Bitcoin ordinals

New Bitcoin NFTs spark discussion — What are Bitcoin Ordinals?


Bitcoin Ordinals have been the hottest topic in the crypto world in recent weeks. It is a protocol built on top of the Bitcoin blockchain that allows files to be sent within Bitcoin’s smallest unit, the satoshi. Many have compared this protocol to the Bitcoin blockchain’s own NFT protocol, but according to the developer of the protocol, it is not.

What are Bitcoin Ordinals?

Each Bitcoin is divided into 100,000,000 units called satoshis (or colloquially sats). The new Ordinals protocol allows people using Bitcoin nodes to write data to each satoshi, creating something called Ordinals.

The data written to Bitcoin’s sats unit can contain smart contracts, which enables, for example, NFTs on Bitcoin’s own blockchain. However, a direct comparison with Ethereum-based NTF projects should not be made because the Ordinals protocol also enables much more.

The Ordinals protocol was developed by software developer Casey Rodarmor. He is from California and studied computer science at the University of California.

In addition to the Ordinals protocol, Rodarmor has developed Agora, an open source software that allows anyone to sell files online using the Bitcoin Lightning Network for payments.

Since the release of the Ordinals protocol on January 21, 2023, almost 100,000 satoshis have been created that utilize the Ordinals protocol. The protocol has also created completely new versions of popular NFT collections from other blockchains, such as Ordinal Punks, which work entirely on the Bitcoin blockchain.

Are Ordinals NFTs?

In most NFT implementations which use Ethereum blockchain, the metadata file and the NFT live in two separate environments.

Files can be stored, for example, on the cloud server of the OpenSea marketplace or in an open file system, such as IPFS (eng. Interplanetary File System).

This is exactly the problem that Rodarmor is trying to solve with the Ordinals protocol. According to him, the current NFT model is incomplete, as most of them require data outside the blockchain to work as expected.

Bitcoin Ordinals differ from that arrangement in that the files involved are stored directly on the Bitcoin blockchain. In other words, all the files of the Ordinals protocol are located in the same environment – in Bitcoin’s own blockchain.

Bitcoin Ordinals also do not include copyright fees, unlike most current NTF projects.

Because of these differences, Rodarmor himself refers to Ordinals as digital objects – not Bitcoin NFTs.

Whether Bitcoin Ordinals are a technical improvement to the NTF world or not is up to everyone to decide for themselves, but it’s great to see that the Bitcoin blockchain is being actively innovated again with the help of Ordinal protocol.

Popularity around Bitcoin Ordinals

Bitcoin Ordinals has been a huge hit since its launch. It has brought thousands of new users to the Bitcoin blockchain. Proof of this is the fact that non-zero Bitcoin addresses exceeded a record number (44 million) in February 2023.

Bitcoin block sizes have also increased over the past couple of weeks as satoshis using the Ordinals protocol carry extra data on the blockchain. About a week ago, the largest Bitcoin block of all time was registered, with a size of 4 MB. In comparison, the average Bitcoin block size was around 0.7 – 1.5 MB before the introduction of the Ordinals protocol.

(Source: Dune Analytics)

The new protocol also benefits Bitcoin miners. In the past, miners only received rewards for money transactions. However, with the introduction of the Ordinals protocol, the Bitcoin network will be used for non-monetary purposes for the first time in its history.

This will increase the network’s transaction volume and bring additional income to the miners. Dune’s data shows that miners have already collected a large amount of transaction fees from the Ordinals protocol, even though it was only launched a month ago. This kind of additional income can be very important for miners when the block fees decrease or stop altogether in the future.

(Source: Dune Analytics)

However, not everyone is happy with these “digital objects.” Bitcoin Ordinals have been referred to, for example, as a “frivolous waste of the blockchain” and as a “completely pointless protocol.” The Ordinals protocol has restarted the discussion also around Bitcoin’s energy consumption.

Many Bitcoin supporters believe that block space should be reserved for sending Bitcoin instead of storing data, since Bitcoin is supposed to be a monetary network for its own currency. If speculative transactions marginalize the general use of the Bitcoin blockchain, it may push some users away from Bitcoin.

