Ordinals
Potential to realise the unmet promises of NFTs.
Ordinals, are a new framework originating on the Bitcoin blockchain, introducing a new primitive that fundamentally differs from the established standard introduced by NFTs. By leveraging Bitcoin’s security and transparency, Ordinals enable the creation and management of unique digital artefacts that are immutable and highly traceable. The framework opens up vast possibilities for art, identity, and data integrity, transforming how we perceive and interact with digital artefacts to date.
Origins of Ordinals
Casey Rodarmor introduced the concept of Ordinals and released the initial paper outlining the concept. Rodarmor envisioned a system that utilises Bitcoin’s inherent security and transparency to bring unique, identifiable digital assets to its blockchain. He unveiled the idea in more detail in his paper, “Ordinals: A Method for Tracking Individual Satoshis and Inscribing Data,” which has since become the foundation for the Ordinals’ ecosystem.
The first Ordinal to be minted on Bitcoin, Inscription 0, is a simple black skull with white markings. This Genesis inscription, created by Rodarmor, is a piece of “tiny pixel art” that marked the beginning of what the Ordinals ecosystem is today. The image was timestamped on December 14, paying homage to Bitcoin’s genesis block.
How Ordinals work
Bitcoin operates on a fundamentally different architecture compared to Ethereum. Each Bitcoin transaction comprises data known as Unspent Transaction Outputs [UTXOs]. Ordinals leverage this UTXO model to create a numbering scheme for individual satoshis, the smallest unit of Bitcoin, giving each satoshi a unique identifier.
Ordinals assign a unique number to each satoshi, allowing them to be individually tracked and identified. These identifiers can be represented in various formats, such as decimals, degrees, or percentiles. An inscription in the Ordinals ecosystem is arbitrary content attached to a specific satoshi.
For example, if a satoshi carries a profile picture image, it is the Ordinal, and the image is the inscription. When creating an inscription, this data is added to a specific UTXO.
Bitcoin’s protocol enforces a dust rule, preventing the creation of transactions that output very small amounts, which are economically unfeasible to spend. This rule mandates a minimum amount of satoshis to be grouped and spent in a transaction. Consequently, Ordinals cannot utilise individual satoshis directly. Instead, they operate in groups, typically around 600 satoshis, to remain above the dust threshold. Casey Rodarmor, the creator of Ordinals, developed an indexer that every Ordinals explorer relies on. This indexer scans the entire transaction history, interpreting the Ordinal’s data embedded within.
NFT Standards on Ethereum
On Ethereum, NFTs are governed by smart contract code, typically adhering to standards like ERC-721 or ERC-1155. Each NFT is a unique token stored within a smart contract, and ownership is recorded by associating a unique token ID with an address. For instance, in the Mutant Ape Yacht Club case, the contract storage would map each unique NFT ID to an owner’s Ethereum address.
Potential & Limitations
To fully grasp Ordinals’ promise, it is crucial to draw parallels with the initial offerings of NFTs and the value-creation elements they introduced. While Ordinals offer a more integrated vision of digital artefacts within the Bitcoin ecosystem, the market remains nascent, facing potential challenges akin to those experienced by early NFT adopters. By addressing these challenges proactively, Ordinals can potentially avoid the pitfalls that hinder the broader acceptance and utility of NFTs.
Unlike many NFTs on Ethereum that point to off-chain data stored on the Interplanetary File System [IPFS] and can be altered through dynamic metadata, Ordinals inscribe all data directly on-chain. This ensures the permanence and authenticity of the digital artefacts on the oldest and most secure blockchain.
- Leveraging Bitcoin’s robust security model, Ordinals offer immutability and traceability. This ensures that each Ordinal’s ownership and history are transparent and tamper-proof.
- By utilising the Bitcoin blockchain, Ordinals benefit from security and name recognition, enhancing their credibility and security compared to NFTs on less established blockchains.
- Attaching arbitrary data to satoshis allows for diverse use cases, including digital art, metadata storage, and more complex assets that can evolve.
Despite their potential, Ordinals must navigate several technical and market challenges to achieve widespread adoption.
- Bitcoin’s limited block size and transaction throughput pose scalability concerns. Efficient data handling and potential L2 solutions could mitigate these issues.
- The dust rule and transaction costs necessitate careful economic planning. Ensuring that Ordinals’ creation, transfer, and storage are cost-effective is crucial for user adoption.
Rare Sats
The Ordinals community values certain satoshis categorised as ‘rare’ or ‘uncommon’. These satoshis, tied to significant events in Bitcoin’s history, such as the start of new difficulty adjustment periods, have become collector’s items and often sell at premium prices. One of the unique aspects of Ordinals is the concept of rare sats. Rare sats are specific satoshis that are considered valuable by the community due to their historical significance or unique properties.
Ord.io is the largest Bitcoin explorer, a platform built to showcase these rare sats, providing insights into their provenance and enhancing their collectable value.
Ordinal Inscriptions
Inscribing Ordinals differs significantly from minting on Ethereum-based NFTs. Minting on Ethereum involves deploying a smart contract and issuing tokens. On Bitcoin, inscribing Ordinals involves inscribing data directly onto satoshis within UTXOs. Inscription platforms like Ordinalsbot streamline this process, ensuring users can inscribe their Ordinals seamlessly. Ordinalsbot specialises in automating the inscription process, enabling users to batch-process multiple Ordinals efficiently. This service is particularly valuable for projects requiring large-scale Ordinal creations.
At Eden Block, we believe in Ordinals’ promise and we have backed great teams building in this vertical. By supporting platforms like Ord.io and Ordinalsbot, we are excited to contribute to the development of robust, user-friendly tools and services that will help Ordinals realise their full potential.
Conclusion
While Ordinals leverage Bitcoin’s unparalleled security and transparency to offer a large product offering, there are still many unanswered questions. Ordinals have the potential to be positioned as the most immutable and decentralized home for digital artefacts if they can address the limitations faced by NFTs, capitalise on Bitcoin’s strengths, build a sustainable ecosystem, and win user mindshare.
The efforts of projects such as Ord.io and Ordinalsbot are instrumental in this journey, equipping creators and users with the tools and infrastructure required to realise Ordinals’ full potential. As this emerging market matures, these platforms will be critical in driving adoption and innovation within the Ordinals ecosystem, making interactions more accessible and intuitive.
The journey of Ordinals is just starting, and there are still many outstanding questions. If the space is able to learn from the mistakes NFTs made and prioritise building a sustainable ecosystem with value creation, security, immutability, and decentralisation at its core, Ordinals can establish a new standard for digital artefacts and fulfil the promise that NFTs never could.
Regards
Thank you to Nelson Ryan, Daniel Luca, Lior Messika, and Rafael Mannelid for all their help, ideas, and feedback on the piece.
Disclosure: Eden Block is an investor in Ord.io and Ordinalsbot.
