Every day, the dynamic field of digital assets experiences new advancements. Although Bitcoin and NFTs have been linked for a long time, Non-Fungible Tokens are now almost known through other platforms like Ethereum, Solana, or Polygon.
Recently, a project called Ordinals has been making waves in the Web3 arena. Since software engineer Casey Rodarmor launched the protocol on January 21, the space has been buzzing with excitement about the new upgrade, while others have completely rejected Ordinals. Nevertheless, nearly 140,000 Ordinals currently exist, despite all the notoriety. So what are Ordinals and why does it make Bitcoin NFTs so scarce? Everything you need to know is in the following article.
The development of Non-Fungible Tokens (NFTs) started in 2014 on Counterparty, a protocol built on top of the Bitcoin blockchain. This resulted in the introduction of well-known collections like Spells of Genesis and Rare Pepes in 2015 and 2016, respectively. However, the application of the Bitcoin blockchain for NFTs sparked a debate within the community about using full nodes for data storage purposes.
The controversy was due to the utilization of a function called OP_RETURN that allows the storage of arbitrary data in the blockchain. Initially, the data limit that could be stored using this function was 40 bytes, which later increased to 80 bytes in 2016. This raised concerns about overloading the blockchain with data led to network congestion and higher transaction fees.
Despite these concerns, upgrades to the Bitcoin blockchain like Segwit and Taproot have made it more cost-effective and easier to store data using OP_RETURN. Segwit reduced the cost by 75%, while Taproot reduced it by 10% and made it easier to store data in a single transaction instead of multiple ones. As a result, it is now possible to store unlimited amounts of data using OP_RETURN by paying for it, as long as the total block size is under 4 MB. This has paved the way for more extensive use of NFTs and the blockchain for data storage.
Each Bitcoin is made up of very small units called satoshis or sats. A new system called Ordinals lets people add information to each of these small units, creating something called an Ordinal. This information can include smart contracts, which allow people to make NFTs. You can think of Ordinals as a type of NFT that you can create directly on the Bitcoin system.
Casey Rodarmor, who created the Ordinals standard, does not want to refer to them as NFTs because he believes the term has negative connotations. Instead, he has given them the name “digital artifacts”. The Ordinal NFTs use ordinal theory to keep track of “inscriptions”, which are essentially the data or content embedded in the blockchain. An ordinal, in this case, refers to a number representing a position in a series (e.g. first, second, third). For Bitcoin, an ordinal is a specific UTXO (unspent transaction output) for a Satoshi, which contains an “inscription” such as text, images, or audio. Inscribed satoshis are treated as special transactions so that users can identify and monitor them.
As of now, the Ordinals protocol has not proposed a 3rd wallet designed for those who want a place to store and move their Ordinals. However, the Web3 space is known for having an infrastructure that can adapt quickly. So, 3 crypto wallets have been announced to support Ordinal NFTs, namely Ordinals Wallet, Xverse, and Hiro Wallet. Although these wallets are still in the development stage so their functionality is quite limited, you can still choose one of them as a starting place to get acquainted with Bitcoin Ordinals.
Of course, if you don’t like those options, you can set up a custom allowing Bitcoin wallet to receive Ordinals. Sparrow is a suitable choice, you can visit this link and download the version which suitable for your computer’s operating system.
If choosing Sparrow is your starting choice, you need to set up your wallet so that it becomes compatible with Ordinals. Once downloaded, follow the detailed instructions here to complete your Sparrow wallet setup. One thing to keep in mind if you follow this guide is that you should not send BTC to or from this Ordinals wallet. This wallet should only be used to receive Inscriptions. If you send BTC from this new Ordinals wallet, you will most likely accidentally send both your Bitcoins and Inscriptions.
Alright, so the preparation is done, you have 3 options to get an Ordinal:
Note that running a full Bitcoin node may not be suitable for most users because of hardware requirements. So we will not focus on the technical details of this approach. There are currently a number of lightweight clients currently in development and will be available in the coming months for those who want to run a Bitcoin node but don’t meet the required technical requirements. So let’s start learning about the remaining 2 options.