Top Bitcoin Ordinals Collections

Just weeks after the protocol was released, the first collections of Ordinals took shape. Created as a tribute to the CryptoPunks collection, Ordinal Punks also gained wild popularity in the Ordinal protocol.

Bitcoin Ordinals NFTs

(Source: OrdinalPunks)

The highest single sale of the collection was seen when Punk 94 sold at a whopping price of $214,000.

Another popular collection is Taproot Wizards, a standard collection of hand-drawn NFT wizards created by Web3 developer Udi Wertheimer.

Why is this project so significant, then? It is said to be the largest block and transaction in Bitcoin history, with a size of a whopping 4MB.

However, Ordinals collections are still a very young part of the market. As the Ordinals market matures, we are likely to see many more innovative collections in a whole new way.

New developers to the Bitcoin network

Whatever you think of the Ordinals protocol, it has brought a lot of new developers and a whole new kind of innovation to the Bitcoin blockchain.

An example of an entirely new kind of innovation is the Ordinary Oranges NTF collection launched by the blockchain company Bloq, which utilizes the Ordinal protocol. The collection is available on the Ethereum mainnet and has the so-called “burn option,” which returns the NFT to the Bitcoin blockchain.

What makes this collection unique is that users can get NFT proven in the Bitcoin network while taking advantage of the liquidity provided by Ethereum-based marketplaces such as OpenSea.

The excitement around Bitcoin Ordinals has also prompted other crypto communities to build better bridges and integrations between Bitcoin and other alternative protocols. If successful, these bridges and integrations with other protocols will continue to drive even more innovation.

The Future of Bitcoin Ordinals

Bitcoin Ordinals are believed to bring a significant amount of income to Bitcoin miners in the future. The creation of new blocks on the Bitcoin blockchain is constantly getting more difficult, resulting in a lower income stream for miners. So it’s no wonder that the majority of Bitcoin miners have been happy with the launch of this protocol.

We also stated earlier that Ordinals protocol transactions took significantly more space in the Bitcoin blockchain than normal money transactions. As a result, we will likely see competition between users for the limited space within the block and how and where it should be used.

From the point of view of the NFT market, the future is more difficult to predict. With a high probability, the majority of NFT projects will be built on top of Ethereum in the future, even if some of them utilize the Bitcoin network.

The number of users of the protocol and the transaction volume will initially increase, but only new innovations will show whether the protocol will maintain its popularity in the rapidly changing crypto market.

It is good to consider that Bitcoin Ordinals is a really young protocol, which makes predicting its future at this point really challenging.

Bitcoin Ordinals — FAQ

Are Bitcoin Ordinals NFTs?

NFTs utilizing the Ethereum blockchain require off-blockchain data to function as designed, while Bitcoin Ordinals store all data on Bitcoin’s own blockchain.

The developer of the Ordinal protocol, Rodarmor himself, wishes that the Ordinal protocol would not be seen as Bitcoin NFT but as digital objects.

What does the Ordinal protocol enable?

The Ordinal protocol allows users to embed files such as smart contracts, images, or videos inside Bitcoin’s smaller unit, the satoshi. This enables a completely new type of data transfer on the Bitcoin blockchain.

In the past, the Bitcoin blockchain has only been used for monetary transactions, but with the Ordinals protocol, it is being used for something other than pure monetary transactions for the first time in its history.

Who developed the Ordinals protocol?

The Ordinals protocol was developed by Casey Rodarmor from California, who was fed up with the imperfection of Ethereum NFTs.

Rodarmor studied computer science at the University of California, and he announced the Ordinals protocol in January 2023.

What does the future of Bitcoin Ordinals look like?

Currently, the future of Bitcoin Ordinals looks bright. Projects utilizing the protocol in question are published in ever-increasing numbers, and new developers bring an entirely new kind of innovation to the Bitcoin blockchain.

However, it is essential to remember that situations in the crypto market change very quickly, so it is almost impossible to predict what the situation of Bitcoin Ordinals will look like in, say, three years.

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The views, thoughts, and opinions expressed in the text belong to the author and not necessarily to the author’s employer, organization, committee, or other group or individual.

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