Editor's note:
With the introduction of the Ordinals protocol, the Bitcoin ecosystem has ushered in a revolutionary transformation. It hasn't been all smooth sailing for Ordinals in this round of the market, with the token skyrocketing or falling from its birth to Bitcoin Core developers threatening to "fix the inscription".
Challenges such as network congestion caused by inscription minting have sparked widespread discussion about the future direction of Bitcoin. Bankless reviewed the design principles and adoption of Ordinals, pointing out the opportunities and risks faced by the Bitcoin ecosystem in the face of challenges. He believes that in the future, the development of the Ordinals space and its impact on Bitcoin and the broader crypto economy will be worth watching. BlockBeats compiled the original text as follows:
The core feature of the Ordinals system is the ability to burn arbitrary data on satososhims. That's why lately the term "inscription" has become synonymous with "Bitcoin NFTs" or "Ordinals-style NFTs."
This inscription process is done by including data in Bitcoin transactions. Specifically, the data is placed in transaction witnesses, which are part of Bitcoin transactions and often contain signatures and other proof of authority.
The data inscribed here can be varied, from simple text to images, SVG or even HTML. Once Satoshi is inscribed by the data, and the transaction is mined, the inscription becomes permanent. It is as secure, immutable, and decentralized as any other data on the Bitcoin blockchain. This means that once inscribed, a satoshi carries its data forever, always distinguishing it from other satososashis.
In addition, thanks to the Ordinals theory, we can trace the circulation and ownership changes of an inscribed satoshi over different transactions and time periods. This makes it possible to trade, give away, or sell these engraved satoshis coins just like any other Bitcoin transaction. However, special care must be taken in the transaction to ensure that a particular inscribed satoshi is transferred correctly, as Bitcoin transactions usually do not distinguish between individual satoshi coins.
Ordinals on-chain
For reasons of flexibility and utility, many NFTs on Ethereum store their art and metadata off-chain, for example, on a storage network like IPFS, rather than directly on Ethereum. This is because in addition to its narrow data limits, on-chain storage costs on Ethereum are also high.
In contrast, each Ordinals mint is entirely on-chain on the Bitcoin chain, thanks to the way the underlying data is stored in transactions, and the storage cost is much cheaper than Ethereum NFTs on the chain. While they are lacking in advanced smart contract features, they have the best permanence versus cost ratio in today's NFT space.
BRC-20
The Ordinals approach has fueled the popularity of creating 1/1 NFTs and NFT collections on Bitcoin. However, the top-tier Ordinals itself ushered in BRC-20, an experimental and unofficial standard for fungible tokens built through inscriptions.
BRC-20 is not a smart contract-based token like Ethereum's ERC-20, and they are not fully fungible either. They are created by inscribed a fragment of JavaScript object representation (JSON) text into a Bitcoin NFT. This JSON contains the basic information about the token, such as the maximum supply and token identifier. For transfers or buying and selling, NFTs are additionally inscribed for bulk tracking balance adjustments, such as 100 tokens, 500 tokens, 1,000 tokens, etc.
In recent months, the BRC-20 token has risen rapidly in popularity, with $ORDI becoming the first token in the crypto economy to break through a $1 billion market cap.
Rare sats
Rare Sats, sparked by the Ordinals protocol, brings a new dimension of cognition to Satoshi.
At the heart of understanding Rare Sats lies in the Rodarmor Rarity Index, named after Casey Rodarmor, the founder of Ordinals. The index classifies satoshis into different categories based on their uniqueness and scarcity. These categories range from the most prevalent, which accounts for the majority of Bitcoin's supply, all the way to the mysterious, which includes the first Satoshi mined in Bitcoin's genesis block.
The index also identifies other important categories such as unusual, rare, epic, and legendary satososes, each with its own unique characteristics and maximum supply, often associated with key moments in Bitcoin's timeline, such as mining difficulty adjustments and halving events.
In addition to these categories, there are other unique types of satoshis that are historically significant, such as Pizza Sats, Palindrome Sats, Block 9 Sats, and more, each of which honors a special moment or pattern in Bitcoin's history. For example, Pizza Sats commemorate the first known transaction in Bitcoin's history to purchase a physical commodity, while Palindrome Sats have an intriguing digital symmetry.
The growing fascination with Rare Sats has given birth to the practice of "Sat Hunting", transforming ordinary satoshis into highly sought-after collectibles, creating one of the newest segments within the NFT ecosystem.
Top Ordinals Marketplace & Wallet
To create and transfer Ordinals and BRC-20, you'll need a wallet that can identify and manage Satoshi Inscription. Some of the wallets that have become popular in this regard include:
· Xverse - "Bitcoin Wallet for Everyone"
· Leather – "Entering the Bitcoin Economy"
· OKX - "Your Web3 Portal"
Once you're ready to use the wallet, you can start browsing the popular Ordinals marketplace to see if any NFT listings or BRC-20s catch your eye. Some of the largest of these markets include OKX's Ordinals Market, Magic Eden, and Gamma.
Ordinals adoption
In 2023, the Bitcoin community began to respond to the surge in Bitcoin NFT minting with the introduction of the Ordinals protocol by Casey Rodarmor, which promoted a way to convert individual satoshis (the smallest denomination of Bitcoin) into non-fungible digital artifacts.
Notably, the Ordinals protocol has caused ridicule among some of the "older generation" staunch Bitcoin supporters, much like these same people who objected to Bitcoin-based Counterparty NFTs in 2014 being considered spam. Their argument is that Bitcoin should always be used only for payments.
In contrast, Counterparty's veterans and a new generation of creative experimenters believe that Ordinals' approach has the potential to revolutionize Bitcoin's NFT scene. On top of that, these new NFTs are driving up Bitcoin miners' transaction fee income, finding an alternative direction for Bitcoin's dwindling block rewards in the future.
Zoom in on the viewing angle
The introduction of Ordinals not only diversified the uses of Bitcoin, but also sparked a debate about the fundamental nature of Bitcoin. While some traditionalists advocate keeping Bitcoin as the original purpose of the payment system, a growing number of people see these developments as a natural evolution of the network's capabilities, opening up new avenues for creativity and financial opportunity.
By enabling the storage of diverse data types on-chain at a relatively low cost, the Ordinals protocol has proven to be a legitimate disruptor in the NFT space. It challenges preconceptions about what can be achieved on the Bitcoin blockchain, extending its utility beyond simple monetary transactions.
However, this innovation is not without its challenges. The proliferation of Bitcoin NFTs, particularly the popularity of BRC-20 tokens and the practice of "Sat Hunting", has led to increased network congestion. This phenomenon has raised concerns about the scalability and efficiency of Bitcoin L1 as it enters new areas of digital asset creation and management.
Going forward, ongoing discussions around network congestion, transaction fees, and the role of NFTs in the Bitcoin ecosystem are likely to shape the future direction of the network. As such, the development of the Ordinals space and its impact on Bitcoin and the broader crypto economy are worth watching.