transaction fees, potentially impacting Bitcoin's accessibility and efficiency for standard financial transactions. These concerns reflect deeper philosophical questions about Bitcoin's purpose and future direction.

Given the protocol's ongoing evolution, potential participants should conduct thorough research before engaging with ordinals, carefully weighing the opportunities against the ongoing debates and technical considerations.

What's new?

Ongoing developments continue to expand ordinals accessibility and utility. Various wallet solutions now offer comprehensive ordinals compatibility, notably supporting recursive inscriptions from multiple platforms. The integration extends to hardware wallet connectivity through both mobile applications and browser extensions, enabling users to manage Bitcoin, ordinals, and BRC-20 tokens within unified account interfaces. This consolidation simplifies address management through support for Native Segwit, Taproot, or both formats, while providing detailed ordinals metadata including sat numbers and inscription IDs.

Major Bitcoin institutional holders have announced plans for decentralized identity services leveraging ordinal NFT inscriptions. These services aim to provide trustless and tamper-proof decentralized identities utilizing the Bitcoin network's security infrastructure, demonstrating institutional recognition of ordinals' potential applications beyond digital collectibles.

Conclusion

BTC digital artifacts, powered by ordinal theory, represent a revolutionary advancement in digital collectibles that fundamentally transforms the NFT landscape. By uniquely identifying each satoshi and enabling creative inscriptions ranging from artwork to videos, the protocol creates distinctive ordinal NFT treasures with varying rarity levels—from common satoshis to the singular mythic satoshi from the Genesis block. The introduction of recursive inscriptions expanded possibilities for complex on-chain applications, demonstrating the protocol's evolving capabilities.

Despite growing market interest and continued integration of recursive inscriptions into various platforms, the Bitcoin community remains divided on these developments. Balancing innovation with concerns about network capacity, transaction fees, and alignment with Satoshi Nakamoto's original vision presents ongoing challenges. Nevertheless, the opportunities presented by ordinal NFT technology deserve serious attention from collectors, developers, and investors alike. As the technology matures and use cases expand, ordinals may well represent a pivotal evolution in how we conceptualize and utilize the Bitcoin blockchain, potentially reshaping the entire digital collectibles ecosystem while maintaining Bitcoin's core security and decentralization principles. The ordinal NFT phenomenon continues to demonstrate that Bitcoin's utility extends far beyond simple value transfer, opening new frontiers for digital ownership and creative expression.

FAQ

What is an ordinal NFT?

An ordinal NFT is a unique digital asset on the Bitcoin blockchain, created by attaching data to a specific satoshi. It uses Bitcoin's ordinal numbering system to assign rarity and became possible after SegWit and Taproot updates.

What is the difference between NFT and Ordinals?

NFTs are unique digital assets on various blockchains using smart contracts, while Ordinals are identifiers inscribed directly onto Bitcoin's blockchain without smart contracts, focusing on permanence rather than programmable features.

How to buy an ordinal NFT?

Set up a Bitcoin wallet, fund it, connect to an ordinal marketplace, browse collections, and purchase your chosen ordinal NFT.

Are any NFTs still valuable?

Yes, some NFTs remain highly valuable. Rare digital artworks, exclusive collectibles, and utility-rich NFTs continue to command significant prices in the market.