In mathematics, ordinals is a concept that describes the ranking order of objects or sets. Similarly, in Bitcoin, the Ordinals protocol has expanded the Bitcoin network by innovating on storing digital artifacts directly on the Bitcoin blockchain. Bitcoin Ordinals allow for the use of block space on each Bitcoin satoshi to be an identifiable inscription of metadata, which can provide added context or record as an output. The output leads to the creation of a digital artifact, which are like NFTs.
This functionality is largely due to the availability of the witness signature data of bitcoin transactions, introduced after the Taproot upgrade and soft fork back in 2021. The block size and space allotted through the Segregated Witness (SegWit) update back in 2017 allowed for more robust inscriptions to a maximum limit of 4 MB, which was the new Bitcoin block size limit that resulted from the update.
Ordinals Associated Terms
BIP - Bitcoin Improvement Proposal.
Ordinal Theory - Assigns sats with a numismatic value, allowing them to be collected and traded as objects like non-fungible tokens (NFTs).
Inscriptions - Arbitrary content added to Bitcoin satoshis (sats) to create bitcoin-native digital artifacts or NFTs.
Digital Artifacts - Essentially inscriptions, which can be NFTs. Immutable, on-chain, unrestricted digital artifacts are NFTs.
Satoshis (sats) - The smallest unit used in measuring Bitcoin, named after the anonymous creator of Bitcoin.
Segregated Witness (Segwit) - Technology upgrade improving the scalability and security of Bitcoin by separating witness data from transaction signature data (ScriptSig).
Taproot - Improved privacy, security, and flexibility through an upgrade, allowing multiple parties to collaborate on a single transaction and utilizing Schnorr signatures for more efficient multi-signature transactions.