What Are Bitcoin Ordinals, and How Do They Work?

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Features Lead
Features Lead
Elena Bozhkova
About Author

Elena is the Features Lead at Cryptonews.com. With a Master's degree in science journalism from City University, London, she is passionate about exploring complex topics in the world of technology.

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Key takeaways:

  • Ordinals protocol assigns unique identifiers to each satoshi, making each one distinct and traceable. This system allows for creating unique digital collectibles directly on the Bitcoin blockchain.
  • The implementation of Ordinals was made possible by significant upgrades to the Bitcoin network which optimized transaction efficiency and scalability.
  • Ordinals can be bought and traded on specialized platforms, and transactions are handled through compatible wallets designed to support these unique digital items.
  • The introduction of the protocol has caused debate among Bitcoin users. Some questioned whether the innovation aligns with Bitcoin’s original purpose as a peer-to-peer financial system.

Bitcoin Ordinals is a protocol that enables each satoshi, the smallest unit of Bitcoin (BTC), to carry unique identifiers, or “ordinals.” These identifiers are assigned based on the order in which the satoshi was mined. This makes each satoshi trackable and unique.

The protocol also allows you to attach arbitrary content to individual satoshis—a process called “inscribing.” The attached data is wrapped in what’s called an “envelope,” which uses Bitcoin script commands to include the data without it being executed by the Bitcoin network. This effectively turns satoshis into Bitcoin non-fungible tokens (NFTs) directly on the blockchain. The content can include images, text, and even more complex file types.

dune ordinals
Type of Ordinals. Source: Dune

The Ordinals protocol became possible thanks to two major upgrades to Bitcoin.

Segregated Witness (SegWit) upgrade, introduced in 2017, changed Bitcoin’s transaction format. It separated the witness data (which verifies transaction integrity) from the transaction data itself. This separation reduced the overall size of transaction data stored in blocks, effectively allowing more transactions per block without increasing the block size limit.

Taproot, rolled out in 2021, increased the potential block size to four megabytes. Together, these upgrades improved Bitcoin’s architecture to support the complex functionality required by the Ordinals protocol.

The protocol was created by a former Bitcoin Core contributor, Casey Rodarmor, and launched on the Bitcoin mainnet in January 2023.

Examples of Popular Bitcoin Ordinals (NFTs)


After their launch, the number of Ordinal inscriptions skyrocketed. In February 2023, there were about 200 inscriptions made daily. By February 2024, this number had jumped to over 130,000 every day. Later, the activity began to slow down. But by August 2024, there were nearly 70 million inscriptions recorded on the Bitcoin blockchain, with more than 300 NFT collections posted just on Gamma, a marketplace for Ordinals. Let’s take a closer look at some of these collections:

Taproot Wizards

Taproot Wizards
Source: Taproot Wizards

Taproot Wizards is a fun collection of 2,108 digital wizard images. The idea comes from a popular Bitcoin meme called “magic internet money,” which started on Reddit in 2013. An artist known as Mavensbot created a simple illustration of a wizard for a Reddit advertisement. This image quickly caught on and coincided with a significant rise in Bitcoin’s price.

Wizard #0001, one of the images in the Taproot Wizards collection, pays homage to this original meme, but the wizard’s design was updated, and instead of “Magic internet money,” the caption says “Magic internet JPEGs.”

Quantum Cats

Quantum Cats
Source: Quantum Cats

Quantum Cats is a collection of 3,333 digital cat images on the Bitcoin blockchain that evolve over time. This collection was made by the same team that created Taproot Wizards. It honors OP_CAT, a piece of code from Bitcoin’s earliest days, written by its creator, Satoshi Nakamoto. Originally, OP_CAT was part of Bitcoin’s scripting tools but was turned off in 2010 due to concerns about its memory use and security.

Now, with technological advances and improvements in Bitcoin’s design, the Taproot Wizards team believes it’s time to bring OP_CAT back. They are using the Quantum Cats collection to draw attention to this idea.

NodeMonkes

Node Monks Ordinals
Source: Magic Eden

NodeMonkes is a set of digital characters, each captured in a small 28×28 pixel image. The collection was made in February 2023, but the creators held off on releasing it until December of the same year. This delay gave the emerging Ordinals ecosystem time to mature.

In the world of digital collectibles, older items often carry more value. NodeMonkes claims to be the first collection of 10,000 profile pictures inscribed on Bitcoin.

