The world of Bitcoin NFTs is ablaze thanks to Ordinals.
That's because the Bitcoin protocol has shown that Bitcoin isn’t just a cryptocurrency. In fact, the it has given us only a glimpse into what's coming for the Bitcoin chain
In this latest article from our 'Not Your Ordinary NFTs: An Exploration of Bitcoin Ordinals' series, we’ll dive into how the Ordinals protocol is transforming the market for non-fungible tokens.
Here's a quick guide.
How NFT Marketplaces usually work
In the current environment, NFTs are minted and verified via tokenization standards built on top of blockchain protocols, such as ERC-721 on Ethereum or Bitcoin’s Counterparty, and exchanged on centralized marketplaces like OpenSea, Rarible, Nifty Gateway, and others.
Transactions meeting these standards will require wallets which support them, find themselves at the mercy of network congestion for speed and cost, and suffer inherent susceptibility to third party risk due to their reliance on centralized marketplaces.
But what if there was a way to de-bloat the market? What if you could mint, buy, and sell NFTs directly on a blockchain’s base layer, and imprint them upon its smallest currency units?
Enter Bitcoin Ordinals
Bitcoin “Ordinals” refers to a protocol that allows each individual satoshi – or sat – to be identified and tracked through time and space according to the order in which it was mined. This protocol allows for unparalleled on-chain asset verification by way of making sure that if any individual sat moves from one wallet to another, its ordinal stays the same.
Ordinals also allow the inscription of many different types of content. You can inscribe an image or text, videos, music, you name it, onto individual satoshis on the Bitcoin network.
And perhaps the most exciting thing is this: these inscriptions occur as a BTC transaction, which means that they are inscribed directly on the Bitcoin blockchain. You can read more about the theory behind Ordinals and the inscription process here.
In practice, inscription allows for content data to be tracked and traded just like any other Bitcoin transaction and without involving multiple layers of protocol and centralized marketplaces. Immutable, uniquely identifiable, and permanently extant on the Bitcoin network, the data inscribed to this individual sat is now a digital artifact, and can now have its movement and ownership tracked across time and space.
In other words, a sat inscribed with Ordinal data is an non-fungible token without the bloat.
Bitcoin Ordinals’ influence on the NFT market
Ordinals have completely reignited the discussion around Bitcoin NFTs since their launch. Transaction and currency volumes have exploded, and new marketplaces for Ordinal NFTs have sprung up.
One of the main reasons why is that thanks to inscription services, it is much, much easier to create and trade an Ordinal NFT than via traditional minting methods. An Ordinal inscription removes the need for a higher-layer smart contract, lowering the barrier of entry for prospective creators, buyers, and sellers. This is a great way to attract them to technology that makes use of Ordinals, and also helps offset what can be higher transaction fees associated with larger block sizes due to inscription.
Plus, as we outlined in our last series entry, users can also avoid having to download, sync, and run a full Bitcoin node. The best platforms have inscription services that allow users to bypass the most technical steps when inscribing an Ordinal, though they still need a wallet (like Hiro Wallet or Xverse wallet) and are required to pay a fee based on network congestion.
Also offsetting those costs are the new ways of identifying and assigning value and collectability to NFTs and digital artifacts utilizing Ordinals inscription. Since each sat can now be identified and tracked, value exists not only in the media inscribed onto the Bitcoin blockchain, but in the Ordinals data of the sat itself.
The software engineer behind Ordinals, Casey Rodarmor, describes this as such:
- Common: any sat that is not the first sat of its block
- Uncommon: the first sat of each block
- Rare: the first sat of each difficulty adjustment period
- Epic: the first sat of each halving epoch
- Legendary: the first sat of each cycle
- Mythic: the first sat of the genesis block
Here’s how Casey’s categories map onto the current global satoshi supply:
- Common: 1.9 quadrillion
- Uncommon: 745,855
- Rare: 369
- Epic: 3
- Legendary: 0
- Mythic: 1
Several platforms gained a lot of traction with Ordinals fans early on, including Gamma, Neoswap, ORDx, and Ordswap. ORDx and Ordswap, the first two Ordinals marketplaces, allow buying and selling parties to interact directly on the trustless market. This eliminates the need for a middleman, increasing the decentralization of the overall Bitcoin NFT market.
Ultimately, all of them provide user-friendly interfaces for Ordinals seekers.
Ordinals and the future of the BTC blockchain
The Ordinals-based market is growing rapidly as builders realize the power of this technology and its potential to revolutionize the NFT community. The amount of people who are still flocking to the marketplace for Bitcoin Ordinal collections has been a boon for NFT creators and the wider ecosystem as a whole.
A big reason is because the protocol has reignited the excitement around building on the blockchain’s base layer.
Ordinals have essentially increased transparency, security, and accountability on the Bitcoin blockchain, and allows unprecedented value to be unlocked for engineers building directly on Bitcoin. This means that aside from shaking up the NFT ecosystem, Ordinals have proven that Bitcoin isn't just a digital asset, but a rival to newer blockchains when it comes to building entire flywheel economies on its layer 1.
In other words, the Bitcoin ecosystem is still expanding, and the Ordinals protocol is just the latest development in that expansion. It's safe to say that this is a watershed moment for the Bitcoin NFT environment and for those interested in building on Bitcoin.
And that means Bitcoin is poised to create an even bigger impact on crypto and Web3 as a whole.
