Ordinal theory concerns itself with bitcoin satoshis (sats), giving them individual identities via numbers and allowing them to be tracked, transferred, and ascribed with additional data. Ordinal theory does not require a sidechain, smart contracts, or token aside from that of Bitcoin itself, and can be used without any changes to the Bitcoin network.
Ordinal theory assigns sats with a numismatic value, allowing them to be collected and traded as digital artifacts, which are similar to non-fungible tokens (NFTs).
According to ordinal theory, the order of transactions in the Bitcoin blockchain is what determines the ownership and transfer of Bitcoin. This is due to each transaction depending on the inputs and outputs of the previous transactions in the blockchain. The order of transactions creates a chain of ownership that determines who owns what Bitcoin.
More information about the technical details of Ordinal Theory can be found on Casey Rodamor’s Blog post on the subject.
Ordinal Theory Related Terms
BIP - Bitcoin Improvement Proposal
Ordinals - The end result of a paired identifier inscribed along with a digital artifact on a Bitcoin Satoshi.
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) - Smallest unit used in measuring Bitcoin, named after the anonymous creator of Bitcoin.