Ultimate Guide to Ordinal Inscriptions/Bitcoin Ordinals in 2024

Bitcoin has primarily been used for decentralized, untraceable financial transactions. However, a new development called ordinal inscriptions now allows users to create digital artifacts (i.e. bitcoin NFTs) on the Bitcoin blockchain for storage, trade, and exchange. This expands bitcoin‘s use case beyond just a P2P cash system.

In this comprehensive guide, we will explain what ordinal inscriptions are, how they work, how to create your own ordinal inscriptions, where they are traded, their use cases and benefits. We will also compare ordinal inscriptions to NFTs on other blockchains.

What are Ordinals?

Ordinals are numbers that are assigned to items in a list to denote their position or order (e.g. first, second, third, etc.).

In the bitcoin context, ordinals refer to the unique identifiers assigned to each satoshi, which is the smallest unit of bitcoin. Each bitcoin is comprised of 100 million satoshis. With over 19 million bitcoins currently in circulation, there are over 2 quadrillion satoshis.

Each satoshi is assigned a unique ordinal number based on when it was originally mined. The 500th satoshi to ever be mined, for example, has an ordinal number of 500.

What are Inscriptions?

An inscription refers to text or data engraved on a physical object, like a stone tablet or coin.

When it comes to bitcoin, an inscription is essentially metadata that is engraved on a satoshi. This allows each satoshi, which previously only contained an ordinal number, to now store additional data.

What are Ordinal Inscriptions/Bitcoin Ordinals?

Ordinal inscriptions, also referred to as bitcoin ordinals, are satoshis that have metadata attached to them in addition to their unique ordinal number.

This metadata can be in any format under 4MB and acts as a digital artifact engraved on that particular satoshi. For example, a JPEG image, PDF file, audio clip, video, etc. can all be engraved onto a satoshi as its inscription.

An inscription of a dog picture engraved on a satoshi

Figure 1: An inscription of a dog picture engraved on a satoshi. Source: Ordinals

In addition to the inscription itself, metadata about when the satoshi was originally mined versus when the inscription was added can also be viewed.

For example, Figure 2 shows a satoshi that was mined in 2013 but had the dog photo inscription added in 2024. This distinguishes it from the millions of other generic satoshis and makes it more unique and valuable.

Metadata shows this satoshi was mined in 2013 but inscribed in 2024

Figure 2: New inscriptions can be made on old satoshis. Source: Ordinals

How are Ordinal Inscriptions Generated?

In 2014, the OP_RETURN function was added to Bitcoin, enabling miners to inscribe 80 bytes of arbitrary data onto each satoshi. This data did not need to be permanently stored by all nodes since it was not integral to the unspent transaction output (UTXO) set.

OP_RETURN has been used for things like embedding transaction explanations or other non-essential metadata. For example, in 2013 someone famously used it to inscribe the lyrics to Rick Astley‘s "Never Gonna Give You Up" as the OP_RETURN data of a transaction.

OP_RETURN used to inscribe song lyrics

Figure 3: The metadata of this satoshi is song lyrics. Source: Blockstream

However, the 80 byte limit severely restricted the types of inscriptions possible. This changed with the Taproot upgrade in 2021 and some clever usage of OP_RETURN by ordinal inscription creator Casey Rodarmor.

Rodarmor found a loophole that enables uploading any file type up to 4MB as an inscription on the Bitcoin blockchain. This allows for images, videos, games, apps and more to be engraved onto satoshis as ordinal inscriptions.

Various inscription file types

Figure 4: Inscriptions can be text, images, video, etc. Source: Dune

While the potential is vast, large files still need to be fragmented to fit within Bitcoin‘s block size limit. But this loophole dramatically expanded the scope of what can be engraved on the blockchain.

Learn more about the events leading up to ordinal inscriptions.

Where are Ordinal Inscriptions Traded?

Several marketplaces have emerged for trading bitcoin ordinal NFTs. The top platforms based on trading volume1 include:

  • Ordinals Wallet
  • Unistat
  • Magic Eden
  • OKX

Over 4 million bitcoin ordinals have already been traded as of April 2023 across these marketplaces. Ordinals Wallet leads the pack by a wide margin in terms of volume.

