How do Ordinals work?
On January 21st 2023, Bitcoin Core developer Casey Rodarmor launched the ordinals protocol, which has been at the centre of crypto news since.
Despite the debates and controversies within the Bitcoin community, Ordinals' benefits and traction suggest that they could lead to a culture shift in the world of digital assets. Paired with Gamma's creator launchpad on the Stacks programming layer for Bitcoin, the Bitcoin NFT creator experience is finally ready for mainstream adoption. Let's take a closer look at why Ordinals have been trending.
What is an Ordinal inscription?
In short, Ordinals allow users to inscribe data onto satoshis (or sats), the smallest measuring unit of the bitcoin cryptocurrency (BTC) recorded on the blockchain.
The protocol allows users to send and receive sats that carry optional extra data in ordinal progression. Each sat is serially numbered, starting at 0. These numbers are "ordinal numbers" in the mathematical sense, giving an order to each sat in the total supply. Satoshis are numbered in the order in which they're mined, and transferred from transaction inputs to transaction outputs first-in-first-out. This system is called the first-in-first-out algorithm.
The Ordinal Theory Handbook states that, "individual satoshis can be inscribed with arbitrary content, creating unique Bitcoin-native digital artifacts that can be held in Bitcoin wallets and transferred using Bitcoin transactions. Inscriptions are as durable, immutable, secure, and decentralized as Bitcoin itself."
The SegWit upgrade in 2017 introduced a new way of storing transaction data. In 2021, the Taproot upgrade improved the network's privacy, security, block size and functionality. Bitcoin's Taproot upgrade made this new protocol possible. Casey Rodarmor's discovery of a method to encode 4MB of data onto a Bitcoin block has opened up exciting prospects for the Bitcoin network.
How to inscribe an Ordinal?
The process of actually creating an ordinal inscription (also called inscribing) is highly technical, complex, and time consuming. In order to inscribe Ordinals, users must download Bitcoin core and run a fully synced Bitcoin full node, which is costly and requires advanced technical skills.
But developers in the Stacks ecosystem have been hard at work. Gamma's no-code platform removes these barriers and makes ordinals possible for anyone with a Bitcoin address. Gamma also provides users the option to choose or customize their transaction fees based on network congestion. Bitcoin-based NFT wallets such as Xverse Wallet and Leather Wallet also quickly announced Bitcoin Ordinal support functionality, making it easier to set up a Bitcoin address for your Ordinal. The Satoshibles NFT collection team created Ordinals Bot, which will inscribe an Ordinal on your behalf.
How are Ordinals and NFTs different?
There are a few important differences between Ordinals and NFTs. Non-fungible tokens such as Ethereum NFTs or Stacks NFTs, generally point to off-chain data (this can be an image, sound, etc). This data can is often kept on IPFS, a decentralized file storage system, and the metadata can be changed.
With Ordinals NFTs, however, the data is inscribed directly on-chain, within a satoshi, making them digital artifacts. Ordinals can, like NFTs, have royalties attached to them, which is the case on some marketplaces such as Gamma.io.
NFT use cases also differ from Ordinals use cases. While NFTs are enabled by smart contracts and can be used in many ways including the gaming industry, the metaverse, digital art and more, Ordinals don't depend on smart contracts and are limited to 4Mb. They also are completely immutable, so they can't be semi-fungible or dynamic, unlike NFTs. However, Ordinals aren't limited to JPEGs and Profile Pics! NFT marketplace Gamma.io used its no-code ordinal inscription service to broadcast their press release directly to the Bitcoin blockchain, making it the the world's first press release inscribed to Bitcoin.