What are Bitcoin Ordinals? A Guide to Bitcoin NFTs

Introduction

While Ethereum, Solana, and Polygon-minted NFTs dominate the NFT marketplace, Bitcoin NFTs have experienced a dramatic surge in popularity in recent months. 

Bitcoin NFTs, also known as Bitcoin Ordinals or Ordinal NFTs, are nothing but Non-Fungible Tokens built and secured on the Bitcoin network. Earlier, creating NFTs on the Bitcoin network was not viable due to its simple architecture and lack of smart contracts capability. However, the advent of Ordinals inscription and other layer 2 solutions have made Bitcoin NFTs possible and are predicted to reach a market size of $4.5 million by 2025.

In this article, we will explore Bitcoin Ordinals, the working of Bitcoin NFTs, their applications, a few popular Bitcoin NFTs projects, and more.

What are Ordinals?

Bitcoin Ordinals became possible by two network updates: SegWit(Segregated Witness) 2017 and Taproot 2021. The SegWit update resulted in a soft fork of Bitcoin and divided the Bitcoin transaction structure into two parts: transaction and witness parts, overall enhancing its storage limits. Following SegWit, the Taproot update improved the security and privacy of Bitcoin transactions, as well as introduced the inscription of data, and increased the block size limit of up to 4 MB. These updates were unintentional but laid out the idea for Casey Radarmor to launch the Bitcoin Ordinal protocol.

Introduced in January 2023, The Ordinals are a way to generate Bitcoin NFTs by attaching extra data on each satoshi through the inscription process without using smart contracts. Ordinal Inscriptions(similar to NFTs) are digital artifacts such as images, videos, text, or others that can be inscribed on a satoshi. A Satoshi, named after Bitcoin creator Satoshi Nakamoto, is 1/100,000,000 part and smallest unit of a Bitcoin(BTC).

Ordinals have shown rapid growth since their inception. Four months later, as of late May 2023, there are more than 9,50,000 bitcoin inscriptions and $43 million spent on the inscription fee.

Additional Read: Bitcoin Halving 2024

How does Bitcoin NFTs work?

Bitcoin NFTs created using inscriptions are based on Ordinal theory and work differently from typical smart-contract-based NFTs. The ordinal theory identifies each satoshi as an individual unit that can be traded on the Bitcoin network. Ordinal theory is implemented through Ordinal Protocol which serializes each satoshi in the order they are mined and tracks them across the transaction on the Bitcoin network. This numbering makes each satoshi unique or non-fungible, unlike fungible Bitcoin. Once a unique ID is assigned to each satoshi, users can inscribe or attach data to it to create an Ordinal NFT. This NFT generation process does not create a separate blockchain or token or alter the Bitcoin original blockchain, instead, it operates within Bitcoin’s existing framework.

While typical blockchain NFTs store metadata file links in them and host digital art off-chain, which can be changed or removed by the contract owner, Ordinals are inscribed directly onto satoshi in blocks on the Bitcoin blockchain, making them highly secure and immutable. Moreover, the rarity of Ordinal NFTs is decided based on Bitcoin periodic events, frequent and uncommon events.

Apart from ordinals, Bitcoin NFTs can be created through layer-2 scaling solutions like Stacks, RSK, and Lightning Networks. These solutions employ smart-contract functionalities to mint NFTs and settle transactions on the base layer of Bitcoin.

Read More: Bitcoin Price Prediction 2023

Utility of Bitcoin NFTs

Here are a few use cases of Bitcoin NFTs:

• Gaming: In-game assets such as cosmetics, accessories, skins, and avatars can be converted to NFTs and offered to players as incentives. 
• Art and music: Artists can tokenize their digital arts and music to preserve them along with the immutable Bitcoin blockchain. NFTs can also be used to provide royalties to creators and merchandise for fans.
• Ticketing: Ticketing NFTs can be an alternative to traditional tickets to entertainment shows, virtual events, sports events, etc. By removing third parties, they can provide a more transparent and convenient verification process.
• Metaverse: NFTs of Lands and properties of a metaverse can be used as ownership tokens and for the development of virtual real estate.
• ID and Authentication: NFTs can be used to represent and verify user identities, allowing them to control the security and privacy of their data.
• Fashion and Luxury: NFTs can Authenticate and preserve ownership of Fashion and Luxury items. They can provide access to exclusive offers, deals, and items related to a particular brand or product.
• Real Estate: Real-world properties can be tokenized in NFTs to prove ownership, authenticity, and easy transfer between two parties. They can also be integrated with other applications and systems, opening various use cases.

