With the invention of Ordinals, Bitcoin has suddenly become the hottest NFT blockchain of them all. More than 8.5 million Ordinals have been created (or “inscribed“) since the protocol’s launch. That’s up from 1,000 in early February and barely over 1 million in mid-April this year.

The big question is, are Ordinals all hype with no substance or should you actually care? While I won’t be able to answer that last question for you or explain the underlying technology, I can at least give you an introduction to what Ordinals are, how they work, and their current use cases.

The number of Ordinals inscriptions really took off in late April this year (Dune Analytics)

First up, some basic Bitcoin theory

When Satoshi Nakamoto created Bitcoin, they wrote into the code that the supply would be limited to 21,000,000 bitcoins (BTC). No more than that will ever exist.

Each of these 21 million coins is made up of smaller units, just like dollars and euros are made up of cents. Bitcoins are typically divided into what’s known as satoshis or just sats. 1 BTC = 100 million sats.

For all of Bitcoin’s existence and for any regular transaction, the concept of satoshis doesn’t matter. If you’re making a 0.01 BTC transfer, you don’t even see that it consists of individual sats, nor would you care.

It’s like having a pile of 1-cent coins and grabbing a handful to make a payment. They’re literally fungible tokens, the opposite of NFTs (non-fungible tokens).

Ordinals, however, turn fungible Bitcoin units into non-fungible tokens and enable individual sats to become meaningful and valuable.

The Ordinal Protocol

The Ordinal Protocol was created by Casey Rodarmor, a long-time Bitcoin enthusiast and developer. The protocol first of all enables tech-savvy people to identify individual satoshis. This is interesting in and of itself because of what’s referred to as the Ordinal rarity scheme.

Since all 21 million BTC are created (aka mined) sequentially over time, some bitcoiners have long seen certain satoshis as more historically significant than others.

Satoshis mined during the first day, week, month, or year of Bitcoin’s existence are naturally interesting from a historical perspective. The same goes for other “firsts” as defined by Bitcoin’s built-in halving cycle. Here’s the most commonly agreed-upon rarity scheme in the community:

• Common: Any sat other than the first satoshi of its block (2.1 quadrillions total supply)
• Uncommon: The first satoshi of each block (6,929,999 total supply)
• Rare: The first satoshi of each difficulty adjustment period (3,437 total supply)
• Epic: The first satoshi after each cycle, theoretically after every 6th halving (5 total supply)
• Mythic: The first satoshi of the genesis block (1 total supply)

I’m personally fascinated by this aspect of Ordinals and there’s a lot more to unpack. Casey Rodarmor wrote a great blog post on the topic. He dives into supply, rarity, naming conventions, “exotic” satoshis, and the idea of “archaeology” in the context of NFTs and Ordinals.

Ordinals use cases

The identification of individual satoshis is clearly interesting. To some, these are collectibles in their own right. But the Ordinals Protocol not only enables satoshis to be identified but also to be transacted with extra data attached. This process is called inscription.

Sticking to the old-school money analogy, you can think of inscriptions as drawing something on a coin. If the drawing is meaningful or made by a famous artist, that coin is suddenly worth a lot more than its actual monetary value.

DeGods is one of the well-established projects that has now launched an Ordinals collection

So far, most Ordinals are extremely low-effort and not worth mentioning. A few well-established NFT companies have joined the fun though. In March, Yuga Labs launched TwelveFold, a collection of 300 unique generative artworks. The auction raised $16.5 million.

Most Ordinal inscriptions until now are text, art, and profile picture projects. But creators are continuously pushing the boundaries. As a prime example of this, someone inscribed the classic and highly popular video game DOOM as an Ordinal(!).

Another noteworthy use case is the new BRC-20 token standard. These tokens are essentially new currencies created on top of the Bitcoin blockchain through the Ordinals protocol. It’s still early days and highly experimental, so I will save the deep dive for a future article.

Ordinals compared to other NFTs

The NFT boom so far has been led by blockchains like Ethereum, Solana, and Tezos. NFTs on these blockchains all utilize what’s known as smart contracts. A smart contract is simply a computer program that runs a specific piece of code when certain conditions are met.

And while smart contracts do exist on Bitcoin as well, they take a much more rudimentary form due to technical limitations of the blockchain. This is one of the key differences and reasons why NFTs simply haven’t existed on Bitcoin until now.

