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The introduction of Bitcoin to the financial market has revolutionized the landscape due to its potential for innovation and decentralized nature. The digital currency has gained traction quickly and become the number one option for investors looking for assets to diversify their portfolios. Bitcoin is more than an alternative to traditional money; it’s a digital ledger that continues to bring innovation. One such innovation it recently introduced on the market is the concept of ordinals, which are its specific form of non-fungible tokens.
Since their launch, ordinals have been a controversial subject among the crypto community because they are different from the regular non-fungible tokens while being presented as Bitcoin’s version of them. Bitcoin enthusiasts believe the innovative assets provide investors new opportunities and could boost the cryptocurrency’s intrinsic value.
Non-fungible tokens have been popular among investors over the last few years, but not all blockchain could host them. They are specific to the ecosystems that support smart contracts, and Bitcoin wasn’t one of them. Ethereum and Solana are the main blockchains that host NFTs.
While many believed that Bitcoin would be limited to being a funds transfer tool, it proved it could keep up with the market’s advancements, but according to its terms.
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What are ordinals?
The Bitcoin ordinals protocol enables the smallest units in a Bitcoin (satoshis) to be assigned unique identifying data to distinguish them from the other units in the block. A single Bitcoin contains 100.000.000 satoshis, and the only way to differentiate between them is to identify the features that make them unique. Casey Rodarmor developed the protocol that brought the ordinals to life to allow Bitcoin to join the list of blockchains that enable the creation of NFTs.
Before the protocol was introduced, Bitcoins were fungible tokens, and you couldn’t differentiate one satoshi from another. However, Casey Rodarmor changed everything when he developed the Ordinals protocol. Two updates in the Bitcoin ecosystem made it possible for the ordinals to be created, Segregated Witness and Taproot.
The Segregated Witness allows the witness script to be detached from transaction data and relocated to another data structure in the network. It extended the size of blocks and enabled Bitcoin users to inscribe content (like video and image data), validation data, and digital signatures in the witness information.
Taproot changed the type of address format the blockchain uses to identify particular satoshis, making it, therefore, possible to differentiate the units between them.
Why are the ordinals considered non-fungible tokens?
Traditional non-fungible tokens are defined as unique digital assets created on a blockchain that provide users with intellectual property ownership. NFTs on altcoin blockchains like Ethereum or Solana rely on metadata to document the authenticity and ownership of digital assets. The metadata is hosted off-chain in a different file.
Bitcoin ordinals are built differently because they store the digital assets on the chain in files containing transaction witness information. Ordinals are also created differently. You must send the ordinal satoshi to a taproot-compatible wallet and inscribe data and metadata in the process. When the token is minted, the inscription becomes permanent and enables blockchain users to identify it.
The Ordinals protocol enables Bitcoin to track all satoshis after being created and transform them into non-fungible tokens with unique inscriptions. Since the protocol was launched at the beginning of 2023, millions of Bitcoin’s NFTs were minted. Because the data inscribed in the ordinals is permanent, they are independent from third parties and decentralized.
Why did the Ordinals spark controversy?
Unsurprisingly, the launch of a new kind of non-fungible tokens has caused plenty of buzz in the crypto sector. While many are enthusiastic about the innovation, critics state that Bitcoin’s NFTs use block space inefficiently and could trigger increases in Transaction fees and slower transaction times. However, everyone is interested in how the protocol will impact blockchain transactions. Casey Rodarmor created the protocol to enable several other capabilities besides creating ordinals. It could also facilitate the association of ordinal satoshis to stablecoins or security tokens so that Bitcoin could have its version of smart contracts.
What are the most popular ordinals?
Bitcoin is the most well-known and largest cryptocurrency by market cap, so it’s no wonder that shortly after it announced it allows the creation of non-fungible tokens, everyone was interested in them and started creating and trading them. Individual ordinals were already sold for thousands of dollars, signaling that the new addition will make Bitcoin even more popular.
One of the most interesting projects is called Ordinal Punks, which includes a collection of 100 NFTs. Crypto enthusiasts compare the collection to Taproot Wizards and CryptoPunks because it includes hand-drawn ordinals.
Bitcoin Rocks is another collection inspired by a competitor’s NFT project. The project is similar to Ether Rocks and includes unique digital rocks, and the first one pays homage to the inaugural NFT of the Ether Rocks collection. The project was designed to promote exclusivity, so it includes only 100 ordinals, which are sold at high prices like 1,000 BTC.
TwelveFold is a collection of non-fungible tokens created by the developers of other famous NFT projects like Yuga Lab and Bored Yacht Club. It contains only 300 inscriptions, which are digital pieces of abstract artwork. The NFTs are designed to reflect the result of a mixture of mathematics, time, and the ever-evolving features of the blockchain landscape.
Web3 developer Udi Wertheimer designed Taproot Wizards, and includes a collection of wizards hand-drawn by the creator. At the project’s core lies the desire to use ordinals to reignite the spark that made Bitcoin a magical asset. Taproot Wizards includes 2105 unique NFTs, sold through the Taproot Wizards Discord, where NFT enthusiasts can find more about the project, discuss it, and socialize.
While the ordinals have been here for a couple of months already, we have witnessed no changes in Bitcoin’s rules. However, the protocol behind them has tremendous potential, so only the future can shed light onto what it will bring.
Featured image via Pixabay.