QUICK TAKE – Bitcoin NFTs Ordinals
- Thanks to Bitcoin’s new features, it’s now less expensive to create completely on-chain NFTs and record them on the blockchain.
- Bitcoin NFTs Ordinals have configured their system to take advantage of this, and satoshis are now linked to their own NFTs.
Bitcoin isn’t new to NFTs, but it hasn’t been kind to them either. When Ordinals, a new type of Bitcoin-based NFT, comes out, all of that could change.
In 2014, Counterparty, which is a protocol built on Bitcoin, made the first NFTs based on blockchain. Spells of Genesis (2015) and Rare Pepes (2016) were the best compilations to come out of this trend.
As Counterparty became popular, people argued about whether or not this was a good way to use the Bitcoin blockchain. Jeff Garzik, who was a core developer of Bitcoin at the time, said at the time, “Using full nodes as dumb data storage terminals are just abusing a resource of a volunteer network.”
The main problem is the use of a function called OP RETURN, which can be used to store any kind of information in the blockchain. Previously, this function could only hold a maximum of 40 bytes of data in Bitcoin, however, that capacity was doubled in 2016.
Peter Todd, a core developer of Bitcoin, says that the Segwit update in 2017 made it 75% cheaper to store data with this function. The Taproot update in 2021 made it around 10% cheaper and easier to store this data in a single transaction (instead of spreading it across multiple transactions).
So, anyone can now use this function to store as much data as they want, as long as they pay for it and the total block size stays under 4MB.
Introducing Bitcoin NFTs Ordinals
Ordinals come into play here. It’s still mostly a workaround, but it gives NFTs a new way to be stored on the Bitcoin blockchain now that it’s easier and cheaper to store more data.
When it comes to Bitcoin NFTs Ordinals, two things stand out. First, they are all made up of data that is already on the blockchain. This means that the actual image for the NFT is stored on the blockchain, rather than just a link to an image on another website. This only works for a small number of NFTs on Ethereum, since most of them link to other sites.
Eric Wall, a Swedish researcher who used to be the CIO of Arcane Assets, thinks that it is now seven times cheaper to store fully on-chain NFTs on Bitcoin than on Ethereum.
The second thing that stands out is that NFTs are linked to single satoshis. That’s not the same as Ethereum, where NFTs are more built-in and each has its token.
Still, it can get complicated. Bitcoins are fungible, which means they can all be used in the same way. The only way to tell them apart is through the complicated system of inputs and outputs for transactions. Ordinals’ main goal was to find a way to stop Bitcoin from being interchangeable. To do this, it chose a shared logic in which every satoshi was given a number based on the order in which it was mined. It keeps the NFTs going by using this numbering system and a few other details.
None of this is built into the Bitcoin software, and if Bitcoin NFTs Ordinals holders aren’t careful, they might spend their NFTs on transaction fees by accident, as Dennis Porto, general partner at Huat Ventures, wrote in a blog post.
What are people using Ordinals for?
With a new tool for making NFTs on Bitcoin, people have already started coming up with new ways to use them.
Someone paid about $2 each to mint a copy of one of the oldest Ethereum NFT projects, the 100 Ether Rocks, using Bitcoin. As Porto pointed out, each NFT has to be created in its transaction with its fee. This is different from Ethereum, where many NFTs can be created at once. Even the bigger transactions can be seen filling up the block they are in.
Wall and an engineer named Rijndael took this one step further by mining one of the Trump NFT images onto Bitcoin. Rijndael then put it on a stats card, which is like a gift card that can be used to store and move Bitcoin. He pointed out that the satoshi connected to the NFT was mined in 2009, which could be a plus.
Some of the other NFTs in Ordinals are the Nyan Cat meme, pictures of Bitcoin clocks made by AI, Rare Pepes cards, Bored Apes, and the original dogecoin meme. But none of these are official yet.
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