Launched in January 2023, the Ordinals Protocol opened the Bitcoin ecosystem to the NFT craze, allowing users to enroll data – images, art, videos and more – into individual Bitcoin denominations known as satoshis.
The idea of bringing NFTs to the Bitcoin network may have seemed frivolous to some.
However, others recognized the significance and called Ordinals a bull’s-eye for the Proof-of-Work blockchain.
As strong as it was, the digital gold story would now be supported by another compelling use case, as bitcoin became more than a deflationary digital currency: now it could function as a non-fungible piece of digital art or a piece of music.
Ordinal numbers: from inscriptions to infinity
The arrival of Ordinals effectively made it possible for the first time to mint NFTs directly on the Bitcoin blockchain. The idea is credited to Casey Rodarmor, ex-Bitcoin Core employee and Ordinals creator.
Ordinals represents a system of assigning serial numbers to satoshis, giving each a unique identifier that can be tracked across transactions and allowing users to add additional data to them (inscriptions).
Just months after the arrival of Ordinals, an anonymous developer pioneered BRC-20, a token standard that expanded Bitcoin functionality by supporting the creation and transfer of fungible tokens via a protocol.
The experimental standard – which uses Ordinal inscriptions to embed token data directly on the blockchain – has been a revelation: less than a year after Ordinals’ launch, the moonshot BRC-20 meme coin ORDI surpassed $1 billion in market capitalization .
As for the Ordinals, approximately 66.5 million inscriptions were made on satoshis, according to Dune Analytics.
Considering there are 100 million satoshis per bitcoin, we still have a long way to go before inscriptions equal an entire coin. The dollar amount generated by Ordinals fees, meanwhile, exceeds $417 million.
In less than 18 months since Ordinals’ official launch, there have been many meaningful milestones, from the debut of the first Ordinals Collection (Bitcoin Shrooms) to the arrival of the first-ever subscription service (OrdinalsBot) and the aforementioned success of ORDI.
One of the biggest milestones was the opening of a Bitcoin NFT marketplace on Magic Eden, which set the stage for frenetic trading in Bitcoin-based BRC-20 NFTs, similar to the Ethereum NFT boom of 2021.
How Do Bitcoin Ordinals Compare to Ethereum NFTs?
So, how do Bitcoin-based NFTs compare to the longer-standing equivalents on Ethereum?
The main difference worth noting is that Ethereum NFTs are created using smart contracts based on standards like ERC-721 and ERC-1155.
This essentially means that NFT data can be stored on different layers of the Ethereum blockchain or even on the InterPlanetary File System, with NFTs benefiting from greater functionality. Bitcoin NFTs, on the other hand, are registered directly on the blockchain of the same name.
Another point of difference concerns transaction costs. Because Ordinals are stored in the chain, transaction costs are higher. Ethereum NFTs, on the other hand, can be stored off-chain and thus benefit from lower fees.
Because NFT royalties work through smart contracts and Bitcoin is not a smart contract network, Ordinals does not entitle creators to royalty income on the resale of their work.
That said, there are initiatives that want to provide Bitcoin with smart contract capabilities, of which covenants are an example.
Although reviled by some for bringing the DeFi degeneration to Bitcoin (not to mention driving up network fees), Ordinals and BRC-20 have been praised by the likes of Vitalik Buterin, who is calling the “organic return of the builder culture” to the PoW network last year. summer.
It’s a culture that has collided with Ethereum’s in the form of the BRC-721 token standard that allows for the bridging of ERC-721 NFTs from Ethereum to Bitcoin.
Interestingly, Ordinals can be used for purposes beyond inscribing a message on a satoshi: a recent initiative from major BTC hodler MicroStrategy sees the protocol used to enable the creation of reliable, tamper-resistant decentralized identifiers (DIDs) .
It can be argued that Ordinals has learned lessons from the previous NFT boom and, since inscriptions cannot be changed after creation and bitcoin NFTs are inherently scarcer, they are better at retaining their value. Time will tell.
The Boom of Bitcoin Layer-2s
Ordinals’ success is inextricably linked to the rise of Bitcoin Layer-2s, secondary protocols built on top of Bitcoin that aim to address the network’s scalability challenges while increasing its usability.
In a way, this evolution of the Bitcoin network follows a similar trend to Ethereum, which spawned its own multitude of Layer-2s during the last major DeFi boom.
One of those Layer-2 is Merlin Chain, which uses ZK-Rollup technology to compress transaction data, enabling faster and cheaper transactions.
Other distinguishing features of the L2 include its decentralized oracle network, tamper-resistant on-chain BTC modules, and compatibility with the Ethereum Virtual Machine.
Despite only being launched earlier this year, Merlin has become by far the largest Bitcoin sidechain, with its $1 billion+ TVL easily surpassing that of Rootstock, Stacks and other Bitcoin L2s.
The team behind Merlin Chain previously developed BRC-420, a standard that converts Ordinals inscriptions into assets that can communicate with each other – also known as recursive inscriptions.
Notably, BRC-420 introduces a royalty standard, entitling developers to revenue from the use of their creations, with the team committed to unleashing the potential of Bitcoin’s native assets, protocols like Ordinals, and associated products.
With the market cap of Bitcoin L2 solutions surpassing $4.3 billion less than 18 months after Ordinals’ launch, Casey Rodarmor has a lot to be proud of.
Not that the developer has rested on his laurels: in April he launched Runes, a protocol for fungible tokens that uses Bitcoin.
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