Ordinal NFT was launched on the BTC mainnet by developer Casey Rodarmor on January 20, 2023. It is the latest way to create NFT on BTC. While NFTs on BTC are not a new concept, and layer 2 networks on top of BTC such as Counterparty and Stacks already support BTC-based NFTs, Ordinal NFTs have a fundamentally different architecture than other NFTs on BTC.
Since the emergence of Ordinal, more than 200,000 ordinal NFTs have been minted by a growing community of users, developers, and enthusiasts who are excited about the potential of BTC-native NFTs. But what exactly are Ordinal NFTs, how do they work, and why are they different from other NFTs?
Ordinal NFTs have grown steadily since their initial launch, with various media types now embedded in different satoshis.
What are Ordinal inscriptions?
Orinal creates Bitcoin NFTs by attaching data such as images, videos, etc. to a single satoshi (Satoshi) on the underlying BTC blockchain. Unlike BTC's NFT that has appeared before, Ordinal NFT does not exist on the second-tier network that is different from Bitcoin. Instead, they use an arbitrary but logical ordering system called ordinal theory to assign each bitcoin satoshi a unique number. In this regard, ordinal NFTs are completely native to BTC. They work without changing the Bitcoin protocol, do not require any additional layer 2 network, and are backward compatible with the BTC network.
A "satoshi" or "sat" is equivalent to 1/100,000,000 of a single bitcoin, the smallest denomination of bitcoin.
History of Ordinal NFTs
Although Ordinal NFT is based on the Ordinal theory, the realization of the current Ordinal NFT also depends on the technical updates of Segregated Witness (SegWit) and Taproot for the Bitcoin protocol in 2017 and 2021.
It is worth noting that these updates were not developed with the purpose of enabling these new types of NFTs. But since both updates increased the data size of a block — meaning there is now room for images, videos, and even games — the deployment of Ordinal NFTs was inadvertently made possible.
Segregated Witness (SegWit)
Segwit was an update in 2017 that resulted in a soft fork of BTC. The update effectively splits Bitcoin transactions in two by adding a "witness data" section that can support arbitrary data.
SegWit separates transaction and witness (signature) data into different parts and allows arbitrary data to be stored in the witness part.
Witness data was originally created as a way to:
- Bypass the strict restrictions of the block size limit
- Allow optional, arbitrary data transfers
- Preventing unintentional transaction malleability
In a technical sense, the implementation of SegWit means that transactions no longer need to include witness data (usually the sender's digital signature). Instead, an extra space is created at the end of the block for the witness data as a separate structure. It supports arbitrary data transmission, and makes the "block weight" smaller (because the witness data in segwit is stored in an independent data structure, so the transaction signature data is no longer counted in the block weight), cleverly integrates a large amount of data Stay within Bitcoin's block size limit to avoid hard forks.
This is the first prerequisite for Ordinal NFTs, as it expands the limit on how much arbitrary data can be included in a transaction.
Taproot
Implemented in November 2021, Taproot is a multifaceted upgrade designed to improve Bitcoin's privacy, scalability, and security. With this upgrade, Taproot created a simpler system for storing arbitrary witness data, and relaxed restrictions on how much arbitrary data can be placed in a Bitcoin transaction. The original goal of this upgrade was to further enhance Bitcoin-based smart contracts, such as the time-locked contracts often used in witness data.
These changes are key enablers for Ordinal NFTs, which store NFT data in Taproot scripts. The upgrade makes it easier to construct and store arbitrary witness data, laying the groundwork for the "ord" standard. And as the data requirements are relaxed, assuming a single transaction can fill an entire block with its transaction and witness data, reaching the 4MB block size limit - this greatly expands the types of media that can be put on-chain.
What is the principle of Bitcoin NFTs?
To understand how Ordinal NFTs work, it is necessary to distinguish between the terms "Ordinal" and "inscription", both of which are used to refer to this new type of BTC-based NFT.
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Ordinal numbers are a system for ordering sats (Satoshi), thereby creating the " non-fungible " property necessary for NFTs.
