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Exploring Bitcoin Ordinals: A Comprehensive Guide to Bitcoin’s Answer to NFTs

NFTs have been making waves in the digital world, offering a new approach to the ownership and exchange of unique digital assets. Initially, these digital collectables and works of art found their home on blockchains like Ethereum, Solana, and the XRPL. However, the landscape changed with the advent of Bitcoin Ordinals. In this article, we delve into the fascinating world of Bitcoin Ordinals, an innovative development that has introduced the concept of NFTs to the Bitcoin network, expanding its functionality and applications beyond simple value transactions.

BTC Ordinals represent a method of attaching information to individual satoshis, the smallest unit of Bitcoin, effectively inscribing unique digital artefacts onto them. These inscriptions, allow each satoshi to represent a unique digital asset, thereby creating Bitcoin’s own version of NFTs. This innovative practice has extended the potential of Bitcoin, adding a whole new dimension to this iconic cryptocurrency.


Until recently, Bitcoin was viewed primarily as a medium of financial transactions, its role confined to storing and transferring value. However, the crypto ecosystem has always been an innovation arena, and thus the concept of Bitcoin Ordinals (BTC Ordinals) emerged. Born out of an ongoing debate within the Bitcoin community about whether Bitcoin should remain a simple financial tool or evolve to incorporate new functionalities, Ordinals offered a compelling answer.

The idea of BTC Ordinals was introduced in January 2023, signalling a significant shift in the Bitcoin narrative. It capitalizes on the potential of the Bitcoin blockchain, using it not just for transactions but also as a platform to create and exchange unique digital assets. This leap was made possible through the incorporation of ‘inscriptions’, a process that involves encoding data onto individual satoshis.

The inception of BTC Ordinals has not been an easy ride, considering the challenges associated with altering Bitcoin’s code, primarily due to the network’s decentralized nature and concerns around network security. Despite these hurdles, BTC Ordinals have managed to carve a niche for themselves, growing steadily as more and more users contribute by uploading different types of content, such as images, audio, and videos.

In the following sections, we will delve deeper into the technical aspects of BTC Ordinals, their functionalities, and their implications for the future of cryptocurrency.

Technical Aspects of Bitcoin Ordinals

As we venture further into the intricate world of BTC Ordinals, we find that the key to understanding this innovative concept lies within the technical intricacies of the Bitcoin network itself. By leveraging some of the unique properties and features of Bitcoin, Ordinals have opened up an entirely new landscape of possibilities.

Bitcoin Network Upgrades: SegWit and Taproot

The realization of BTC Ordinals was primarily facilitated by two significant upgrades to the Bitcoin network: Segregated Witness (SegWit) and Taproot. Implemented in 2017, the SegWit update was crucial in improving the scalability and security of Bitcoin. By separating witness data from transaction signature data, SegWit freed up block space, allowing more transaction information to be stored in each block.

Following SegWit, the Taproot upgrade in 2021 further enhanced the Bitcoin network by enabling multiple parties to collaborate on a single transaction and utilizing Schnorr signatures for more efficient multi-signature transactions. The combined impact of these two upgrades provided a foundation for the establishment and operation of BTC Ordinals.

The Inscription Process

At the core of the BTC Ordinals concept is the process of ‘inscription’. This refers to data encoding onto individual satoshis, the smallest denomination of Bitcoin (0.00000001 BTC). Inscriptions can range from simple texts to complex digital artefacts like images, audio, or video files. The process of inscription effectively transforms each satoshi into a unique digital artefact that can be stored and traded, much like an NFT.

This process relies heavily on the witness data of Bitcoin transactions, which is where the SegWit upgrade comes into play. With the increased block space that SegWit facilitated, inscriptions can be more robust, reaching a maximum limit of 4 MB.

Ordinal Theory and Bitcoin NFTs

Inscriptions underpin the Ordinal Theory, which assigns sats with a numismatic value, thereby allowing them to be collected and traded as objects, similar to NFTs. By linking each satoshi to unique data, BTC Ordinals imbue them with a distinctive identity, making each one singular and valuable in its own right.

While BTC Ordinals share some similarities with NFTs, it is crucial to understand that they are not the same. BTC Ordinals take advantage of the on-chain inscription process on the Bitcoin network, whereas NFTs are created through tokenization on various other blockchain networks.

