Bitcoin NFTs — How the Ordinals Protocol Works

Learn all about the Bitcoin Ordinals protocol, from satoshis to inscriptions to NFTs, and how it revolutionizes Bitcoin-based digital assets.

Introduction

The Bitcoin Ordinals protocol has surged in popularity, with inscriptions exceeding 58 million as of January 2024. This innovative protocol enables the minting of non-fungible tokens (NFTs) directly on the Bitcoin blockchain, merging Bitcoin's security with the creativity of digital collectibles.

Key Takeaways

• Bitcoin NFTs: Gained traction since the Ordinals protocol launched in January 2023.
• Direct Minting: NFTs are inscribed directly onto the Bitcoin blockchain, enhancing immutability.
• Satoshis as NFTs: Each satoshi (the smallest Bitcoin unit) is assigned a unique identity via inscriptions, making them non-fungible.
• On-Chain Metadata: Unlike many Ethereum NFTs, Ordinals store metadata entirely on-chain.

Why Ordinals? A Brief History of Bitcoin NFTs

Minting NFTs on Bitcoin was historically challenging due to limited smart contract functionality and the absence of a dedicated token standard (e.g., ERC-721). Early attempts like Colored Coins (2012) marked Bitcoin’s first steps toward NFTs. The Ordinals protocol (2023) revitalized this space by enabling direct NFT minting on Bitcoin.

How the Ordinals Protocol Works

Bitcoin Ordinals NFTs operate via Ordinal Theory, developed by Casey Rodarmor. Key concepts:

1. Sequential Numbering: Each satoshi is numbered chronologically (e.g., the first mined satoshi is #1).
2. Inscriptions: Satoshis are inscribed with data (images, text, videos) via Bitcoin transactions (up to 4 MB).
3. Permanence: Inscribed data becomes part of the blockchain, viewable through Ordinals-compatible wallets like Ledger.

👉 Explore Ordinals-enabled wallets

Advantages Over Traditional NFTs

• Full On-Chain Storage: No reliance on off-chain links, reducing tampering risks.
• Bitcoin’s Security: Leverages Bitcoin’s decentralized and immutable ledger.

Bitcoin Stamps: An Alternative Approach

Bitcoin Stamps offer a different method for embedding NFTs:

• Storage: Data is stored in Bitcoin’s UTXOs (unspent transaction outputs), making it immutable but costlier.
• Semi-Fungibility: Supports "1 of 1" or "1 of many" assets, similar to Ethereum’s ERC-1155.

Ordinals vs. Stamps

| Feature | Ordinals | Stamps |
|------------------|-----------------------------------|----------------------------------|
| Pros | Lower cost; witness data storage. | Immutable; UTXO-based storage. |
| Cons | Prunable data. | Higher costs; limited file size. |

Popular Bitcoin Ordinals Projects

1. Ordinal Punks: 100 on-chain PFPs inscribed early in the protocol’s history.
2. TwelveFold: Yuga Labs’ generative art collection (300 pieces).
3. BitcoinShrooms: Auctioned by Sotheby’s, blending Bitcoin’s history with art.
4. Domain Names: Projects like Stacks offer .BTC domains for decentralized identities.

BRC-20 Tokens and Ordinals

The BRC-20 standard (inspired by ERC-20) enables fungible tokens on Bitcoin using Ordinals inscriptions. Unlike ERC-20, BRC-20 tokens avoid smart contracts, relying on JSON data inscribed via Ordinals. Over 34,000 BRC-20 tokens exist, including ORDI, the first of its kind.

👉 Learn more about BRC-20

FAQs

1. What makes Bitcoin Ordinals unique?

Ordinals NFTs are stored entirely on-chain, unlike many Ethereum NFTs that reference off-chain files.

2. Can Ordinals NFTs be deleted?

No—once inscribed, data is permanently embedded in Bitcoin’s blockchain.

3. Are Bitcoin Stamps better than Ordinals?

Stamps offer stronger immutability but are costlier. Choose based on use case.

4. How do I view Ordinals NFTs?

Use Ordinals-compatible wallets or explorers like ordinals.com.

5. What’s the future of Bitcoin NFTs?

Expect growth in Layer-2 solutions (e.g., Stacks, Rootstock) for scalable, low-cost minting.

Conclusion

The Ordinals protocol unlocks Bitcoin’s potential for NFTs by combining its security with on-chain metadata storage. From Ordinal Punks to BRC-20 tokens, Bitcoin’s NFT ecosystem is expanding rapidly, offering new opportunities for creators and collectors alike.

Further Reading: Dive deeper into Bitcoin’s evolving ecosystem with our Bitcoin hub.

Disclaimer

This article is for informational purposes only. Conduct your own research before engaging with crypto assets. Past performance does not guarantee future results.

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