Bitcoin NFTs/Ordinals is a hot topic among the crypto community. In this article, we’ll simplify this topic for you.
Ethereum, Solana, and Polygon are the favorite blockchains for NFT developers to create NFT collections. However, the introduction of Bitcoin NFTs/Ordinals has provided the Bitcoin blockchain its entry into the NFT world.
At the time of writing, Bitcoin Ordinals inscriptions have crossed over 35 million. In addition, the ordinal fees generated are close to $60 million.
But what actually is Bitcoin Ordinals? Is it just another buzzword from the crypto space? Let’s get into that right away!
What are Bitcoin NFTs/ Ordinals?
Bitcoins NFTs or Ordinals is a protocol developed to inscribe NFTs into the Bitcoin blockchain. This innovative protocol was developed by a software engineer and Bitcoin enthusiast, Casey Rodarmor, in January 2023.
Before the introduction of Ordinals, it was difficult to mint NFTs on the Bitcoin blockchain. Namely, the limited functionality of Bitcoin’s smart contract restricted developers from developing NFT projects on the Bitcoin blockchain.
In addition, there was also the limitation of token standards that supported the minting of NFTs. For example, Ethereum’s blockchain uses ERC-721 as a token standard for their NFTs.
In addition, Bitcoin Ordinals comes with various use cases, such as:
Metaverse: Avatars or virtual lands can be provided to the Metaverse users in the form of Bitcoin NFT. Moreover, you can sell these NFTs at marketplaces for other cryptocurrencies.
Crypto Gaming: Bitcoin NFTs can be used as in-game digital assets like gaming characters, accessories, cars, and more. In addition, you can use this NFT to upgrade your gaming level or enhance your in-game accessories.
Real Estate: The tokenization of real estate is gaining popularity, and Bitcoin NFTs have the potential to prove the ownership of a property. Additionally, you can easily transfer the ownership to another person instantly.
Music and Art: The large storage availability enables creators to convert their music or art form as a Bitcoin NFT. Furthermore, this conversion helps the creators to gain exposure among the crypto community.
With the help of Ordinals, you can mint your favorite NFTs on your Bitcoin network. But how does this protocol work? Let’s understand it.
How Do Bitcoin Ordinals Work?
Bitcoin Ordinals are derived from the Ordinal Theory, which assigns a specific serial number for trading and tracking digital collectibles like NFTs. Moreover, this theory provides individual identities for the smallest unit of Bitcoin, satoshi (1 Bitcoin (BTC) = 100 million satoshis).
In simpler terms, this ordinal protocol allows the NFT minters to create unique satoshis that are non-fungible or irreplaceable. These satoshis are created using a process called inscription.
The numbering of satoshis is based on its mining order. For example, the ordinal number of the first satoshi from the first block is “zero,” and the second from the same block is “one.”
Furthermore, the Ordinals are inscribed directly on the Bitcoin blockchain. Therefore, it doesn’t require any separate tokens or sidechains like NFTs of other blockchains.
How are Ordinal NFTs Authenticated?
There is not a single direct method to authenticate your Bitcoin NFTs. However, you can follow these simple steps to verify the authenticity of an Ordinal NFT.
Step 1: Select your favorite Bitcoin NFT from any of the available NFT marketplaces. For example, let’s take the case of the Bitcoin Frog (#6582) available on Magic Eden.
Step 2: Next, find the “Inscription ID” of this Bitcoin NFT from the “Details” section.
Step 3: Note down or copy the Inscription ID according to your convenience.
Step 4: Next, visit ordinals.com from your web browser. Ensure to visit this exact website, as scammers might create similar fake websites.
Step 5: Then enter or paste the NFT’s Inscription ID on the search bar and click “Search.”
Step 6: Now, you’ll get the complete details of the Bitcoin NFT, including content type, time stamp, fees, and more.
Step 7: Finally, compare the owner’s wallet address. If both the wallet addresses from Magic Eden and ordinals.com are the same, then this NFT can be considered authentic.
You can try this same method with any other NFT marketplace that supports Bitcoin Ordinals.
Pros of Ordinal NFTs
First, let’s discuss the pros of Ordinal NFTs:
#1. Market Demand
The crypto space has witnessed a high demand when it comes to Ordinal NFTs. As a result, these NFTs are expected to get placed among the list of top NFT collections.
Moreover, the higher demand in the market helps to increase the liquidity of the NFTs. Therefore, you’ll be able to trade your Bitcoin NFTs smoothly.
#2. More Mining Rewards
The reduction of mining rewards has always been a concern for Bitcoin miners. Now, the Ordinal NFTs tend to provide more fees for the miners of the Bitcoin blockchain.
Moreover, it encourages more miners to enter the mining process, which will eventually strengthen the Bitcoin ecosystem for good.