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If you want to create your own Ordinals but don’t want to run Bitcoin nodes, we suggest you a few third-party services as follows:
To receive an Ordinal, you’ll need to provide the BTC address to the service you’re using. This address should come from the new Ordinal wallet that you created in Sparrow. The service will then tell you how many sats you need to pay for the transaction, as well as any additional service fees. They’ll also give you an address to send your BTC. The cost of the transaction can vary from less than $50 in BTC to several hundred dollars, depending on the size of the file you’re embedding.
After you deposit BTC, then as planned, you will receive your Ordinals in the wallet address you provided. However, this process takes a long time compared to other blockchains, usually from a few hours to a few days.
Currently, buying and selling Ordinal NFTs is conducted through manual order books and over-the-counter (OTC) trading. To index and track Ordinal NFTs, you need a special wallet and block explorer. However, they can send and receive Ordinals using any type of Bitcoin address. In addition, you also need to run a Bitcoin node to be able to sell your Ordinals.
The important thing to understand when trading OTC is that you will have to break all the safety rules when trading online, which increases the risk of getting scammed. Specifically, you may have to contact a stranger you never knew and send money before receiving Ordinal in your wallet. There is no way to guarantee absolute safety when trading OTC, you can only minimize the risk by trading through well-known middlemen or consulting people in the community before making any decisions. Because this is a risky market, we also recommend that you only invest a small amount of capital that you are willing to lose.
Finally, if you understand the risks and are ready to trade Ordinals, follow these steps:
Currently, the topic of Bitcoin NFTs is still heavily debated on Twitter, with the majority saying that it is still too risky to attempt to trade Ordinals at this point. Colay, co-founder of Discovery Squad, said in a tweet:
“Yeah the problem is – the Inscription is technically tied to the $ basically. So if you accidentally send that satoshi somewhere, someone else now has ownership of it. So you want to make sure the wallet that hold them is either frozen for now/not touched till more tools come out”
Sean Bonner, a well-known NFT collector also said he gets a lot of questions about Ordinals and Bitcoin NFTs, and here are some of his answers:
“If you want to mint a CryptoPunk on BTC it’s not like how we think of it on ETH, there are no smart contracts or tokens to mint. It’s something entirely different and it’s brand new so it doesn’t work smoothly outside of some specific criteria…”
“A. There’s no market so you have to rely on trust and scammers are everywhere B. Fomo is insane and people are asking stupid prices C. Receiving is hard, transferring is harder. Again this isn’t like eth in the way that we’re all used to…”
In general, in the opinion of experts, we can see that NFT minting and trading on the Bitcoin network is still quite complicated and only suitable for those who have knowledge of blockchain technology in general and running Bitcoin nodes in particular. Trying without enough knowledge may lead to you accidentally losing assets in your wallet or worse, being scammed. But anyway, the first steps with something new are always difficult challenges. In my opinion, if you don’t have a lot of time to learn about running a Bitcoin node, you can wait for the next 1 to 2 months when platforms roll out support tools more commonly. For those of you who still want to experience it, the advice is to manage your capital and be wary of any online decisions. Wish you all get acquainted soon and make a profit from this new but potential investment segment!
1. Where to find Ordinals projects?
You can join this discord Ordinals to find the Ordinals you want to buy.
2. How many NFT collections are on Bitcoin?
There is currently no specific number of collections on the Bitcoin network. However, according to on-chain data, there are almost 140,000 Inscriptions created through Ordinals.
3. Are Bitcoin NFTs expensive?
Like other NFTs, the value of each NFT collection on Bitcoin is different. You can find many NFTs at different prices that are right for you
4. Is Bitcoin NFTs the same NFT?
While there are some technical differences, in general Bitcoin NFTs still have the same basic characteristics as NFTs on other blockchains such as non-fungibility and scarcity.
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