Along with this distinction comes another essential difference: NFTs on Ethereum, Solana, etc., are created as entirely new tokens on top of the existing blockchain. Bitcoin Ordinals are not. Rather, Ordinals are simply repurposing the native Bitcoin currency, i.e., the individual BTC units.

Because of this, many people in the crypto and NFT communities are also hesitant to refer to Ordinals as NFTs. Yes, they’re non-fungible, but they’re not really tokens. Casey Rodarmor himself sometimes refers to them as “digital artifacts”.

Last but not least, Ordinals differ from most NFTs by being fully on-chain. NFTs usually utilize IPFS (InterPlanetary File System) for storage of images, videos, etc. Ordinal data is inscribed directly onto individual units of BTC with no external dependencies.

This means that you have full ownership and control over your Ordinal. No one can change or destroy it and it will exist for as long as Bitcoin does. And if you want to bet on a blockchain to be around forever, you’d be hard-pressed to find a better option than Bitcoin.

One downside to Ordinals is that the on-chain nature and lack of smart contracts significantly limit their potential size and capabilities. To many collectors, this limitation is outweighed by the fact that Ordinals inherit the strengths and ethos of the Bitcoin blockchain itself.

What you need to get started

Just a few months ago, the earliest adopters of Ordinals were relying on nothing but spreadsheets and trust to trade with each other. Keeping an Ordinal separate from all the regular satoshis in a wallet was a whole other headache in and of itself.

Luckily, the Ordinals tooling has come a long way in just a few months. And all you really need to find and collect your first Ordinal is a wallet funded with BTC and a place to spend it.

Wallets

Several Bitcoin wallets have been quick to integrate Ordinals so you can easily see and trade them. Some of the most trusted include Xverse, Hiro Wallet, and Ordinals Wallet. The latter is specifically designed for Ordinals and no other Bitcoin activity. I personally use Xverse.

Marketplaces

Some well-established and trusted NFT marketplaces have expanded their offerings to include Ordinals. A prime example of this is Magic Eden, one of the leading marketplaces for Solana NFTs. As of this writing, Magic Eden has already captured more than 50% of the Ordinals market.

Magic Eden serves as both a marketplace and launchpad for Bitcoin Ordinals

Second in terms of market share is UniSat. UniSat is an open-source Ordinals marketplace and wallet, providing an all-in-one solution for Ordinal collectors.

Considering the pace of innovation in the past month alone, I expect lots of new wallets and marketplaces to enter the scene in the coming weeks. Which tools are considered best-in-class may look completely different by the time you read this.

Closing thoughts and a bit of controversy

I’m a long-time Bitcoin believer and investor. I like Bitcoin as decentralized money and digital gold. Ordinals introduce a whole new use case and to some extent change the entire Bitcoin narrative. Not everyone is celebrating this development.

Some Bitcoin maximalists believe that Bitcoin should be used to store and transfer value — and nothing else. They see Ordinals as a silly distraction, a way of “hacking” Bitcoin to do things it wasn’t meant to do.

I’m generally pro-innovation and love to see people experiment with new technology. This is especially true when a new innovation combines two of my passions like the merger of Bitcoin with digital art and collectibles.

I also like that satoshis weren’t originally intended to be collectible items. They have only become collectibles afterBitcoin’s success and with the introduction of the rarity scheme. This feels way more authentic than digital artifacts created solely to be collectibles (i.e., most other NFTs).

I’m clearly biased by my own interests and don’t understand the underlying Bitcoin technology well enough to comment on the risks, but I personally don’t see an issue with Ordinals. At least not yet. Most people, even in the passionate Bitcoin community, seem to share this sentiment.

Ordinals introduce a new use case and increase the value of the Bitcoin blockchain. Miners benefit from the extra activity. This could turn out to be even more important in the future as block rewards get reduced (based on Bitcoin’s halving cycle).

The discussions are still unfolding while Bitcoiners are tallying up the pros and cons of Ordinals. I encourage you to do some more digging if you’re curious. I have listed some resources below for you to get started.

• Ordinal Theory Handbook by Casey Rodarmor
• Ordinal Theory Explained: Satoshi Serial Numbers and NFTs on Bitcoin on the Hell Money Podcast
• Bitcoin Ordinals NFTs with Casey Rodarmor & Eric Wall on Bankless
• Bitcoin NFTs? Ordinals Inscriptions Explained (Finding, Buying, & More) on the nft now blog
• Demystifying Bitcoin Ordinals | Insights w/ creator Casey Rodarmor on the NFT Catcher Podcast