Inscriptions are the content of the Ordinal NFT itself - images, text, video, or any other arbitrary data that the user deems usable in the NFT. -
These NFTs can be better understood by analogy to non-BTC NFTs, which are unique one-to-one Tokens that usually have two components: TokenID and metadata.
TokenID
Fungible Tokens are interchangeable. For example, two different ETHs cannot be distinguished, just like one dollar cannot be distinguished from another dollar. TokenID injects "non-fungible" attributes into NFTs - they provide each NFT with a unique barcode, enabling users to distinguish Tokens from each other. TokenID is what makes NFT unique.
*NFT can have the same TokenID if created by different smart contracts. In this case, smart contracts are the means of distinguishing one NFT from another.
Ordinal Theory as TokenID
Bitcoin is fungible, which means that one BTC is indistinguishable from another. This is where ordinal number theory comes into play.
The key innovation of Ordinal NFTs is that they provide a system for numbering each individual satoshi. The result: each individual satoshi on the Bitcoin blockchain has a unique ID. Each Ordinal, in its most basic form, is just a satoshi assigned a unique number. Here's how it works.
In Ordinal theory, individual satoshis are numbered in the order in which they were mined. The first ordinal goes back to 2008 when the first satoshi was mined. When a satoshi is transferred, its order is preserved through a first-in-first-out system based on the order of transactions.
Ordinals are numbered in the order they were mined. Based on a first-in, first-out process, orders will be held in trade.
The Ordinal theory does not violate the essence of BTC's substitutability. The BTC protocol does not officially recognize this novel ordering of satoshis. Instead, a community of ordinal enthusiasts simply decided to collectively give importance to this numbering system and built tools based on it.
metadata
In non-Bitcoin blockchains, metadata is an optional attachment to NFTs that can store arbitrary data. It is used to represent and display art, a wide range of in-game assets, profile pictures, financial assets, and more, which have become synonymous with the term "NFT."
Inscriptions as Metadata
Ordinal NFTs do not have metadata specifying locations like NFTs in non-BTC networks. Instead, Ordinal NFT metadata is kept in the witness data of the transaction.
Example of a Bitcoin inscription - a CryptoPunk image that was repurposed by its owner.
This is also where the term "inscription" comes from - data attached to a particular satoshi is "inscribed" in a particular part of a Bitcoin transaction. To inscribe a specific satoshi with data and create an Ordinal NFT, a user must send a transaction for a single satoshi to a Taproot-compatible wallet, attaching the required metadata to the transaction. They must also pay attention to the order of transactions to ensure that the required satoshi are not used as network fees. Tools that automate this process help eliminate these risks and make the process easier for non-technical users.
How are Bitcoin ordinals different from NFTs?
The main difference between Bitcoin Ordinals and more standard NFT types is their liquidity. Because the Bitcoin protocol does not formally recognize the theory of ordinals, ordinals can be fungible or non-fungible. It all depends on who owns the ordinal and whether they wish to keep this single satoshi.
For example, if a BTC user doesn't recognize or care about the ordinal or the data attached to it, it can simply be used like any other BTC. Sequence numbers are fungible in this way - they can be used to pay for network charges or sent as payment, although arbitrary data will remain attached. Ethereum NFTs are different. Ethereum NFTs are completely different from ETH, and it is impossible to confuse fungible tokens with NFTs because the Ethereum network treats each token type differently.
The debate surrounding Ordinal NFTs
The rise of Ordinal NFTs has sparked discussions within the Bitcoin community about the fundamental role and spirit of BTC.
Some argue that BTC should be used for secure financial transactions, and the meme-fueled rise of ordinal inscriptions unnecessarily fills up Bitcoin's block space and drives up transaction fees. Others are excited about the meme/cultural value that ordered NFTs can bring to the Bitcoin blockchain and the idea of Bitcoin extending its immutable, decentralized database beyond financial transactions.
Because Ordinals are fully functional on the BTC network today, removing the ability to create Ordinal inscriptions would require an update to BTC's protocol. Therefore, it is ultimately up to the Bitcoin community to collectively decide whether to keep Ordinal.
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