[EXPLAINER] What are Bitcoin Ordinals (NFTs on the Bitcoin Blockchain) and how do they work? – BitcoinKE
Yuga Labs, a popular NFT creator, has been in the headlines after announcing that they earned over $16 million (735.7 bitcoin) from the auction of 300 bitcoin NFTs in the TwelveFold collection.
TwelveFold, whose auction is now complete, is described as a limited edition, experimental collection of 300 generative artworks enrolled on Satoshis on the Bitcoin blockchain.
“These pieces represent a complete art project and will not have any other use or interact with or be related to any past, ongoing or future Ethereum-based Yuga projects.” – Twelvefold.
Ordinal inscriptions, sometimes referred to as just inscriptions, or just ordinals, are NFTs that you can put directly on the Bitcoin blockchain and that live on the network. An inscription is created when a file, such as an artwork, is written into (inscribed in) units of Bitcoin, called Satoshis.
Satoshis are the smallest individually identifiable units of Bitcoin (100 million Satoshis equals one Bitcoin). Inscriptions, also called digital artifacts, are native to the Bitcoin blockchain and are made possible through the Ordinal Theory Protocol.
Ordinals
The concept of Bitcoin Ordinals was first proposed in a whitepaper by a team of researchers led by Tadge Dryja in 2019. The idea is to create a new type of transaction that allows users to encode arbitrary data into the Bitcoin blockchain, including metadata related to NFTs. This metadata may include information such as ownership origin and other attributes important to NFTs.
However, entering bitcoin only became possible thanks to the Taproot upgrade launched on the Bitcoin network in November 2021, while the Bitcoin Ordinals protocol was first launched in January 2023 by Casey Rodarmor.
Bitcoin Ordinals are a way of encoding arbitrary data into Bitcoin transactions, allowing metadata related to NFTs to be stored on the Bitcoin blockchain. This metadata includes information such as ownership, provenance and other attributes important to NFTs.
The Taproot upgrade enables Ordinals by:
- Reduce the cost of data storage on the Bitcoin blockchain by 75%
- Solving the scalability problem by reducing the amount of data needed to process each transaction
- The introduction of the ‘MAST’ transaction enables the creation of more complex and flexible smart contracts
- Improving the privacy of the network by allowing users to hide the details of their transactions from the public
However, to enter an Ordinal, users are required to run a full Bitcoin node.
Ordinal inscriptions are seen as an improvement on Ethereum NFTs since all metadata is stored off-chain on Ethereum often on the Interplanetary File System (IPFS) – a decentralized file storage, sort of like a blockchain hard drive.
Ordinals essentially allow you to enter “complete” data on the chain, hence the term digital artifacts, according to Rodarmor.
The rise of Bitcoin Ordinals has caused a significant increase in the usage, fees, and storage space of the Bitcoin Network, as shown in the chart above. It also represents a major breakthrough for the Bitcoin application level and could change the narrative from being just a “store of value” to more practical use cases.
If you are interested in buying, selling or trading ordinals, follow these steps:
- Go to ordinalswallet.com
- Click on “Create Wallet”
- Take a backup of your wallet recovery phrase
- Set up a password for wallet access
- Use the Ordinals Wallet address to send some Sats to the wallet
- Go to ‘Collections’ at the top of the page
- Select the collection of orders and the inscription you wish to purchase
- Buy the ordinary (use Sats in your wallet)
See also
Another notable project in addition to TwelveFold is Ordinal Punks, which honors CryptoPunks with a set of 100 Bitcoin NFT inscriptions on the Bitcoin chain.
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