The NFT craze ran its course over the last couple of years on Ethereum, where smart contracts enabled people to attribute unique digital signatures to off-chain pictures of monkeys and lions. Some of the resulting jpeg images sold for hundreds of thousands of dollars in a flare-up of frenzy reminiscent of other crypto-driven fads like the ICO craze.
Barely has the NFT fad subsided somewhat, now we have NFT-like digital artifacts coming to the bitcoin blockchain. Are we witnessing the perversion and corruption of the thus-far-pristine top digital asset? Or are digital artifacts extensions of its functionality and an improvement of the NFT angle?
NFTs on Bitcoin?
In January 2023,developer Casey Rodarmor launched Ordinals, a digital artifacts feature of the bitcoin network made possible by the Taproot upgrade.
Ordinals is not the first attempt to involve bitcoin in the NFT business. Counterparty and Stacks came before it in 2014 and 2017, respectively. Unlike the previous attempts, Ordinals does not require a side chain or an additional token.
Ordinals inscribes NFTs directly on satoshis. It doesn’t link to off-chain data. In this sense, it is an upgrade over the NFT solutions of the Ethereum network, which link to off-chain data that can be altered.
What are Ordinals, and How Do They Work?
Ordinals use the smallest subunit of bitcoin, satoshis. The new protocol can inscribe every satoshi with data. This data can range from images to smart contracts, documents, and sound files. Smart contracts can enable NFTs.
Once inscribed, the satoshi becomes the bearer of unique, non-fungible data. Instead of NFTs, some people call these “inscriptions.”
To create inscriptions, people need to run a full network node. They can also pay a service to create inscriptions for them, or buy already existing inscriptions from a seller.
What Differences are there Between Inscriptions and NFTs?
Ordinals’ creator, Casey Rodarmor, perceives off-chain links as an incomplete solution. In his view, NFTs or inscriptions must reside entirely on the blockchain.
Ethereum’s NFTs contain links pointing to data stored on the Interplanetary File System. This data consists of plain jpegs. Now and then, NFT issuers update the quality of their jpegs, requiring NFT owners to refresh their metadata so they can see their precious ape cartoons in higher definition.
By contrast, Rodarmor’s inscriptions reside entirely on the blockchain and, like bitcoin itself, are immutable. Considering them digital artifacts is more accurate than calling them NFTs.
Unlike NFTs, inscriptions do not carry creator royalties.
How to Get and Trade Ordinals
The Ordinals market is already booming, and in true NFT fashion, many bitcoin inscriptions have already changed hands at the cost of hundreds of thousands of dollars. If you want to get some Ordinals, you have three options to acquire them.
- Create your own Ordinals. To create an Ordinal, you must run a full node. Running a full bitcoin node is a relatively complex operation. That said, it is within everyone’s means to do so.
- Buy an Ordinal. If you want to buy an Ordinal that already has value, find an owner. Contact the person and make an offer. To make the transaction, you will need a wallet that can store inscriptions.
- Use a service. If you can’t muster the wherewithal to mint your inscriptions yourself, you can pay a service to do it for you. To use an inscription service, you have to provide an address where they can send your Ordinals. You have to pay them in BTC. Ordinals minting can cost anything from $50 to hundreds of dollars.
To handle, store, and transact Ordinals, you need a wallet that supports this type of digital asset. Browser wallets like Metamask do not support these assets. You will need something like Sparrow. To set up your wallet, you will need to follow the instructions available online at Github.
Once you have your wallet and inscriptions or digital artifacts, you can sell them and transfer them to others. Wallets like Sparrow are only suited to transact Ordinals. Do not use them to transfer bitcoin, as you may send your inscriptions together with the funds you transfer.
How Can You Find Ordinals Worth Buying?
The budding Ordinals market is not as vibrant as the NFT market. But it is growing. If you want to buy Ordinals, you can reach out to creators and owners through Discord. People advertise their Ordinals there, allowing you to get your hands on digital artifacts, the value of which may increase in the future.
Be aware that buying Ordinals is tedious and risky. You have to break every rule you may have learned about avoiding Web 3.0 scams.
- You have to connect with people through public and private online channels.
- You may have to send a payment for the inscriptions before you receive them.
- You may have to engage in direct transactions with unknown parties.
How Do Ordinals Impact Bitcoin?
The launch of NFTs on the bitcoin network has elicited mixed reactions from the community.
Some think that Ordinals taint bitcoin, hijacking its purpose. Bitcoin inscriptions can lead to rocketing transaction fees and open the world’s most secure digital asset to malware attacks, etc.
Given the tedious and risky transactions inscriptions require, they certainly open bitcoin to a lot of peer-to-peer abuse and scams. These digital artifacts may bring all the negative reputational baggage of NFTs to bitcoin, with little to show in benefits.
Others believe that the concept of digital, cryptographic trading cards is not foreign to bitcoin. Hal Finney, whom many consider to be the creator of bitcoin, the elusive Satoshi Nakamoto himself, did consider bitcoin a medium suitable for the trading of cryptographic art.
The presence of smart contracts inscribed to satoshis may open up bitcoin’s use cases. Even if images of cartoon apes are boring and passé, it may make sense to inscribe banned books and leaked government documents to satoshis – according to bitcoiner Eric Podwojski.
In addition to being sound money, bitcoin is also the world’s most secure network. Even if we don’t consider NFTs viable or worthy of attention, we must admit that the network’s use cases may exceed that of a medium of exchange and store of value. The potential is certainly there.