Bitcoin NFT with Stacks

Launched in 2021, the Stacks layer is built on top of the Bitcoin blockchain which allows developers to build smart contracts to write and secure data on the Bitcoin network. Stacks protocol uses a Proof of Transfer consensus mechanism to secure and settle transactions on Bitcoin without forking or altering the original network. 

NFTs built on Stacks are created through the programming language Clarity, which allows users to write fully expressive smart contracts capable of building almost anything on the Bitcoin network. These smart contracts exist on the Stacks blockchain and settle on Bitcoin. Furthermore, the Stacks protocol employs defined standards for traits, functions, unique identifiers, and metadata for creating and minting NFTs on the blockchain.

The Stacks ecosystem has an NFT marketplace and wallets to ease the issuance, buying, selling, and transfer of NFTs on the network. This includes the Hiro desktop wallet app for exchanging and storing NFTs, the Xverse mobile wallet app, which supports various tokens and NFTs on both Bitcoin and Stacks and Gamma- Bitcoin NFT Marketplace for the deployment of smart contracts for NFTs and lists them for buying and selling.

How to Buy & Sell Bitcoin NFTs

You can trade Bitcoin NFTs only with Taproot-compatible wallets such as Hiro, Xverse, and Ordinal Wallet. Here are steps to trading NFTs:

For Buying:

• Go to your desired wallet and create an account.
• Backup your seed phrase, set the password for the wallet
• Deposit funds to your ordinal wallet address
• Click on the “collections” section to view listed Bitcoin NFTs
• Select the desired collection you wish to purchase, click on “Buy Now.”
• Complete the transaction, and the ordinal will be added to your wallet.

For Selling:

• Similar to the buying procedure, first create your account, and secure the seed phrase and password.
• Deposit funds to your ordinal wallet address.
• Go to the Ordinal marketplace like Gamma, OrdinalsBot, etc.
• Select your inscription type, image, or text and upload it.
• Choose the Inscription fee. This fee will depend on the inscription size and duration of the transaction to be completed.
• Add the Ordinal recipient address, and complete the transaction.
• Once NFT has been inscribed on the Bitcoin blockchain, it will be available for viewing on Ordinal.com.

Read On: How to Buy Bitcoin in India

NFT Projects on Bitcoin

1. Megapont Ape Club: MegaPont Ape Club is the most popular NFT collection in Gamma Marketplace, with 431 listed NFTs out of 2500 items. MegaPont is a fictional universe of peaceful earth and scientifically mutated species.
2. Ordinal Punks: Ordinal Punks is a collection of 100 exclusive NFTs paying tribute to legend CryptoPunks. The collection is part of the first 650 inscriptions on Bitcoin, which makes it rare and unique from others. These NFTs were created by FlowStay, a pseudonymous creator.
3. TwelveFold: A collection of 300 generative NFTs by BAYC(Bored Ape Yacht Club) parent Yuga Labs. These art pieces are inscribed onto satoshis and do not have utilities or interaction with previous or future Yuga Labs projects.

Conclusion

In conclusion, Bitcoin NFTs stand out among other NFTs in their unparalleled design, immutability, and security.  The Ordinal protocol and other solutions help in unlocking the potential of Bitcoin network development and utility. However, there are ongoing controversies in various web3 communities about Bitcoin NFTs and Ordinal, which developers are working to address. Overall, Bitcoin NFTs can be an investment option for investors bullish on Bitcoin to explore in order to have a possibility to have an outlook on the upcoming network opportunities.

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