How to make and sell Bitcoin NFTs

How to make and sell Bitcoin NFTs

Bitcoin nonfungible tokens (NFTs) have caught the crypto world’s attention quickly, opening up new possibilities for the oldest blockchain and digital art enthusiasts. Since their explosion in 2020, NFTs have typically been minted and traded on Ethereum-based platforms, in addition to other blockchains, such as Cardano and Solana.

However, a new protocol known as Ordinals was launched in January 2023 by former Bitcoin Core contributor Casey Rodarmor, which leveraged the 2021 Bitcoin Taproot upgrade to extend the cryptocurrency feature and enable the chains of Bitcoin-native NFTs.

Taproot offered a way to extend the base layer’s blocking capabilities by condensing the size of transactions requiring less data usage and encouraging the use of smart contracts on Bitcoin. The upgrade greatly increases the types of transactions possible on Bitcoin, including decentralized finance (DeFi) and NFT applications.

By February 2023, the world’s largest issuer of NFTs, Yuga Labs, had already announced the creation of TwelveFold, a new NFT collection issued on Bitcoin, thereby supporting Bitcoin NFTs and confirming their success.

Here’s what you need to know about Bitcoin NFTs, how they differ from the more popular Ethereum-based alternative, and how to create and sell them.

What are Ordinals?

Ordinals are serial numbers imprinted in a single, unique satoshi (sat), the smallest unit of Bitcoin (BTC), through ordinal theory that assigns them in the order they are mined. The first satoshi in the first block has the order number 0, the second has the order number 1, and the last satoshi in the first block has the order number 4,999,999,999.

Colored coins were the first representation of such a concept back in 2012, and were cryptoassets repurposed to represent something of value by adding metadata information. Counterparty is another attempt to embed data into regular Bitcoin transactions. However, it has its own XCP token, which is required for certain functionality, making it officially an altcoin and not an extension or second layer to Bitcoin.

Ordinal theory rewards satoshis with numismatic value, allowing them to be collected and traded as rarities. Satoshis are given individual identities to be tracked, transferred and embedded with meaningful arbitrary data, such as images, text or videos, through a Bitcoin transaction that remains permanently part of the blockchain. Such data can be viewed in Ordinals-compatible wallets, such as the Sparrow wallet, and online explorers.

Inscriptions

The process of assigning assets to individual satoshis is called inscription. Inscriptions are digital objects native to the Bitcoin blockchain, the digital equivalent of physical objects.

They are completely on-chain, do not require a sidechain or a separate token, and use the Ordinals protocol to enter stakes with word content, an index, an explorer, and a wallet that relies on Bitcoin Core for private key management and transaction signing.

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Ordinals allow the position of specific satoshis and their ordinal numbers to be tracked, and can be viewed with the Ordinals explorer. Unlike traditional NFTs that rely on off-chain content stored on the Interplanetary File System (IPFS), Inscriptions are endowed with Bitcoin’s immutability and security. They are permissionless and uncensorable digital artifacts since they can be sold royalty-free.

How to make Bitcoin NFTs

The Ordinals ecosystem is in full development, but availability is still limited to two primary ways to mint an ordinary NFT.

The first method of entering Bitcoin Ordinals requires some technical skills, to run a full Bitcoin node and then install Ord on this node to enter satoshis into an Ordinals wallet and create Bitcoin Ordinals NFTs. Two types of Bitcoin wallets can process Ordinals; they both need to be Taproot compatible and have a “coin check” feature to avoid using Ordinal satoshis as network fees or accidentally sending them in another transaction.

  • The Sparrow wallet is only recommended for receiving Ordinals to avoid sending Ordinals rate unintentionally. However, using it does not require running a full node. How to set up a Sparrow wallet.
  • An Ord wallet requires running a full node of 500 GB capacity. Unlike the Sparrow wallet, an Ord wallet allows you to create inscriptions and freeze the inscribed rates to prevent accidental spending. How to set up a Word wallet.

Whichever wallet you use, make sure you have some Bitcoin available to pay for the transaction fee.

The second method is simpler and involves using a no-code tool, such as Gamma or Ordinalsbot.com, to enter your ordinal NFT. How to set Ordinal to Gamma:

  • Select the file type you want to use to create your Bitcoin NFT.
  • Upload the required file from your computer.
  • Set up the transaction fee depending on how long you want to wait for the Ordinal to be minted.
  • Copy and paste the Bitcoin address where the digital artifact will be sent, which must be an Ordinal compatible address or a Taproot address.
  • Wait for the NFT to be minted. Such a wait depends on the fee you paid for the process to be completed and can be hours or even days. You will be able to track the embossing status via a link you will receive by e-mail.
  • See your embossed Ordinal on OrdinalsViewer.

How to trade Ordinals

While the proper infrastructure and marketplaces for trading Bitcoin Ordinals are being built, the digital artifacts are traded peer-to-peer over-the-counter (OTC) in dedicated Discord servers, with escrows as intermediaries and tracked on Google Sheets.