#3. Enhance NFT Adoption
The introduction of Ordinal NFTs also has the potential to add new NFT users. Moreover, the authenticity of the Bitcoin network creates a trust factor among people who are new to NFTs.
For this reason, more NFT marketplaces are adding Ordinal NFTs to their collection. For example, one of the top NFT marketplaces, Magic Eden, has launched the Ordinal NFT marketplace.
Furthermore, these marketplaces also list popular NFT collections to attract new users. Therefore, you can buy the top NFT collections like Ordinal Maxi Biz, Goosinals, Bitcoin Frogs, Bitcoin Punks, and more.
#4. Security Aspects
The most important advantage of Ordinal NFTs is the high security of the Bitcoin blockchain. As a result, it is difficult to manipulate the network and tamper with the data of NFTs.
Additionally, this enhanced security adds more confidence to the NFT buyers and sellers on marketplaces. Also, it’s impossible to create fake NFTs on the Bitcoin blockchain.
#5. High Flexibility
The ordinal NFTs also bring more flexibility to the entire Bitcoin ecosystem. Along with Bitcoin (BTC), you can also use Ordinal NFTs for storage, payment, and transactions.
Furthermore, you can also use Bitcoin NFTs as collateral for lending other crypto assets. As a result, you can approach the Bitcoin blockchain for multiple use cases.
Cons of Ordinal NFTs
Now, let’s discuss the cons of Ordinal NFTs:
#1. Slow Transaction Speed
The increase in the Ordinal inscription creates difficulty for the node operators. Therefore, these operators find it hard to run the Bitcoin network’s full nodes.
Over time, this network congestion slows down the transaction speed of the Bitcoin network. As a result, the transaction speed is reduced, and one needs to wait much longer to complete an on-chain transaction.
#2. Privacy Concern
When you conduct a transaction using the Bitcoin network, only your smart contract address is recorded. As a result, the public can only identify your address, and your identity stays anonymous.
In contrast, Ordinals provide a unique serial number for each satoshi in the first place. Therefore, it is easier for the public to track all your on-chain activities.
#3. Lack of Creator Royalties
Creators are the backbone of the NFT ecosystem, and Bitocin Ordinals don’t have a proper system to reward their creators or artists. For this reason, those creators who depend on passive royalties tend to stay away from Bitcoin NFTs.
For example, other blockchain NFTs allow creators to benefit from the resale of their NFTs. This system helps creators generate income on every sale of their NFT. Unfortunately, this income generation doesn’t work for Ordinal NFTs.
Bitcoin Ordinals vs. Bitcoin Stamps
Bitcoin stamps are a type of Bitcoin NFT that has been trending in recent times. Let’s look at the difference between Bitcoin Ordinals and Bitcoin Stamps. Stay tuned!
The image data relies on witness validation, leaving a chance for security breaches due to blockchain pruning.
The image data is stored on the transaction outputs. This process secures the blockchain by restricting the possibility of pruning.
It’s impossible to change the Ordinal NFTs once they are created. Which means it’s completely non-fungible.
It’s impossible to change the Ordinal NFTs once they are created. Which means it’s completely non-fungible.
Ordinals support a large variety of data types. Therefore, you can add high-resolution images, high-definition videos, games, documents, audio files, and more.
You can only add files on Stamps in SVG, PNG, and GIF formats.
You can store a wide range of data up to block sizes of 4 MB.
Here, you can only store low-size images up to 24×24 pixels.
Controversy Regarding Bitcoin Ordinals
The introduction of Bitcoin Ordinals had a mixed reception from the crypto community. Therefore, a large number of critics have emerged against the concept of Bitcoin NFTs. Let’s check the major concerns raised by the critics.
#1. Bitcoin’s Fungibility
The non-fungible nature of satoshis concerns the critics. Here, they demand that every satoshi must be equally valued without any unique distinction.
Each satoshi represents the basic unit of Bitcoin, and converting it into an NFT makes it unique and rare. Therefore, critics believe that this will disrupt the fungible nature of Bitcoin.
#2. Network Congestion
A group of community members argue that the Ordinal NFTs will drastically increase the Bitcoin block space. This block space has limited capacity for storing transactional data.
Moreover, the speed of the network tends to decrease with an increase in block space usage. As a result, the waiting time for each transaction increases.
#3. Increased Transaction Fees
The increase in the network congestion directly affects the transaction fees. Therefore, Bitcoin network users need to pay higher transaction fees.
Bitcoin’s community members are concerned that the transaction fees affect all their activities around the Bitcoin ecosystem. Moreover, they believe that the increase in demand for Ordinal NFTs will add more pain to the current situation.
Bitcoin NFTs/Ordinals have a huge potential to transform the whole NFT space. Moreover, these NFTs also offer more flexibility to the Bitcoin blockchain.
The introduction of Bitcoin-based NFTs has also received various criticism from the crypto community. However, I think that these Bitcoin Ordinals will play an important part in the wider adoption of NFTs.
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