Ordinals catching fire, how does it work

Over the past few days, Bitcoin NFTs have generated a lot of buzz in the crypto space. For the first time ever, NFTs have been brought to the Bitcoin Blockchain and expanded the functionality of the chain beyond financial transactions. Since the launch of the Ordinal Protocol, the number of inscriptions on the blockchain has surpassed 100,000, featuring a wide range of items from cryptopunks to the classic first-person shooter game Doom. In this article, we will explore the evolution of Bitcoin NFTs, delve into the workings of the Ordinals Protocol, and examine the events that have led us to this point and a mini “How To” guide.

History of NFTs on Bitcoin

Bitcoin and NFTs have a deep relationship with each other. The history of NFTs can be traced back to the early years of the Bitcoin blockchain. The first iteration of NFTs can been pinpointed Colored Coins. The open-source protocol synthesized digital assets on top of Bitcoin, as early as 2014. While the protocol had no mentions of ‘Non-Fungible Tokens’, colored coins is unanimously considered to be the initial step towards creation of NFTs.

Post Colored Coins, the counterparty protocol emerged as a next monumental step for NFTs. Built on top of the Bitcoin blockchain, counterparty allowed users to mint, buy and sell NFTs on the Blockchain. Early NFTs such as Spell of Genesis (game) and Rare Pepe gained prominence on the protocol and were the frontrunners of the NFT market.

While Bitcoin was the home to the initial wave of NFTs, they failed to gain significant traction. NFTs on Ethereum and other Layer-1 chains were thriving, while NFTs on Bitcoin struggled. NFTs on Bitcoin sidechains/Layer-2 solutions did not appeal to investors, and limitations with Bitcoin’s structure continued to hinder digital collectibles on the chain. Additionally, the perception that Bitcoin’s ultimate purpose is to act as a settlement for financial transactions did not help.

The relationship between Bitcoin and NFTs in recent times have been minimal — until now, with the launch of Ordinals.

Introduction to Ordinals

In January of this year, a new protocol called Ordinals was deployed on the Bitcoin blockchain. Created by former Bitcoin Core Contributor, Casey Rodarmor, Ordinals are a fresh take on NFTs on the bitcoin blockchain. Unlike previous attempts of having NFTs stored on Bitcoin sidechains/layer 2s, Ordinals permits entire NFTs to be stored natively on the bitcoin blockchain.

The protocol allows bitcoin node operators to inscribe satoshis (smallest unit of bitcoin) with arbitrary content, creating bitcoin-native artifacts. This allows satoshis to store images and videos on the mainnet.

How Ordinals work?

Ordinals work by using the Ordinals theory. Put simply, the theory works by keeping track and ordering satoshis (sats for short) based on the order they are mined. Given each Bitcoin contains 100,000,000 Sats, each sat is considered as individual identities. Ordinals help in numbering each of the sats and give their position in the bitcoin supply. 

Each of these sats can be tracked, transferred and imbued with meaning by node operators. This allows text, images, video and audio to be inscribed and linked into each of the individual sats, unlocking new possibilities on the Bitcoin Network. 

With the total of 21 million Bitcoin, the network will theoretically be able to store 2.1 quadrillion Ordinals on chain. The rarities of these depend on the position of the sat and the events on Bitcoin. For example, the first sat of a bitcoin block has a higher rarity than the subsequent ones. The first sat of each halving cycle and the first sat of the genesis block will obviously have the highest rarity.

Two critical updates to the Bitcoin blockchain — SegWit and Taproot — have paved the way for the creation of Ordinals. 

  • SegWit Upgrade: Changed the Bitcoin transaction format and increased Bitcoins block size from 1MB to 4MB
  • Taproot Upgrade: Blockspace savings and improved transaction throughput

Both these updates have been monumental for the introduction of Ordinals on Bitcoin.

Digital Artifacts, not NFTs

Rodarmor refers to the inscriptions on the Bitcoin blockchain as something beyond NFTs, calling them Digital Artifacts. A key reasoning behind the alternative name lies with the current flaws of NFTs residing on blockchains like Ethereum.

The state of NFT file storage on most blockchains is still far from optimal. Most developers store the files representing NFTs on cloud storage solutions like IPFS. In reality, most NFTs follow this structure and actual NFTs are not present natively on-chain. 

In comparison to this, all the inscriptions on the Bitcoin are stored directly on-chain, making them fully decentralised and immutable. Once any inscription is made, they remain permanent and cannot be edited or deleted forever. In some sense, these ordinals are what NFTs are truly meant to be.

Additionally, token standards used for NFTs like ERC 721 and ERC 1559 with unique token IDs and the type of complexity leads to higher transaction fee, on other blockchains. This is not the same for Digital Artifacts as sending inscription cost relatively lower due to the Taproot update on Bitcoin.

The Meteoric Rise of the Digital Artifacts on Bitcoin

Digital Artifacts on Bitcoin have seen a surge in popularity over the past few weeks and have been the subject of most discussions. The growth has been a sight to behold as the daily image ordinals mints grew 14,774% in 2 weeks, while all ordinals are up 15,900% over the same period. 

Source: Dune Analytics (@ilemi)

Over the past week, we have seen a flurry of inscriptions being made that mirror the bluechips present on other chains like Cryptopunks. Multiple sales of NFTs at high orders of magnitude took place, as investors rushed to purchase the earliest inscribed collections. Ordinal Punk, a collection of 100 punks on Bitcoin received the most attention due to its high sales and scarcity attached with it. 

With the uptick in interest to inscribe NFTs on Bitcoin, there has been a significant impact on on-chain activity. The block size has been increasing steadily on Bitcoin. The daily total block size has surpassed 300MB over the past few days, up drastically from an average of 120–200MB added to the chain previously. 

Reception from the Bitcoin Community

Ordinals have split the Bitcoin community in half. On one end, advocates have been quite forthcoming in giving their support to the ordinals. 

On the contrary end, chain bloat, transaction fees and complexity for node operators have been cited as criticisms for the innovation.

How to inscribe Ordinals?

At the current stage, inscribing, selling and transferring Ordinals is a bit tedious. Inscribing ordinals requires an operational node or you could use websites like Ordinals bot.

Here is a thread that summarizes the steps to inscribe Ordinals and purchase them.


Ordinals have been a monumental innovation to the Bitcoin Blockchain, whether individuals like it or not. For the first time ever, NFTs can be stored on Bitcoin. While the methods of inscribing or procuring ordinals has its own series of complexities surrounding them that is hindering the current adoption, there are a multitude of developments occurring behind the scenes to make this process seamless. Ordinals could truly be the key advancement that solves the problem of dwindling rewards for bitcoin miners. 

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