Ordinals
Bitcoin Ordinals: NFTs on the Original Blockchain
Imagine Bitcoin's blockchain as a giant public ledger. Every transaction gets recorded on this ledger, and each transaction involves transferring a specific amount of Bitcoin (BTC). But Bitcoin can be further divided into its smallest unit, the satoshi (named after Bitcoin's creator, Satoshi Nakamoto). There are 100 million satoshis in 1 BTC.
Traditionally, NFTs (non-fungible tokens) haven't lived directly on the Bitcoin blockchain. They often reside on separate blockchains specifically designed for NFTs, like Ethereum, or on additional layers built on top of Bitcoin.
Bitcoin Ordinals change this. With the Taproot upgrade (activated at block 709,632 on Sunday, Nov 14, at 5:15 UTC), Ordinals leverage a technique called "inscription." This allows attaching data directly to individual Satoshis within a Bitcoin block. Think of it like writing a small message on a specific coin in a giant pile of coins. That message could be anything digital: an image, a video snippet, a piece of text, or even a computer program.
Here's what makes Ordinals unique:
Directly on Bitcoin: Unlike other NFTs, Ordinals are truly "native" to the Bitcoin blockchain. The data is permanently etched onto the Bitcoin ledger itself, benefiting from Bitcoin's robust security and immutability.
Using Satoshis: By attaching data to individual Satoshis, Ordinals create a unique identifier for each NFT. This "ordinal number" is based on the order in which the Satoshi was inscribed, adding another layer of uniqueness.
Bitcoin Ordinals vs. Ethereum NFTs: Familiar Ground with a New Twist
Both Bitcoin Ordinals and Ethereum NFTs share some core concepts:
Ownership: Both represent unique digital assets with verifiable ownership recorded on a blockchain. You can buy, sell, and trade them just like other digital collectibles.
Scarcity: Both Ordinals and Ethereum NFTs are created in limited quantities, making them scarce and potentially valuable.
However, there are some key differences in how they achieve these functionalities:
Data Storage:
Bitcoin Ordinals: Embrace on-chain storage. The actual data, like the image or video, is directly inscribed onto individual Satoshis within a Bitcoin block. This means the data itself benefits from the same security and immutability as the Bitcoin blockchain itself.
Ethereum NFTs: Typically use off-chain storage. The NFT itself acts as a pointer or "token" that references the actual data stored elsewhere, often on a decentralised storage network like IPFS (InterPlanetary File System). This approach keeps transaction fees lower on Ethereum but introduces a layer of complexity and potential risk if the off-chain data becomes unavailable.
Standardisation:
Bitcoin Ordinals: Currently lack a dedicated standard like Ethereum's ERC-721. This standard defines common functionalities for NFTs on the Ethereum blockchain, making them more interoperable and easier for wallets and marketplaces to recognize. Ordinals are still evolving, and creating or interacting with them might require specialised tools. A recent example of this is the NAT protocol that required Magic Eden to integrate specific coding to enable the display of these ordinals on their marketplace.
Ethereum NFTs: Benefit from established standards like ERC-721. This creates consistency and simplifies the development and interaction with NFTs across different platforms on the Ethereum ecosystem.
Unique Identifiers:
Bitcoin Ordinals: Utilise ordinal theory for identification. Each Ordinal has a unique identifier based on the order in which the Satoshi is inscribed. This adds another layer of uniqueness compared to simple sequential numbering and bolsters the early inscription narrative that has taken firm hold.
Ethereum NFTs: Primarily rely on token IDs. These are standard sequential numbers assigned during the minting process. Token IDs are correlated to contract addresses and are otherwise independent token IDs of other collections.
However, there are also some considerations for Ethereum collectors:
Technical Learning Curve: As a relatively new technology, Ordinals require specialised tools and knowledge compared to the established ecosystem of Ethereum NFTs. Collectors might need to invest some time in learning the ropes before diving into Ordinals. Part of my aim in putting this series of articles together is to help collectors leapfrog some of these difficulties and avoid some common pitfalls.
Potential Scalability Issues: Including large data files within Ordinals can increase Bitcoin transaction fees and potentially impact scalability. This could affect the user experience and overall adoption of Ordinals. The bitcoin halvening is fast approaching
In conclusion, Bitcoin Ordinals offer a more "purist" approach, etching the NFT directly onto the Bitcoin blockchain for ultimate security and immutability. Ethereum NFTs prioritise efficiency and leverage existing standards for broader compatibility within its ecosystem. Both approaches have their pros and cons.
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