For anyone tuned into the crypto space this year, 2023 has become the year of Ordinals and Bitcoin. These innovative digital collectibles have renewed enthusiasm for the Bitcoin ecosystem.
A recent report by Galaxy revealed that in the first 200 days since the first inscription took place on the Bitcoin network, 1.14 million image-based inscriptions have been minted. That's more than the total number of NFTs that were minted on Ethereum, Solana and Polygon (blockchains that have become synonymous with NFTs over the years) in the first 200 days starting from when the first NFT was minted.
That's not all: thanks to Ordinals, Bitcoin is now the third most popular chain for digital collectibles and still accounted for over half of all Bitcoin transactions in September. The protocol also continues to motivate the Bitcoin community to rethink what they know about everything from block space and size to the true potential of some of Bitcoin's biggest developments in the last few years (like Taproot and Segregated Witness).
At the end of the day, Ordinals are a testament to the power of decentralized technologies. To inscribe an Ordinal is to help move towards a future where trustless technologies, including those built on the Bitcoin protocol, ultimately give the wider crypto ecosystem a chance to solidify their place in an emerging digital economy.
How Bitcoin Ordinals Came to Be
Software developer Casey Rodarmor developed Ordinal theory and launched the project in 2023, but he had actually started developing the idea a year prior as he considered how it might be possible to create Bitcoin NFTs.
After working in the Ethereum ecosystem, Rodarmor was more convinced than ever that he wanted to bring new and innovative ideas to Bitcoin in a way that others had believed impossible.
Part of Rodarmor's intention was to make Bitcoin fun during the bear market, but he did much more than that. With Ordinal theory, the Bitcoin community was exposed to a cascade of new ideas and protocols, all of which were inspired by Ordinals.
How Bitcoin Ordinals and Inscriptions Work: Digital Artifacts vs. Bitcoin NFTs
Until Ordinals, every bitcoin was the same as the next in the sense that they were all perfectly fungible. But Ordinal theory attempts to identify and differentiate individual satoshis, the smallest denomination of bitcoin. Ordinal theory effectively assigns unique numerical values to individual satoshis. This systematized way of labeling sats effectively makes them a non-fungible token or Bitcoin NFTs.
The values are assigned based on the order in which satoshis are mined, rather than the wallet addresses holding them. This creates the ability to track every individual satoshi in a way that was previously impossible.
But what really sets Bitcoin Ordinals apart is their capacity to create Ordinal inscriptions. Ordinal theory assigns values to satoshis, but inscriptions attach information for “digital artifacts” to a unique satoshi using Taproot and SegWit.
Digital artifacts and inscriptions
Digital artifacts are digital assets or items stored on a blockchain. An Ordinal inscription can include images, audio files, videos, and other forms of digital content. On blockchains like Ethereum, digital artifacts like NFTs have a critical drawback—they are usually hosted off-chain.
This means if the hosting platform experiences downtime or the off-chain database is compromised, the digital artifacts are at risk. Bitcoin Ordinals are stored directly on-chain when they’re inscribed onto the associated satoshi.
An inscription, as defined in the Ordinals documentation, involves "[inscribing] sats with arbitrary content, creating bitcoin-native digital artifacts, more commonly known as NFTs. Bitcoin inscriptions do not require a sidechain or separate token."
In simpler terms, inscriptions are digital artifacts. In fact, most people use the two terms interchangeably. But Ordinal inscriptions are unique in their ability to be written onto the Bitcoin blockchain in the form of Bitcoin transactions.
Ordinals’ on-chain nature gives them a level of security and permanence that is unparalleled in the world of NFTs. Even if the hosting platform were to face issues, the inscriptions would remain intact and securely anchored to the Bitcoin blockchain.
Evolution of Bitcoin Ordinals
Since Bitcoin Ordinals launched, they’ve seen several developments that continue to improve the protocol. Like with all crypto technologies, Ordinals (and Bitcoin itself) is ever-evolving. Here are some of the developments that have happened in the Ordinals community:
Recursive inscriptions are inscriptions that refer to previous Ordinals within the Bitcoin blockchain. They essentially retrieve data from other existing inscriptions for use in future inscriptions.
You can think of them as a digital trail of breadcrumbs, where one inscription daisy-chains into another. Recursive inscriptions have sparked debates about the potential for creating intricate networks of interconnected content, enabling new forms of storytelling and digital art that extend across multiple transactions.
"Cursed" inscriptions are inscriptions not currently recognized and indexed by the Ordinal protocol. These inscriptions cannot be identified and assigned an inscription number within the existing system. The term "cursed" was coined as a catchall to describe inscriptions that either accidentally or intentionally misuse opcodes to create inscriptions. When this is the case, they become invalid or “cursed.”
In June of 2023, with the release of Ordinals Version 0.6.0, a solution was created for cursed ordinals. This upgrade introduced the necessary changes to recognize and index previously unrecognized inscriptions.
Proposed future changes
There are a few more changes to the protocol that are generating discussion and may be implemented in the future.
In the wake of challenges that emerged from solutions for cursed ordinals, Rodarmor proposed the idea of making inscription numbers perpetually unstable. This means that inscription numbers would no longer remain constant and would change over time. This change is aimed at streamlining the Ordinals codebase and making it more adaptable for future protocol alterations.
The proposal also includes retroactively “blessing” all previously cursed inscriptions and continuing this practice for future inscriptions. This process would involve reverting negative inscription numbers to positive ones.
Ultimately, Rodarmor announced that inscription numbers would remain stable. But the inscription number discussion is just one of a number of PRs that have been opened to discuss other changes to the Ordinals system. As with the introduction of Ordinals themselves, these proposed protocol changes have been met with mixed reactions. However, most of the community is supportive of needed changes to improve the ord protocol.
The Impact of Bitcoin Ordinals
Bitcoin Ordinals have made their mark in the cryptocurrency landscape, expanding possibilities and creating new use cases. They didn’t just create a new way to put digital artifacts on the blockchain, they sparked a Bitcoin renaissance. Ordinals have breathed fresh life into Bitcoin, generating a renewed fascination with building on Bitcoin. Before Ordinals, some were questioning Bitcoin's cultural relevance and its ability to innovate. Ordinals have effectively reversed that assumption and served as a sort of guide to Bitcoin's true potential.
Ordinals inspired more new ideas like BRC-20 tokens, Bitcoin’s answer to Ethereum's ERC-20 tokens and the BRC-721E token standard, which allows users to bridge NFTs from Ethereum to Bitcoin, among other innovations. Recursive and cursed inscriptions have also been used in a number of Ordinals collections (like OCM Dimensions, for example), and Bitcoin community members are already discussing how to create everything from video games to increased smart contract functionality utilizing these technologies.
Thanks to Ordinals, Bitcoin wallets (like Leather, a Trust Machines product) have become more versatile and usable in Web3, accommodating the storage and management of Ordinals alongside traditional BTC holdings. NFT marketplaces have also integrated Ordinals, providing a secure and on-chain alternative to conventional off-chain NFTs.
And now, Casey Rodarmor is introducing Runes as a potential replacement for the BRC-20 token protocol. This new endeavor is still in its infancy, but one thing is certain—Bitcoin Ordinals have shaken up the Bitcoin game in 2023.