Volume of ordinal inscriptions by marketplace

Figure 5: Ordinals Wallet accounts for the majority of bitcoin ordinal trading volume. Source: Dune Analytics

Learn more about how ordinal inscriptions are impacting Bitcoin‘s block space.

How to Create Bitcoin Ordinals

Creating your own bitcoin ordinal NFT requires just a few steps:

  • Obtain an Ordinals-compatible bitcoin wallet to store your inscription, like Ordinals Wallet.
  • Use a no-code platform like Gamma.io, Ordinals Wallet, or Unistat to create your inscription file.
  • Fund your wallet with BTC to pay mining fees.
  • Upload your inscription file and broadcast it to the Bitcoin network.

Read our in-depth guide for fully detailed steps on creating bitcoin ordinals.

Ordinal Inscriptions vs. NFTs

While bitcoin ordinals are often referred to as "bitcoin NFTs", there are some key differences from NFTs on other blockchains like Ethereum:

  • On-chain storage – All inscription data is stored directly on the Bitcoin blockchain instead of separately on IPFS.
  • Clearer royalties – Creators earn royalties on the initial sale, but not on secondary sales. This avoids the complex royalty schemes common in NFT marketplaces.
  • Uncensorable – Bitcoin ordinals cannot be taken down, even by their creator. This was demonstrated when an explicit image was engraved.

According to the creator, bitcoin ordinals represent "what NFTs should be." Their on-chain nature ensures they align with the core values of transparency, immutability and uncensorability that NFTs strive for.

Learn more about the key differences between bitcoin ordinals and NFTs.

Use Cases

As a new innovation, bitcoin ordinals do not yet have the vast array of use cases seen in the NFT space. The limited block size makes certain applications like games challenging. Most inscriptions so far have been JPEG images.

However, with further adoption, bitcoin ordinals could potentially expand into diverse use cases including:

  • Music – Artists can tokenize songs and album art.
  • Fashion – Digital outfits and accessories for the metaverse.
  • Collectibles – Ordinals as serialized collectibles.
  • Identity – Inscriptions to hold identity documents.
  • Supply chain – Product origins and shipping data engraved on ordinals.
  • Ticketing – Tokenized event tickets.
  • Art – Original and limited edition digital art.

Note that applications relying on changing metadata, like live event ticketing, may be limited since bitcoin ordinals are static once created.

Benefits

Bitcoin ordinal inscriptions offer several advantages over other NFT platforms:

1. Expand Bitcoin‘s Use Case

Allowing bitcoin to be used for more than just payments expands its potential value and adoption among mainstream users. Artists and creators are drawn to the space and may stick around to learn about bitcoin‘s benefits.

2. Leverage Bitcoin‘s Network Effects

By minting NFTs on Bitcoin, creators benefit from its security, decentralization and large user base. It provides more visibility and liquidity compared to smaller blockchains.

3. Enhanced Security

All data is stored directly on the Bitcoin blockchain. It does not rely on sidechains or IPFS for storage. This enhances security and reduces centralization risks.

4. Cheaper Fees

Transaction fees are lower compared to Ethereum since bitcoin ordinals do not require complex smart contract interactions. Simple on-chain storage costs around $50 per 1 million bytes.

5. Immutable Metadata

Unlike some NFTs that rely on dynamic off-chain metadata, bitcoin ordinals‘ inscriptions are set in stone once created. This better fulfills the promise of NFTs as immutable digital assets.

For an in-depth look at the benefits of bitcoin ordinals, read our full article.

Conclusion

Bitcoin ordinal inscriptions represent an exciting new use case for the world‘s most secure blockchain. By expanding bitcoin beyond just payments, they make the network more useful and accessible to mainstream users.

While still early, expect ordinal inscriptions to evolve into a flourishing ecosystem for digital collectibles, identity, supply chains, music and more. Their on-chain nature enhances security, transparency and aligns with the ethos of NFTs.

By leveraging Bitcoin‘s network effects and security, bitcoin ordinals are poised to drive further adoption of blockchain technology across consumers and enterprises. Their emergence is a promising step in Bitcoin‘s progression as the global standard for digital asset transactions.


1: “Volume by MarketplaceDune.com. October 9, 2023. Retrieved on October 9, 2023.

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