Compared to the more popular NFTs traded via Ethereum and other blockchains, Bitcoin Ordinals trading appears to be an outdated method. Still, this has not contained public interest in Bitcoin NFTs, with hundreds of thousands of newly minted digital items appearing within just a few weeks of launch.

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The Ordinals market is completely trustless, using the secure Partially Signed Bitcoin Transaction Technology (PSBT), which allows users to easily sign transactions in cold storage, and atomic swaps without intermediaries and a 2.7% market fee. A system to verify creators is being developed to include royalties of 4.2%.

How to buy Bitcoin NFTs

Taproot compatible wallets must be used to purchase Bitcoin Ordinals, such as the Ordinals wallet, Xverse and Hiro wallets. The Ordinals wallet is very easy to use and the others are also similar:

  • Create an account, secure your seed phrase and deposit money into your wallet.
  • Select the order lists you wish to buy and click on “Buy now”.
  • Once the transaction is completed, Ordinals will be added to your wallet.

How to sell Bitcoin NFTs

Similar to buying a Bitcoin NFT, you need to select a Bitcoin Taproot compatible wallet and download it.

  • Create an account, secure your seed phrase and upload your inscription. The fee will depend on the file size and how quickly you want the transaction to be completed.
  • Once your file has been entered onto the blockchain, you can view it on the Ordinals.com enrollment page.
  • You can freeze Ordinals to ensure you don’t use them.
  • You must use a peer-to-peer OTC market, usually the Bitcoin Ordinals Discord server, to sell your inscription.

It is recommended that special attention be paid to these trades. Being in an unregulated peer-to-peer OTC market, the platforms are full of scammers trying to catch the latest Bitcoin NFT craze.

Ordinals vs. traditional NFTs

A few differences separate Ethereum-based traditional NFTs from Bitcoin Ordinals, although they both tend to be grouped under the same umbrella of digital art. The creator of Bitcoin Ordinals, Casey Rodarmor, defines Bitcoin NFTs as authentic digital artifacts because they are on chain and enjoy all the good qualities of Bitcoin. Here are the main differences:

  • Bitcoin inscriptions are always immutable, while Ethereum-based NFTs can technically be changed or deleted by the contract owner. Traditional NFTs need to be revised to become immutable, which requires deep knowledge of the Ethereum Virtual Machine (EVM) and Solidity.
  • Bitcoin inscriptions always have content on the chain, making it impossible to lose. It is durable and scarcer because inscription creators must pay fees proportional to the size of the content. In contrast, Ethereum NFT content can be off-chain and stored on platforms such as IPFS and can be lost.
  • Bitcoin inscriptions are more secure because the blockchain is the most secure. Inscriptions can be sold with PSBT without a third party, such as an exchange or marketplace, needing to transfer them on the user’s behalf. On the other hand, Ethereum NFTs tend to give intermediary platforms unlimited permission over a user’s NFT, and the use of complex smart contracts can be challenging to interact with for the common non-techie looking to trade digital art.
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Unlike NFTs, which are minted as brand new tokens, Ordinals have the raw data written directly onto the stakes of the Bitcoin blockchain.

Bitcoin NFT Controversy

The new Ordinals protocol has raised an important question and triggered a heated debate among the NFT community. Should Bitcoin be just money, or should it extend its functionality to other use cases? Is the Ordinals Protocol an Attack on the Bitcoin Network?

The Bitcoin blockchain has traditionally only been used for payment transactions due to its limited block size and network architecture. Such infrastructure favors solutions built on top of the blockchain as additional layers to increase the network’s programmability and scalability.

The latest Ordinals craze has raised many eyebrows among the BTC community. Some are concerned that it could distract from Bitcoin’s primary use case as a medium of exchange and whether Ordinals make good use of block space. Ordinals can be images, audio clips, or even games that inevitably require space that is subtracted from the financial data, significantly reducing on-chain confirmation times.

Bitcoin’s fungibility

Bitcoin’s fungibility – one of the main properties of money – is also challenged by Ordinals. This is because inscriptions are printed into a satoshi, making it a rare unit, just as numismatic coins are rare physical objects used for collections.

Ordinal satoshis become individual identities that can be tracked, transferred and imbued with meaningful information, such as text or an image, making the satoshi unique and turning it into a de facto NFT. On the other hand, the traditional attitude sees all satoshis as equal, or they begin to lose a significant property of money.

Full node costs

A few weeks after the project was launched, a record 4MB block was created, raising concerns among the community about the future efficiency and cost of the blockchain and its full nodes. The average size of a Bitcoin block had never exceeded 1.5 MB before the launch of Ordinal NFTs.

Inscription contrarians fear that increasing the Bitcoin blockchain size due to the large transactions and blocks will increase the requirements and costs of devices running a full node. The counter argument is that for the Bitcoin blockchain to be more secure, the blocks must be full, which would justify users paying a higher fee.

The debate will unfold in the future as the Ordinals market takes a more robust shape and new opportunities emerge. Ultimately, Bitcoin’s true spirit and value lies in its resilience to lead the market in the direction people want.