NFTs
With ordinals, Bitcoin is changing the perception of NFTs
Ordinals are very similar to non-fungible tokens or NFTs, but there are some notable differences that set them apart from their traditional tokenized counterparts.
They are similar to NFTs in the sense that they are both unique digital assets that can be owned by an individual and stored on the blockchain. But creator Casey Rodarmor has blessed Ordinals with some new features that have made the market for these transformative NFTs explode, even as traditional NFTs on blockchains like Ethereum lose their luster.
Today, the Ordinals market is worth well over a billion dollars, and the community that has grown up around it has emerged as one of the most quirky and engaged in the entire crypto industry.
What are ordinals?
Previously, NFTs were only minted and used on smart contract blockchains such as Ethereum, Solana, Tezos, and BNB Chain. In Bitcoin, they didn’t really exist due to the lack of smart contract capabilities. But everything changed with the emergence of the Ordinals project at the end of 2022.
Ordinals is a protocol that provides a numbering system for satoshis, which is the smallest denomination of BTC. A single BTC can be divided into 100 million satoshis, each worth 0.00000001 BTC. By assigning each Ordinal what is essentially a serial number, they become unique. These ordinal numbers are inscribed on each satoshi by adding extra data, in a process known as “inscription”. In addition to assigning a number to the satoshis, the registration process also allows other information, such as images, to be added to them.
With ordinals, each satoshi is numbered according to the order in which it was first extracted and transferred. These numbers can be used as stable identifiers for each satoshi and also for the data attached to them.
The rise of NFTs
The first NFTs are believed to be the Colored coins project, which was conceived in 2012 as a system for creating non-fungible assets by adding metadata to BTC transactions. This idea, while quite revolutionary, never took off, but it may well have been the inspiration for the first true NFTs that appeared on the Namecoin blockchain in 2014. The first truly successful NFT collection was Crypto Kittenswhich was hosted on the Ethereum network and sparked a craze in the crypto community with its launch in 2017, briefly congesting this network and causing gas fees to increase drastically, resulting in early questions about its limited scalability.
During the 2021 bull run, NFTs captured attention like never before, with millions of dollars being invested in things like a tokenized version of the first tweetIt is an incredible US$69 billion spent to acquire a single piece of digital art created by an artist known as Beeple.
As the crypto industry entered its most recent “winter,” the hysteria quickly subsided and the the value of most NFTs has collapsedleading many to wonder if these unique digital tokens would ever reach their potential.
Ordinals gave new life to NFTs
The NFT market was still down when Rodarmor launched the finishing touches to its Ordinals protocol, which initially launched without much fanfare in December 2022. However, in early 2023, Ordinals suddenly gained traction, becoming very attention from bored Bitcoin holders and others in the crypto community looking for the next big thing.
In six months, the community that quickly embraced the Rodarmor concept created more than 23 million Ordinals, and a thriving market emerged to trade them. Users were suddenly spending absurd amounts of money on this new generation of Bitcoin NFTs, while the revenue generated by their transactions brought a windfall for miners. To date, Ordinal transfers have generated over half a billion in fees, while over 66 million registrations have been created.
There were some setbacks along the way. Just like with Crypto Kitties and Ethereum, the craze resulted in a highly congested network, slowing transactions down to a snail’s pace. However, as always in the crypto market, innovation saved the day, and many Ordinals users switched to so-called Layer-2 networks such as Stacks It is Merlin Chain.
Merlin Chain has created an entire ecosystem around Bitcoin-native assets, providing a more efficient platform for trading and inscribing Ordinals, along with a thriving marketplace and launchpad for Ordinal-based projects. The unique thing about L2s like Merlin Chain is that they can facilitate multiple transactions, such as buying and selling thousands of subscriptions in a single transaction.
The unique value proposition
The main distinction between Ordinals and NFTs is that their value is not only tied to the artwork inscribed on each sat, but also to the history of the sat itself. In addition to creating a satos numbering technique, Rordarmor designed a “rare sats” indexing system to distinguish the most famous satoshis, such as those mined by Bitcoin creator Satoshi Nakamoto.
The age and transaction history of a single sat can increase its value. Like Magical Eden points, sats mined by Satoshi himself are becoming increasingly sought after by a new generation of rare sat collectors. Other sats are highly valued for being minted at specific halving events, mining difficulty adjustments, and similar milestones in Bitcoin’s colorful history.
There are also some technical differences between traditional NFTs and Ordinals, leading some to believe that Ordinals represent a significant improvement on NFTs. Rodarmor himself says that NFTs, which he refers to as “digital artifacts,” are incomplete because many of them require off-chain data to attach things like royalties to their original creators. With Ordinals, all your data is written to the Bitcoin blockchain, making it more “complete”, says the creator.
Technical improvements, combined with the concept of rare satoshis and the uniqueness of traditional NFTs, mean that Ordinals can be considered the next evolution of digital assets. They increase the value of NFTs by incorporating Bitcoin’s rich history and making them more decentralized, creating an altogether more attractive value proposition for crypto enthusiasts.
Ordinals lack the ability to create a mechanism that pays royalties to their creators and many believe this has prevented some of the most famous NFT artists from adopting them until now. But the lack of notable NFT artists has simply encouraged others to step up, and Ordinals’ core collections are the work of the popular community, adding to their allure.
Bitcoin: the future of NFTs
Ordinals are changing the perception of digital art, paving the way for a new generation of more distinguishable NFTs deployed on the original blockchain, Bitcoin itself. With their rapid rise, Ordinals have created a much-needed new utility for Bitcoin, boosting its activity on the network and helping to propel its value to new all-time highs.
Ordinals represent a unique and transformative moment for Bitcoin, which is evolving from a simple store of value and payment mechanism to a network that can be much more.
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