Bitcoin Ordinals are making waves in the Bitcoin industry as an emerging technology that improves and diversifies the Bitcoin blockchain. In this article, we look at what Bitcoin Ordinals are, how they work, and how they can be used in different industries.
What Are Bitcoin Ordinals?
Bitcoin ordinals are units of satoshis (A satoshi is the smallest division of Bitcoin with a value of 0.00000001 BTC) that have been inscribed with a piece of information like an image or video, transforming them into a Bitcoin Ordinal. These assets are a new use case of Bitcoin and are created and used on the Bitcoin blockchain.
Think of it this way: you have two identical bottles of wine with serial numbers. These bottles contain the same vintage wine and are sold for the same price. While these bottles are unique based on their serial numbers, they both have the same intrinsic value. Now imagine that one of the bottles was signed by the winemaker. While the two bottles are still identical and can be sold for the same price, the value of the signed one increases significantly.
This is essentially how Bitcoin Ordinals work.
It takes an identical satoshi, which is a fungible digital asset, and adds a unique piece of information to it, making it a rare and collectible item, like the signed bottle of wine. While the underlying satoshi retains its value and can be traded like any other bitcoin, the added uniqueness of the inscription on a Bitcoin Ordinal makes it more valuable and sought after by collectors and enthusiasts.
What Is Ordinal Theory?
Ordinal theory is a method of assigning numbers to satoshis in the order in which they are mined. It tracks each satoshi as they are spent in transactions.
Metadata is attached to each satoshi that already has an ordinal number in a process called inscribing. This metadata can be any file that is under 4 MB.
To create an inscription on a Bitcoin Ordinal, you would first need to create a taproot output with a file you want to inscribe. Then, you will need to spend the output thus revealing the inscription to the rest of the blockchain participants. Inscriptions are wrapped in “envelopes”, meaning that it is stored in a formart that doesn’t change the script.
Once an inscription is created, it is permanently and immutably recorded on the blockchain. This is a highly secure way to store information, as there is no need for any third-party validation.
By keeping everything on the blockchain, Ordinals are incredibly durable and tamper-proof. This makes them an ideal choice for creating inscriptions that are meant to last a lifetime. Whether it’s a meaningful quote, an image, or a special date, any inscription made with Ordinals will remain intact and will never be lost as long as the blockchain exists.
Ordinal Rarity
Data provided by Dune Analytics shows that the highest volume of minting occurred on March 1, 2023, with over 24,000 inscriptions made that day. Text files were the most commonly inscribed with 15,981 inscriptions, followed by image files with 8,817 inscriptions. Other file types such as applications, audio files, models, and videos had only a few inscriptions each.
The total number of Ordinals inscriptions to date is more than 21,000,000, but given the relatively new concept of Ordinals, they are still relatively rare. The unique images or text inscribed on some Ordinals make them even rarer since they cannot be duplicated. As a result, Bitcoin Ordinals are considered a valuable and unique asset that is catching the attention of collectors and enthusiasts.
Where Can You Buy Bitcoin Ordinals NFTs?
There are few ways in which you can buy Bitcoin Ordinals. The first is through a collection’s social media channel like Discord while the second and safest option is through Bitcoin Ordinal Wallets.
An Ordinal inscriptions wallet is much like a traditional Bitcoin wallet except that anyone can create, buy, sell, swap, and trade Bitcoin Ordinals in them. To accomplish this, the wallets are designed specifically to host inscriptions. Examples of leading Ordinals wallets include Xverse and Hiro.
Are Bitcoin Ordinals a Good Investment?
Bitcoin Ordinals have accomplished what was once considered as ‘impossible’ on the Bitcoin network.
Despite the monumental move, it is relatively early to know what the future of Bitcoin NFTs and how they will affect the network, and the rest of the industry. You should, therefore, do your research on any Bitcoin Ordinals project you want to invest in, and always remember to only invest what you are willing to loose.
