What Are Bitcoin Ordinals?
Bitcoin Ordinals are assets that have had data inscribed or written on individual satoshis on the Bitcoin blockchain. Every satoshi is given a serial number based on the order in which it was mined. These numbers are known as ordinals and they help the blockchain keep track of where every satoshi is located and who owns it.
The Ordinal protocol makes it possible to create unique and scarce digital assets similar to non-fungible tokens (NFTs) by attaching the data from an asset to a satoshi. They benefit from the security and decentralization of Bitcoin’s blockchain. The Bitcoin mainnet Ordinals software was released in January 2023.
Key Takeaways
- Bitcoin ordinals are NFTs, meme tokens, and other assets on the Bitcoin blockchain.
- Bitcoin ordinals have been controversial in the Bitcoin community because some believe the activity to be similar to spam email.
- Most Ordinals' activity has revolved around digital images.
- The protocol may also be useful for other applications.
How Bitcoin Ordinals Work
The Ordinals protocol assigns more information to the serial numbers of each satoshi, the smallest Bitcoin unit. This extra data is referred to as an inscription.
A single bitcoin can be divided into 100 million satoshis, each worth 0.00000001 BTC. Satoshis are numbered according to the order in which they were mined on the Bitcoin blockchain.
Note
The Ordinals protocol lets users record ownership of assets by attaching information about them to satoshis.
Ordinal inscriptions are written to satoshis. Ordinals inherit the security, immutability, and durability of Bitcoin itself in this way.
How to Mint Bitcoin Ordinals
Bitcoin Ordinals are minted in the same manner as other NFTs. They're just special types of transactions that use the Bitcoin blockchain and network.
- Select a Bitcoin-compatible platform such as Magic Eden.
- Find the section for inscribing or creating an Ordinal.
- Drag your file to the interface, insert your text, or choose your domain if desired.
- Click "Inscribe" or the equivalent button.
This is Magic Eden's Ordinals inscribing webpage:
:max_bytes(150000):strip_icc():format(webp)/MagicEdenInscribeanOrdinal-685bebe22d9d4f16bb10a1d43dce99bb.jpg "Bitcoin Ordinal NFT: Everything You Need to Know (1)")
How to Buy, Sell, and Trade Bitcoin Ordinals
Bitcoin Ordinals can be bought, sold, and traded like NFTs. Several marketplaces such as Ordinals Wallet and OKX allow you to trade Bitcoin Ordinals.
Warning
The Bitcoin Ordinals market is much less active than NFTs on other blockchains so there's less liquidity and interest. It's essential to do your research and due diligence before jumping into Ordinals.
Specific directions for trading Ordinals can be found at each respective marketplace; however, the process will usually look something like this:
- Visit any Bitcoin Ordinals marketplace in a web browser or via an app.
- Create a Bitcoin wallet within an Ordinals marketplace or connect to one that has been used in the past.
- Make sure there is some bitcoin in the wallet to be used for trading.
- Search the marketplace’s various Ordinals collections.
- Find a Bitcoin Ordinal worth purchasing, and use the connected Bitcoin wallet to make the purchase.
Three wallets that support Bitcoin Ordinals are Ordinals Wallet, Xverse, and UniSat. It’s also possible to trade Bitcoin Ordinals in an over-the-counter (OTC) peer-to-peer (P2P) manner.
Warning
Most Bitcoin wallets don't support the Ordinals protocol. You'll have to download a specific wallet or use a wallet associated with one of the Ordinals marketplaces if you're looking to buy, sell, or trade Bitcoin Ordinals. Use caution with new blockchain software, offerings, and protocols.
Bitcoin Ordinals vs. NFTs
NFTs are added to their respective blockchain networks like any other transaction on that chain. Bitcoin Ordinals will use the blockchain's existing network, contributing to the already massive Bitcoin network energy requirements, the minting time that's dictated by network congestion, and fees paid. NFTs on chains that use proof-of-stake consume much less energy and are generally faster.
NFTs are usually minted on platforms that are compatible with several blockchains because most of these chains have evolved to be Ethereum-compatible. Ordinals can only be minted on the Bitcoin blockchain so you must find one that's Bitcoin-compatible. OpenSea is one of the largest NFT marketplaces but it's not Bitcoin-compatible.
Important
Blocks don't have enough storage space to hold digital images, documents, or other assets within them. The inscriptions and tokens represent these assets. The assets themselves are stored off-chain. Ownership is recorded via tokenization but no assets are stored on-chain.
Impact of Bitcoin Ordinals
The impact of Bitcoin Ordinals is best illustrated through the division it's created among Bitcoin users. This functionality on Bitcoin sparked a heated debate among users who have differing opinions on whether Ordinals are beneficial for the network.
Some supporters argue that Ordinals are an innovative and elegant way to make Bitcoin more sustainable over the long term by creating more demand for block space. Bitcoin will eventually lose its block rewards and become completely reliant on transaction fees for miner revenue. They also say that Ordinals attract new developers and users who were previously more interested in other non-Bitcoin crypto projects.
Advocates also claim that Ordinals are more secure, decentralized, and censorship-resistant than traditional NFTs.
Some critics contend that Ordinals are a misuse of the Bitcoin network, however, and a waste of its scarce resources. They point to the large amount of data associated with Ordinal inscriptions and the increased demand for block space which could lead to higher fees and congestion on the network.
They also question the legality and ethics of Ordinals which could be used to conduct scams on the blockchain by issuing fraudulent assets. It's argued that Ordinals aren’t compatible with the original vision and design of Bitcoin which is meant to be a P2P electronic cash system.
What Are Bitcoin Ordinals?
Bitcoin Ordinals are assets that have been tokenized on the Bitcoin blockchain.
How Do I Buy Bitcoin Ordinals?
You can buy Bitcoin Ordinals on NFT or ordinal marketplaces that support the Bitcoin blockchain.
What Is the Difference Between NFTs and Ordinals?
Ordinals are minted on Bitcoin or similar blockchains by inscribing data about an asset to satoshis. NFTs are minted by adding data about an asset to a smart contract on non-Bitcoin blockchains.
The Bottom Line
The Ordinals protocol is a way to issue digital assets on the Bitcoin blockchain. It's been controversial from its earliest days. At least one developer has claimed that there isn’t much that Bitcoin users can do about removing this functionality in a principled manner.
The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimerfor more info. As of the date this article was written, the author does not own Ordinals.
