Ordinals are a new way to add unique digital content to Bitcoin’s smallest units, called satoshis. Launched in 2023, this protocol lets users attach images, text, and videos directly to specific satoshis on the Bitcoin blockchain. It’s similar to NFTs but works differently because it’s built on Bitcoin instead of other networks. The system relies on recent Bitcoin updates like SegWit and Taproot to function. There’s much more to discover about this innovative development in cryptocurrency.
Quick Overview
- Ordinals are digital artifacts created on the Bitcoin blockchain by assigning unique identifiers to individual satoshis (the smallest Bitcoin unit).
- Launched in 2023, Ordinals allow users to attach various data types like images, text, and videos directly to Bitcoin transactions.
- The protocol utilizes Bitcoin’s SegWit and Taproot updates to enable larger data storage capacity of up to 4MB per transaction.
- Similar to NFTs, Ordinals create unique, traceable digital assets on Bitcoin, though they lack features like smart contracts or royalties.
- Through BRC-20, Ordinals enable the creation of fungible tokens on Bitcoin, expanding the cryptocurrency’s functionality beyond payments.
The Ordinals protocol has shaken up the Bitcoin world since its launch in January 2023. Created by Casey Rodarmor, this innovative system lets users assign unique identifiers to individual satoshis, which are the smallest units of Bitcoin. It’s like giving each tiny piece of Bitcoin its own serial number, making it possible to track and identify specific satoshis throughout their journey on the network.
What makes Ordinals special is that they allow people to attach different types of data, like images, text, or videos, directly to these individual satoshis. This creates unique digital artifacts that some people compare to NFTs (non-fungible tokens). However, unlike traditional NFTs that often store their data off-chain, Ordinals inscribe everything directly onto the Bitcoin blockchain. Each satoshi has a value of 0.00000001 BTC.
The technology behind Ordinals wouldn’t have been possible without two important Bitcoin updates: SegWit in 2017 and Taproot in 2021. These updates added new features to Bitcoin, including a “witness data” section and increased data storage limits up to 4 MB per transaction. To use Ordinals, people need to run a full Bitcoin node and have a special wallet that’s compatible with Taproot. The recent introduction of the Runes Protocol adds new possibilities for fungible token management on Bitcoin.
A new development called BRC-20 has emerged from the Ordinals project, allowing users to create fungible tokens on Bitcoin. This has caught the attention of many cryptocurrency enthusiasts and even institutional investors, including companies working on Bitcoin ETFs.
However, not everyone’s happy about Ordinals. Some Bitcoin supporters argue that using the network for storing images and other data goes against Bitcoin’s main purpose as a digital currency for peer-to-peer transactions. Others say it’s a positive development that could help make the Bitcoin network more secure by encouraging more mining activity.
The technical process of creating Ordinals is more complicated than minting traditional NFTs, and they don’t have some common NFT features like smart contracts or built-in royalties. But they do have a unique advantage: inscribed satoshis can still be used like regular Bitcoin for transactions or network fees.
As a relatively new development in the cryptocurrency world, Ordinals represent an interesting evolution in how Bitcoin’s blockchain can be used. While debate continues about their role in Bitcoin’s ecosystem, they’ve undeniably opened up new possibilities for data storage and digital artifacts on the world’s first cryptocurrency network.
Frequently Asked Questions
How Do I Buy and Sell Bitcoin Ordinals?
Buying and selling Bitcoin Ordinals starts with choosing a marketplace like Magic Eden or Gamma and setting up a compatible Bitcoin wallet.
Users connect their wallet to the marketplace, browse available Ordinals, and make purchases with Bitcoin.
For selling, they’ll list their Ordinals at their chosen price.
The process works like other digital collectible platforms, with transactions completing on the Bitcoin blockchain.
What Wallets Support Ordinal Transactions and Storage?
Several popular wallets support Ordinal transactions and storage.
Xverse works across multiple platforms, while UniSat Wallet handles both Ordinals and BRC-20 tokens.
Hiro Wallet (formerly Leather) was one of the first to offer Ordinal services.
Magic Eden Wallet connects directly to its marketplace, and Ordinals Wallet focuses specifically on Bitcoin NFTs.
These wallets typically include features like non-custodial storage, Taproot compatibility, and the ability to view, send, and receive inscriptions.
Are Ordinals Affecting Bitcoin Transaction Fees and Network Performance?
Ordinals have greatly impacted Bitcoin’s network performance.
Transaction fees jumped 25 times higher over the past year, reaching $34.08 for medium-priority transactions in June 2024.
The network’s seen over 333,400 unconfirmed transactions during peak times, leading to slower processing speeds.
While higher fees benefit miners and could boost network security, they’re also causing debate in the Bitcoin community about resource usage and network efficiency.
Can Ordinals Be Created on Other Blockchains Besides Bitcoin?
Yes, ordinals can be created on other blockchains.
Litecoin has already implemented ordinals, and Dogecoin’s community is looking into it. These blockchains can support ordinals because they’re similar to Bitcoin’s structure.
While Ethereum has its own NFT system, some projects are trying to create ordinal-like features there too.
Layer-2 solutions like Stacks and the Liquid Network also offer ways to work with ordinal-style assets.
What Are the Risks of Investing in Ordinal Collections?
Investing in ordinal collections comes with several key risks.
The market’s highly volatile, with prices that can change dramatically in minutes. There’s limited liquidity, making it hard to buy or sell quickly.
Technical risks include potential loss through incorrect transactions and the need for special wallets.
The market’s also unregulated, which means there’s no protection against scams or fraud.
Network fees can be expensive, and there’s uncertainty about long-term value and adoption.
