Ordinals is a protocol on the Bitcoin blockchain that allows for the creation of non-fungible tokens (NFTs) by inscribing data directly onto individual satoshis (the smallest unit of Bitcoin). This protocol was developed by Casey Rodarmor and launched in January 2023. The key idea behind Ordinals is to give each satoshi a unique identifier, allowing it to carry data like images, text, or other forms of digital content, thus creating NFTs directly on Bitcoin.
Key Components of Ordinals
- Ordinal Theory:
- Ordinal theory is the basis of the protocol, providing a method for numbering each individual satoshi in the order they are mined. This creates a unique ID for every satoshi, enabling their distinction and tracking across transactions (Chainlink).
- Inscriptions:
- Inscriptions refer to the actual data (images, text, etc.) inscribed onto the numbered satoshis. This data is stored in the witness data section of Bitcoin transactions, enabled by the Segregated Witness (SegWit) and Taproot upgrades (Chainlink) (Crypto.com).
- SegWit and Taproot:
- SegWit, implemented in 2017, separated transaction data from signature data, allowing arbitrary data to be stored within transactions. Taproot, introduced in 2021, enhanced this capability by improving privacy and scalability, and further easing the storage of complex data in transactions (Chainlink).
How Ordinals NFTs Work
- Numbering Satoshis: Each satoshi is given a unique number based on its position in the blockchain.
- First-In, First-Out Order: When satoshis are transferred, their order is preserved through a first-in, first-out system based on transaction order.
- Storing Data: The actual NFT data is stored within the witness data of a transaction, making the satoshi carrying this data non-fungible (Chainlink).
Popularity and Use Cases
Ordinals have quickly gained traction within the Bitcoin community, leading to various NFT projects. Some notable examples include:
- Ordinal Punks: Inspired by CryptoPunks on Ethereum, this collection includes unique profile pictures created entirely on-chain during the first 650 inscriptions.
- TwelveFold: A collection by Yuga Labs featuring 300 generative art pieces inscribed onto satoshis (Crypto.com).
Benefits and Challenges
Benefits:
- Decentralization: Since Ordinals operate directly on the Bitcoin blockchain, they benefit from its robust security and decentralization.
- Immutability: Data inscribed on Bitcoin is permanent and tamper-proof, ensuring long-term preservation.
Challenges:
- Scalability: Storing large amounts of data on Bitcoin can lead to higher transaction fees and potential network congestion.
- Pruning: Individual node operators can choose to prune certain data, potentially affecting the visibility of some inscriptions (Crypto.com) (Chainlink).
In summary, Ordinals represent a significant advancement in creating NFTs on the Bitcoin blockchain, leveraging recent technological upgrades to inscribe unique data onto individual satoshis, thus enabling new forms of digital assets and art on Bitcoin.
