Bitcoin Ordinals have gained recognition as a form of NFT that utilizes the “Ordinal theory” to record information on satoshis, which are the smallest units of Bitcoin.
The NFT ecosystem has recently taken notice of BRC-20 (Bitcoin Request for Comment 20) as a new trend.
Bitcoin Ordinals Explained: Things To Discover About Bitcoin NFT
Bitcoin Ordinals are similar to Ethereum’s non-fungible tokens (NFTs), except that they operate on the Bitcoin network. They utilize ordinal theory, or the Ordinal Protocol, to assign a number to the inscribed satoshis, allowing for tracking.
While Ordinals were introduced in December 2021, it wasn’t until the end of January 2022 that they gained significant popularity. Since then, many well-known NFT projects have joined the Bitcoin network, including OnChainMonkey, DeGods, and Yuga Labs. Despite its innovative nature and use case on the network, it has been criticized for the high transaction fees as the network becomes congested.
Bitcoin Ordinals and BRC-20 tokens have caught the attention of the NFT ecosystem with their unique method of tracking data on the Bitcoin network. However, the high transaction fees and concerns about the appropriateness of NFTs on the Bitcoin network pose significant challenges to the concept.
Despite these hurdles, BRC-20 token marketplaces have emerged, but their sustainability is uncertain. There is a risk of pushback and opposition to inscriptions on Bitcoin as the hype around them continues.
Nevertheless, the value proposition of Ordinals lies in the enhanced security of Bitcoin compared to Ethereum’s flexibility. The future prospects of this technology are unclear, but it is likely that further exploration and development will continue in the short term.
How do Bitcoin ordinals work?
Bitcoin ordinals utilize ordinals theory, which gives sats individual identities and allows them to be treated as atomic units on the Bitcoin blockchain. Essentially, ordinals are a numbering scheme for sats.
The mechanics of Bitcoin ordinals are driven by ordinals theory, which defines sats as the atomic unit that can be traded individually on the Bitcoin network. Each sat is identified by a unique ordinal number based on the order of mining, and this allows sats to be inscribed with digital content to form Bitcoin ordinals.
These ordinals are immutable digital collectibles that can be transacted using Bitcoin wallets. According to ordinals theory, sats can also be attached to security tokens, accounts, or stablecoins using ordinal numbers as stable identifiers.
Ordinals are much more than just nonfungible tokens, as they have a variety of potential use cases beyond this.
How to mine Bitcoin ordinals?
The process of creating Bitcoin ordinals has been referred to as mining, minting, or inscribing. However, unlike minting NFTs on the Ethereum blockchain, which is a relatively mature process with intuitive tools, mining Bitcoin ordinals is a technically complex process that currently lacks user-friendly tools.
Initially, only users who ran a Bitcoin node could mine Bitcoin ordinals. For these tech-savvy users, a Bitcoin node with the ord app, a command line wallet, was necessary to mine ordinals. Node operators would load their wallets with sats to pay for gas fees and then inscribe their ordinals.
However, no-code ordinal mining applications like Gamma or Ordinals Bot aim to simplify the process by allowing users to upload the content they want to inscribe and create their Bitcoin ordinals. The payment process involves using a QR code and is intuitive enough for less technically-gifted users.
Currently, the tools and ecosystem surrounding Bitcoin ordinals are still at an early stage. It has only been a few months since the genesis ordinals were inscribed, so as demand from ordinary users and followers increases, the ecosystem and tooling should mature with more user-friendly options.
Ordinals vs. traditional NFTs
From a technical perspective, there are several differences between ordinals and traditional NFTs that impact their pricing. Ordinals uniquely identify sats and store content on-chain, while Ethereum-based NFTs typically store metadata or art off-chain. Rarity and pricing for Ethereum NFTs are generally determined by the attributes of the art or limited supply, but for Bitcoin ordinals, rarity and pricing are based on key moments represented by Bitcoin blocks.
The first sat of every new block is rarer than others, as is the first sat of an adjustment period that occurs every two weeks. The first sat of each halving epoch, which occurs every four years, is even rarer, and the first sat of the adjustment period that occurs every six halvings is the rarest. This framework creates a level of randomness in rarity that is not controlled by the founding teams or artists of nonfungible token collections.
This unique approach to rarity could explain the high activity around Bitcoin ordinals in the short term, and it will be interesting to see how activity ramps up closer to the 2024 Bitcoin halving.
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