Bitcoin Ordinals 101

For this "Prosper 101" edu-series, we are collaborating with @BLIFEProtocol, a protocol that aims to lead the adoption and growth of Web3 on Bitcoin, utilizing $BLIFE to revolutionize the ordinals and Bitcoin fungible tokens ecosystem from being niche and complex to valuable and accessible. Learn more: https://www.blifeprotocol.com/.

At Prosper, we're working with BLIFE to build the future of Bitcoin experiences.

In this article, we explore how ordinals are revolutionizing the Bitcoin blockchain.

What Are Bitcoin Ordinals?

Ordinals are a method of creating non-fungible tokens (NFTs) on the Bitcoin blockchain. Launched by developer Casey Rodarmor in January 2023, Bitcoin ordinals work by attaching data (images, videos, etc.) to an individual satoshi on the Bitcoin mainnet.

Historically, it has been more difficult to mint Bitcoin NFTs compared to smart-contract compatible networks such as Ethereum. Certain Layer 2 protocols, such as Stacks, enabled the creation of Bitcoin NFTs, but Bitcoin ordinals were the first to exist on the base Bitcoin blockchain.

Ordinals have changed the Bitcoin landscape as they bring more 'fun' to Bitcoin through emblematic communities on BTC, such as the Pizza Ninjas, a Bitcoin ordinals collection that hosts community events, giveaways, etc.

How Do Bitcoin Ordinals Work?

To understand how Bitcoin ordinals work, you should understand some key technical terms:

• Satoshi (Sat) – 1/100,000,000 of a bitcoin (the smallest denomination of bitcoin)
• Metadata – Data about the essential properties of an NFT, such as descriptions, attributes and links to off-chain data
• Inscription – Metadata added onto a satoshi
• Witness – Transaction signatures used to attest authenticity of specific transactions by Bitcoin nodes that have implemented the SegWit upgrade

Ordinals work by attaching data to individual satoshis on the Bitcoin mainnet using a system called "ordinal theory", which involves giving each satoshi a unique number.

In its simplest form, a Bitcoin ordinal is a satoshi that has been assigned a unique number. These satoshis are numbered in the order that they're mined.

Outside of the Bitcoin network, metadata is the attachment of data to an NFT, usually in the form of art, in-game assets, or something similar. With ordinal NFTs, there is no designated spot for metadata. Instead, it's held within the witness data of a transaction—this is referred to as an "inscription".

To inscribe a specific satoshi with data, users send transactions to a compatible wallet and attach the required metadata as part of the transaction.

Why Are Bitcoin Ordinals Special?

Bitcoin ordinals were made possible thanks to the 2017 SegWit and 2021 Taproot upgrades, which together helped to streamline transaction processing and make them more efficient.

They are important because they enable the creation of NFTs on the Bitcoin mainnet and therefore don't need to rely on Layer 2 networks—they are the first truly native Bitcoin NFTs. This ensures greater immutability and reduces reliance of external links of storage.

The Bitcoin protocol does not formally recognize ordinal theory, and so ordinals can either be fungible or non-fungible—it depends on the owner of that particular ordinal. If a user isn't interested in ordinals, then the satoshi(s) can be used like normal bitcoin, making them fungible.

What is the Current State of the Bitcoin Ordinals Market?

Not every Bitcoin user may be keen on the idea of Bitcoin ordinals but there is definitely a community of enthusiasts that have implemented and honored this system.

Some users believe that Bitcoin should be used for secure financial transactions, arguing that Bitcoin ordinals will increase transaction fees. On the other hand, some believe that ordinal NFTs are an expansion of Bitcoin's capabilities and could increase the network's adoption further still.

Today, there are more than 70 million inscribed Bitcoin ordinals. Alongside a growing ecosystem of tools and changes to the Bitcoin network (e.g., Taproot), Bitcoin's use cases continue to grow.

Some examples of Bitcoin ordinal NFTs include:

• Ordinal Punks – a collection of 100 unique profile pictures, paying tribute to CryptoPunks
• Bitcoin Puppets – a collection of 10,001 artworks created by artist Le Fou
• Pizza Ninjas – a collection that hosts community events for holders featured in Sotheby’s
• Bitcoin Shrooms – auctioned by Sotheby's New York, a hand-crafted collection of pixelated art

What is the Future Potential of Bitcoin Ordinals?

The future of Bitcoin ordinals could lie beyond digital art, in much the same way that Ethereum NFTs have evolved beyond just Crypto Punks.

We’ll potentially see gaming assets brought on-chain and digital identities attached to Bitcoin ordinals.

It's also possible that Bitcoin ordinals will lead to entirely new utilities for the network and the cryptocurrency by empowering cultural expression and experiences on the Bitcoin network.

This is the vision of projects like BLIFE, alongside 30+ leading members and partners – leaders in the BTC space such as Magic Eden, Xverse, OrdinalsBot, Ordzaar, and Ordz Games.