In the following sections, we will explore how BTC Ordinals function, their unique traits, and their potential for transforming the Bitcoin network.

The Working of Bitcoin Ordinals

To understand BTC Ordinals, it’s essential to understand how they function within the Bitcoin network. The operation of BTC Ordinals centres around the unique identification of individual satoshis (sats) on the blockchain.

Positioning and Ranking Sats

The position of a satoshi or sat on the Bitcoin blockchain is determined by four distinct parameters as defined by developer Casey Rodarmor (a seasoned software developer with a deep-seated interest in Bitcoin, that has spent numerous years making impactful contributions to the evolving Bitcoin ecosystem). These parameters include the index of the satoshi in the block, the cycle number, the index of the block in the difficulty adjustment period, and the index of the block in the halving epoch.

These parameters form the foundation for the ‘ordinal ranking’ of sats. The ordinal ranking system helps to establish the rarity of a particular Bitcoin NFT. In the world of NFTs, rare mints generally carry more value for collectors. Therefore, the position and ordinal ranking of a satoshi indicate how rare, and thus potentially valuable, a particular Bitcoin NFT is.

Inscribing Data on Sats

The process of inscribing data onto satoshis is the defining feature of BTC Ordinals. Users can mint their unique digital artefacts on Bitcoin by inscribing them onto individual satoshis. With the increased block size limit brought about by SegWit and Taproot upgrades, larger data can be inscribed onto satoshis, allowing for more complex and detailed digital artefacts.

The result is a satoshi or an ‘ordinal’, that contains unique, immutable data. It’s worth noting that two satoshis may have the same Bitcoin value, but their inscriptions can greatly vary their perceived worth or social recognition.

In the next section, we’ll delve deeper into what differentiates BTC Ordinals from conventional NFTs and discuss their unique traits.

Ordinal Ranking and Rarity

One of the fascinating aspects of BTC Ordinals is the system of ranking and rarity that it introduces. This system is predicated on the understanding that not all satoshis are equal – depending on their ordinal number, certain satoshis can have more ‘rarity’ than others.

Understanding Ordinal Rankings

The Ordinals protocol assigns a distinct serial number to each satoshi, creating a unique identifier. This identifier is known as an ordinal. Ordinals are determined by the order in which satoshis are mined and transferred, meaning that each satoshi is unique and can be tracked individually.

The first satoshi in the first block, for example, has the ordinal number 0, while the second satoshi has the ordinal number 1, and so on. This system of ordinal ranking helps identify the exact position of a satoshi in the sequence of all satoshis.

Rarity Categories

The ordinal number of a satoshi also contributes to its rarity. The rarity of different satoshis has been classified into six ranks as follows:

  1. Common: Any satoshi other than the first satoshi of its block. This category comprises the majority of satoshis, with a total supply of around 2.1 quadrillions.
  2. Uncommon: The first satoshi of each block. There are about 6.93 million such satoshis.
  3. Rare: The first satoshi of each difficulty adjustment period. There are approximately 3,437 such satoshis.
  4. Epic: The first satoshi after each halving event. The total supply of such satoshis is 32.
  5. Legendary: The first satoshi of each halving and difficulty adjustment cycle. There are only five such satoshis in existence.
  6. Mythic: The first satoshi of the Genesis block. There’s only one such satoshi, making it the rarest.

In the realm of NFTs, rarity often dictates value. The rarer an NFT is, the higher value it tends to fetch in the marketplace. Similarly, in the world of BTC Ordinals, satoshis with a higher rarity rank could potentially carry more value.

In the following sections, we’ll explore how the BTC Ordinals differ from traditional NFTs and how to create and trade these unique digital artefacts.

Difference between Bitcoin Ordinals and Traditional NFTs

The advent of BTC Ordinals introduces an entirely new paradigm in the realm of digital assets and NFTs. It’s crucial to understand how BTC Ordinals differ from traditional NFTs to appreciate the potential they bring to the blockchain ecosystem fully.

On-Chain Minting

One of the most significant differences lies in the process of minting. BTC Ordinals permit the storage of actual raw file data directly on the Bitcoin blockchain. This is a stark contrast to traditional NFTs on Ethereum and other chains, which generally only store reference points to the files. These files can be hosted anywhere and may point to a piece of artwork in a gallery, for instance.

