Non-Fungible Tokens (NFTs) are becoming a hot topic in the world of cryptocurrency, and the Bitcoin network is no exception. In February 2022, a proposal was sent to the Bitcoin dev mailing list to bring NFTs to the Bitcoin network using a unique approach. In this article, we'll take a closer look at how Ordinals and Inscriptions play a crucial role in the creation and use of NFTs on the Bitcoin network.

Tracing the Origins of Bitcoin NFTs: A Look Back

While NFTs are commonly associated with smart contract blockchains, it may be a surprise that they have been part of the bitcoin community for nearly ten years. However, their popularity never took off, and most bitcoin owners see little value in these forms of digital assets.

Earlier initiatives like Colored Coins and Mastercoin, which aimed to add extra information to the bitcoin chain, failed to gain traction as the bitcoin network became congested. Adding data with no additional value was no longer cost-effective, leaving bitcoin to primarily store important financial transaction information.

Today, NFT projects within the bitcoin ecosystem mainly exist on the Liquid Side Chain, which requires a specific type of wallet to access. Most NFTs currently available are tokens generated through smart contracts, which require a Turing complete scripting language, something the bitcoin base chain does not support. This exclusion has kept bitcoin out of the NFT market.

However, Rodarmor, a former Bitcoin core contributor, has developed and launched a new protocol called Ordinals. This allows for the transfer of individual satoshis on the bitcoin network and serves as an anchor to attach NFTs.

The Backbone of Bitcoin Transactions: Ordinals

Ordinals refer to the position of a transaction in a block. For example, the first transaction in a block would be referred to as "transaction number 1" or "transaction ordinal 1."

Ordinals form the backbone of the Bitcoin transaction system and help to ensure that transactions are correctly processed and recorded on the blockchain.

Here's an example of an ordinal.

Creating Unique Digital Artifacts: Inscriptions

Inscriptions refer to the data that is stored within a Bitcoin transaction, such as the amount of Bitcoin being sent and the sender's and recipient's addresses. Inscriptions make up the actual transfer of value on the Bitcoin network. With the proposal to bring NFTs to the Bitcoin network, Inscriptions have taken on a new role.

In the context of Bitcoin Ordinals, an Inscription is a metadata attached to a Bitcoin (Satoshi) in the form of extra data stored within a Bitcoin transaction. This extra data could be anything from text, images, sound files, HTML, or other digital assets, and the block size limit caps the size of the Inscription. The idea behind Inscriptions is to create non-fungible properties for Bitcoin, allowing each Satoshi to have its own unique digital artifact.

Here's an example of Inscription and data.

Comparing NFTs on Ethereum and Bitcoin

Compared to NFTs on Ethereum, the creation and use of Inscriptions on Bitcoin is a distinct approach.

Unlike Ethereum NFTs, which have their own token standards such as ERC721 and ERC1155 and are given a unique token ID to identify them, Inscriptions are stored directly on the Bitcoin blockchain, making them immutable and fully decentralized.

In other words, they are composed of on-chain data, which means that the actual image for the NFT is stored directly on the blockchain rather than being linked to an external website, as is the case with most NFTs on Ethereum.

This increases their security because the data cannot be lost or altered without affecting the blockchain itself. Eric Wall, a former Arcane Assets CIO and Swedish researcher, estimates that storing fully on-chain NFTs on Bitcoin is now seven times cheaper than on Ethereum.

For NFTs on Ethereum, there have been concerns about removing metadata if the centralized storage solution goes offline or if the project manipulates the metadata.

But despite the benefits of immutability for Inscriptions, this also means that any illegal or undesirable content in Inscriptions will remain on the chain forever.

Buying/Minting Ordinals

Currently, the OTC (over-the-counter) market is the only trusted platform for buying and selling Ordinals. Although there is no marketplace for trustless trades yet, the OTC market has proven to be a reliable alternative.

If you are a ‘Degen’ and what to buy/mint them at any cost, then here’s how you can go about it -

1. Set up a Sparrow Wallet.
2. Run a node and inscribe an Ordinal yourself.
3. Find an Ordinal owner and buy directly from them.
4. Use a service to inscribe an Ordinal without running your own node.

For a more in-depth explanation on how to execute the aforementioned steps, please refer to the official Ordinals document. However, to remain focused on the topic at hand, we will not delve into the specifics of these procedures here.

Wrapping up

In conclusion, Ordinals and Inscriptions bring NFTs to the Bitcoin network. Creating unique digital artifacts using Bitcoin transactions opens up new opportunities for Bitcoin to be used in ways that go beyond its original purpose as a digital currency. With its immutability, decentralization, and low transaction costs, the Bitcoin network has the potential to bring new and exciting use cases to the Web3 ecosystem.

Additionally, the use of ordinals and inscriptions in Bitcoin NFTs provides a new level of security and trust compared to traditional NFTs. The ordinal number assigned to each Satoshi serves as a unique identifier, making it nearly impossible to duplicate or manipulate NFTs on the Bitcoin network.

‍