Bitcoin Ordinals vs. Traditional NFTs


Bitcoin NFTs, like Ordinals, and traditional NFTs on networks such as Ethereum or Solana, both create unique digital items. However, there are some important differences. Traditional NFTs often store their content off the blockchain, which can be on websites or other online platforms, and sometimes these are not decentralized. With Ordinals, everything is stored directly on the blockchain. This means all the data for Bitcoin NFTs is kept within the Bitcoin network itself. In summary, here are the main differences:

Feature Ordinals NFTs
Immutability Always immutable Can vary, sometimes mutable
Content storage Always on-chain Often off-chain, potentially less durable
Fungibility Can be used as a virtual currency (fungible asset) in one transaction and as an NFT (non-fungible) in another Always non-fungible
Transaction fees Higher ​​for larger data inscriptions Often lower
Security Arguably more secure as Ordinals inherit Bitcoin’s transaction model Prone to end-user security issues

Ordinals vs. Runes


When you hear about Bitcoin tokens, you might also come across the term “Runes.” This protocol was created by Casey Rodarmor, who also developed Ordinals, and was released in April 2024. However, Runes and Ordinals are different.

  • Runes protocol allows for the creation of fungible tokens on the Bitcoin network. “Fungible” means these tokens can be easily exchanged because each one is identical to another, making them perfect for uses like digital currencies or loyalty programs.
  • While Runes and Ordinals both add new features to Bitcoin, they do so in different ways. Runes attach extra information to Bitcoin’s existing transaction outputs, making them fit seamlessly with Bitcoin’s existing systems. Ordinals embed unique data directly into transactions.
  • Transferring Runes is straightforward, just like any Bitcoin transaction. But moving Ordinals involves splitting transaction outputs to manage the unique data, which can complicate the process.
  • Runes might use the blockchain more efficiently. Ordinals, due to their complexity, could lead to higher fees and bigger transactions, which might affect Bitcoin’s scalability.
  • Lastly, because Runes work with Bitcoin’s current setup, they easily fit into existing wallets and exchanges. Ordinals might need special tools and wallets to manage them.

How to Create Your Own Ordinal


The process for creating your first Ordinal depends on your technical skills. If you are familiar with using a command line interface (CLI), you will need to install Bitcoin Core, sync the Bitcoin blockchain, create a Bitcoin Core wallet, and then follow several more steps. If this seems too complex, you can use one of the special platforms like Gamma that simplifies the process.

How to Buy Bitcoin Ordinals:

  1. Find a platform for trading Ordinals. Here are some of the top marketplaces where you can buy Bitcoin Ordinals: Magic Eden, UniSat, Gamma, OKX, Magisat, Ordinals Wallet.
  2. Download and set up an Ordinals-compatible wallet. Below are some popular options: Ordinals Wallet, MetaMask, Xverse, OKX Wallet, Leather Wallet.
  3. Explore the marketplace and pick the Ordinal you want to buy. Then, follow the platform’s instructions.

Ordinals Controversy: Spam or New Opportunity?


The introduction of Ordinals on the Bitcoin blockchain has sparked a debate within the community. Some see the innovation as a new opportunity to create unique digital collectibles, while others argue that it strays far from Bitcoin’s original intent, which is to facilitate peer-to-peer financial transactions.

Ordinals inscriptions caused network congestion and higher transaction fees, filling the blockchain with non-essential data. For instance, by the end of 2023, the average transaction fee on the Bitcoin network soared to $37, the highest for the year, largely driven by the popularity of these digital inscriptions. A similar spike happened in April and May 2023, where fees reached an average of $19.

Some developers even proposed to curb what some called “spam NFTs,” but the proposals were ultimately shut down.

FAQs


What are Bitcoin Ordinals?

Bitcoin Ordinals is a protocol that assigns a special identifier to each satoshi, the smallest unit of Bitcoin. This identifier, called an ordinal, marks the order in which the satoshi was mined, making each one trackable and unique.

Who created Ordinals protocol?

The Ordinals protocol was developed by Casey Rodarmor, a former contributor to Bitcoin Core. He began working on Ordinals in 2022, inspired by Bitcoin’s pseudonymous creator, Satoshi Nakamoto.

How do Bitcoin Ordinals work?

Ordinals allow you to attach different types of data directly to individual satoshis through a process known as “inscribing.” This data, which could be anything from text and images to complex files, is wrapped in a script called an “envelope” that integrates seamlessly into the Bitcoin network, effectively transforming ordinary satoshis into one-of-a-kind digital assets.

Where can I buy Bitcoin NFTs, or Ordinals?

Bitcoin Ordinals can be purchased on various platforms that support them. Popular marketplaces include Gamma, Magic Eden, and UniSat. To use these platforms, you’ll need an Ordinals-compatible wallet such as The Ordinals Wallet, MetaMask, or Xverse.

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