With BTC Ordinals, the entire data is inscribed on the blockchain, ensuring a level of permanence and security that external hosting cannot provide. This creates an immutable record of the digital artefact directly on the Bitcoin network, making it resistant to censorship, loss, or manipulation.

Inscription vs. Tokenization

Another critical distinction is between the processes of inscription and tokenization. Traditional NFTs are created through tokenization, where new tokens are minted on various blockchain networks. Each token represents a unique digital asset and is linked to metadata describing the asset’s properties.

On the other hand, BTC Ordinals operate on the principle of inscription. Each satoshi on the Bitcoin network can carry unique data such as text, audio, or video files inscribed directly onto it. This practice results in creating a digital artefact that is indistinguishable from the Bitcoin itself, creating a closer bond between the digital asset and the Bitcoin network.

Interoperability and Security

BTC Ordinals leverage the robustness, security, and widespread acceptance of the Bitcoin network. In contrast, traditional NFTs often depend on specific smart contract platforms like Ethereum, which can sometimes lead to issues of interoperability and security.

These key differences make BTC Ordinals an innovative and promising addition to the world of digital assets. 

In the following sections, we will explore how to create and trade BTC Ordinals, along with their potential uses and implications for the future of blockchain technology.

Controversies and Challenges

Despite the innovation and potential benefits that BTC Ordinals bring to the table, they also raise some controversies and challenges that need to be addressed.

The Debate over Blockchain Bloat

One of the primary concerns regarding BTC Ordinals relates to the issue of blockchain bloat. Each time a digital artefact is inscribed onto a satoshi, it consumes block space on the Bitcoin blockchain. Critics argue that as the popularity of BTC Ordinals grows, the amount of data stored in the Bitcoin blockchain could lead to significant bloat, slowing down transaction times and increasing the cost of transactions.

Blockchain bloat can also increase the requirements for storage and processing power, potentially centralizing control over the network in the hands of those with the resources to maintain these larger nodes.

Environmental Concerns

The environmental impact of cryptocurrencies is a hotly debated issue. Because BTC Ordinals rely on the same proof-of-work consensus mechanism as Bitcoin, they share the same criticisms regarding energy consumption. Inscribing digital artefacts on the blockchain requires significant computational resources, which requires electricity. As the number of inscriptions grows, so does the network’s energy consumption, raising concerns about the environmental sustainability of this technology.

Regulatory Uncertainties

As with all emerging technologies, BTC Ordinals operate in a regulatory grey area. Given their resemblance to NFTs, regulators might want to apply the same rules to BTC Ordinals as to NFTs. However, the distinctive features of BTC Ordinals—particularly that they are inscribed directly onto Bitcoin rather than being separate tokens—might complicate these regulatory efforts. The lack of clear rules and guidance could deter some users and investors from engaging with BTC Ordinals until the regulatory landscape becomes clearer.

Despite these challenges, the potential of BTC Ordinals to revolutionize how we view and use Bitcoin and blockchain technology cannot be underestimated. By providing a robust and secure method for storing digital artefacts directly on the Bitcoin blockchain, BTC Ordinals may well open the door to a myriad of exciting possibilities in the realm of digital ownership, collectables, intellectual property rights, and beyond.

Practical Usage of Bitcoin Ordinals

BTC Ordinals, with their ability to inscribe unique data onto individual satoshis, open up a myriad of use cases beyond the realm of traditional cryptocurrencies. The blockchain’s immutability, combined with the value and scarcity of Bitcoin, makes these inscriptions a potentially powerful tool for various industries and applications.

Digital Art and Collectibles

The most immediate use case for BTC Ordinals echoes the use case that has driven the popularity of NFTs: digital art and collectables. Artists could inscribe their artwork onto satoshis, creating unique digital artefacts that can be bought, sold, and collected. These BTC Ordinals would be completely unique and could carry additional prestige due to their inscription on the Bitcoin blockchain.

Similarly, fans and collectors could create or commission BTC Ordinals to commemorate specific events, people, or items of interest. Like physical memorabilia, these BTC Ordinals could increase in value over time based on their rarity and the demand among collectors.

Intellectual Property Rights

BTC Ordinals could serve as an immutable record of intellectual property rights. Creators could inscribe their copyrighted material onto satoshis, providing a timestamped and tamper-proof record of their claim to the material. This could streamline the process of registering and enforcing copyrights, as well as potentially reducing disputes over ownership.

