What are Bitcoin Ordinals? Working Explained

Bitcoin Ordinals are satoshis that have been converted into NFT analogs. They have become one of the most discussed Bitcoin blockchain innovations in the shortest time. They paved the way for digital collectables art and metadata, such as applications, audio, video, and text, to exist as a native component of Bitcoin, previously linked to innovative contract platforms such as Ethereum. Ordinals have ushered in a new generation of on-chain creativity, making Bitcoin useful beyond peer-to-peer payments since early 2023.

The post will discuss the nature of Bitcoin Ordinals, their functionality, and how creators can make their own.

What Are Bitcoin Ordinals?

Bitcoin Ordinals are digital assets written directly onto individual satoshis, the smallest unit of Bitcoin. Bitcoins may be broken down into 100 million satoshis, and the Ordinals protocol claims a serial number for every satoshi. As soon as information is stored as images, text, audio, or even minor applications on a satoshi, it is a permanent on-chain object.

These writings serve as equivalents of NFTs, with one significant exception: they are not based on smart contracts and external metadata storage. Instead, the asset itself exists entirely on the blockchain of cryptocurrency (Bitcoin) and thus is immutable and censorship-resistant. Due to this reason, Ordinals are commonly known as Bitcoin-native NFTs.

The Reason Bitcoin Ordinals Went Viral

Before Ordinals, Bitcoin was perceived pretty much as a store of value and a payment network. Ethernet and other chains had been leading in NFTs because they were flexible. Ordinals, however, added digital collectibles to Bitcoin without altering the base protocol. This generated enthusiasm on the part of artists, collectors, and developers since:

• On-chain permanence is another feature that introduces authenticity and historical context.
• Bitcoin is unmatched in security and decentralisation.
• It does not rely on IPFS links or external servers.
• Every inscription is stored in the immutable chain of Bitcoin.

The aspect of scarcity also contributes to it. As there are only a small number of satoshis, early inscriptions are more valuable, particularly those on rare sats such as those minted to commemorate special occasions such as block halving.

How Bitcoin Ordinals Work?

Bitcoin Ordinals are based on two concepts: inscriptions and ordinal theory. They can be used together to create NFT-like items without changing Bitcoin’s fundamental rules.

1. Ordinal Theory

The ordinal theory is an approach invented by Casey Rodarmor giving an order to Satoshi based on the order of their mined. Each satoshi will have a distinct identifier used to track it through the blockchain. This numbering system enables users to find and move a particular amount of satoshis with purpose, which, before this system, Bitcoin did not consider significant.

2. Inscriptions

The process of adding information to a satoshi via a Bitcoin exchange is known as inscription. In the 2021 Taproot upgrade, this data is recorded in the witness section of a Taproot transaction. With Taproot, larger data could now be stored more effectively because images, HTML files, scripts, and other types of data could be stored on-chain.

3. UTXO Control

Inscriptions are placed on the satoshis in a UTXO (Unspent Transaction Output). In sending an inscribed satoshi, the wallet should be such that there is no confusion of the satoshi sent with others. Special Ordinals wallets preserve this accuracy at the satoshi level to avoid accidental loss of inscriptions.

The Bitcoin Ordinals vs. The Traditional NFTs

Ordinals and Ethereum-style NFTs have the same use-cases but are different in structure:

Organisations’ Ordinals are fully on-chain in storage, whereas numerous NFTs are just associated with off-chain files. There are no smart contracts; there are only Bitcoin transactions. No standard, such as ERC-721, exists; the inscriptions are based on the assignment of satoshi.

Transfers are also easier and processed like any other Bitcoin transaction, except that they must be made with special wallets to ensure sat-level tracking.

Those distinctions ensure that Ordinals are closer to the philosophy of minimalism, permanence, and decentralisation of Bitcoin.

Introduction to Creating Ordinals with Bitcoin

It is now much easier to create (or inscribe) Bitcoin Ordinals with easy-to-use tools. The process can be explained clearly and, as described here.

The first step is to install a compatible Bitcoin wallet

• You require a wallet to handle Ordinals and satoshi. Popular options include:
• Xverse Wallet
• Hiro Wallet
• UniSat Wallet
• Sparrow Wallet (manual inscriptions)

Such wallets guarantee that engraved satoshis are not lost in the transaction.

Step 2: Fill Your Pocket with Bitcoin

Inscriptions incur network and storage costs because the data is written directly to the blockchain. Depending on the file size and network congestion, the fees can range from a few dollars to several hundred dollars.

Step 3: Select an Inscription Platform

Ordinals may be struck by:

• Gamma.io
• UniSat.io
• OrdinalBot
• Ordinals.com tools

Such sites have an easy upload button for your picture or file.

Step 4: Save Your File and choose Inscription Settings

You can inscribe:

• PNG/JPEG images
• Text
• JSON Files
• HTML Art
• Audio Clips
• Code Snippets
• Applications

Select compression settings where necessary to save on fees

Step 5: Check the Inscription and Pay the Fee

When you have finished your inscription:

• The platform generates a Taproot transaction.
• You make the necessary network fee.
• The message is relayed to the Bitcoin network.

Upon confirmation, your Ordinal will be available in your wallet as a special object.

Final Thoughts

Bitcoin Ordinals are a revolutionary breakthrough in how digital assets can be stored on the Bitcoin blockchain. The Ordinals protocol has created digital art and collectable culture by permitting fully on-chain inscriptions without altering the fundamental rules of Bitcoin, thereby preserving the Bitcoin protocol’s unparalleled security. Ordinals are redefining what can be constructed on the world’s foundational cryptocurrency network, whether it is artwork, digital archives, or experimental code.

Disclaimer: BFM Times acts as a source of information for knowledge purposes and does not claim to be a financial advisor. Kindly consult your financial advisor before investing.