Supply Chain and Provenance Tracking

BTC Ordinals could be used to track the provenance and authenticity of various goods, ranging from luxury items to food and beverages. By inscribing details about the production and distribution process onto satoshis, manufacturers and distributors could provide consumers with unprecedented transparency and confidence in the authenticity and ethical sourcing of their products.

Data Authentication

Due to their immutability, BTC Ordinals could be used to verify the authenticity and integrity of various data types. This could range from verifying the authenticity of academic credentials and professional certifications to maintaining the integrity of scientific data or the results of elections.

The potential applications of BTC Ordinals are vast and largely untapped. As the protocol continues to evolve and as more people become aware of its potential, we can expect to see a wide range of innovative and transformative uses for this technology.

Future Prospects and Developments

The advent of BTC Ordinals has begun a new chapter in the evolution of the Bitcoin network and blockchain technology. While still in its nascent stages, the potential for this protocol to usher in a new era of digital ownership, creativity, and data verification is significant. Looking forward, several promising prospects and developments could further shape the landscape.

Technological Advancements

As the underlying technology of Bitcoin continues to evolve, we can expect new features that can make inscriptions more efficient, secure, and versatile. Future Bitcoin upgrades could introduce new mechanisms for embedding data into satoshis or allow for more complex inscriptions. In parallel, advances in blockchain scalability and data storage could enable larger inscriptions and more sophisticated BTC Ordinals.

Regulatory Clarity

As previously mentioned, BTC Ordinals exist in a regulatory grey area. As they become more prevalent, regulatory bodies worldwide must provide clear guidance on their status, which could significantly influence their future development and use. For instance, regulations could determine how BTC Ordinals are taxed, how they’re used in commerce, and how intellectual property rights are enforced for inscriptions.

Market Adoption

The value and utility of BTC Ordinals will largely depend on market adoption. As more artists, creators, businesses, and consumers understand and use BTC Ordinals, their value and utility could significantly increase. The development of marketplaces and platforms for trading BTC Ordinals could also play a crucial role in their adoption.


The interoperability of BTC Ordinals with other blockchain systems and digital assets could open up exciting possibilities. For instance, future developments could allow BTC Ordinals to interact with Ethereum smart contracts, be used as collateral in decentralised finance (DeFi) platforms, or be incorporated into decentralised applications (dApps).

Use Cases Expansion

As BTC Ordinals become more established, we can expect to see an expansion of their use cases. They could potentially be used for things like secure messaging, data verification, digital identity systems, decentralised domain names, and much more.

Overall, the future of BTC Ordinals appears to be bright and full of potential. While there are certainly challenges and uncertainties ahead, the innovation and adaptability of the Bitcoin community give us reason to be optimistic about what lies ahead for BTC Ordinals.


The advent of Bitcoin Ordinals has not only introduced a fascinating concept to the realm of cryptocurrencies but also potentially revolutionized how we perceive and utilize the Bitcoin network. This innovation extends the functionality of Bitcoin far beyond being a mere financial instrument. By enabling data inscription onto individual satoshis, the smallest Bitcoin units, the Ordinals protocol has laid the foundation for Bitcoin-native digital artefacts akin to non-fungible tokens (NFTs).

However, like any nascent technology, Bitcoin Ordinals have their share of hurdles to overcome. Technical complexity, legal ambiguity, and market acceptance are all potential stumbling blocks on the path to widespread adoption. Furthermore, their differentiation from traditional NFTs, while offering unique benefits, may also add to the learning curve for potential users.

Despite these challenges, the potential use cases and future prospects of Bitcoin Ordinals are vast and thrilling. As the technology matures and gains more recognition, it could catalyze various applications, from digital art and intellectual property to data verification and beyond. The crypto space has often been the breeding ground for disruptive technologies, and Bitcoin Ordinals certainly fit that bill.

In conclusion, Bitcoin Ordinals represent an exciting new chapter in the story of blockchain technology. Their blend of novelty, versatility, and potential heralds a future where Bitcoin isn’t just a digital currency but a multifaceted platform for diverse digital interactions. The path forward may be challenging, but it is unquestionably a journey worth watching.

Louis de Jong
Louis de Jong