Ordinals, akin to non-fungible tokens (NFTs), possess distinct features that differentiate them from traditional NFTs. Created by Casey Rodarmor, Ordinals have introduced novel elements, leading to a booming market even as traditional NFTs on blockchains like Ethereum lose their appeal.

Currently, the Ordinals market exceeds a billion dollars, supported by a highly engaged and unique community within the crypto industry.

What Are Ordinals?

Previously, NFTs were confined to smart contract blockchains like Ethereum, Solana, Tezos, and BNB Chain, with Bitcoin not supporting them due to its lack of smart contract functionality. However, the Ordinals project, launched in late 2022, changed this dynamic.

Ordinals provide a system for numbering satoshis, the smallest unit of BTC (0.00000001 BTC). By assigning a serial number to each satoshi and adding data through a process called “inscription,” they become unique digital assets. This process also allows additional information, such as images, to be inscribed.

With Ordinals, each satoshi is numbered based on its mining and transfer sequence, serving as stable identifiers along with their attached data.

The Evolution of NFTs

The concept of NFTs began with the Colored Coins project in 2012, aiming to create non-fungible assets via metadata added to BTC transactions. Although it didn’t take off, it inspired the first true NFTs on the Namecoin blockchain in 2014. The first successful NFT collection, Crypto Kitties, launched on Ethereum in 2017, sparked a craze that temporarily congested the network.

The 2021 bull run saw unprecedented interest in NFTs, with millions spent on digital assets like the first-ever Tweet and Beeple’s digital artwork. However, the subsequent crypto winter saw NFT values plummet, leading to doubts about their potential.

Reviving NFTs with Ordinals

The NFT market was in decline when Rodarmor introduced the Ordinals protocol in December 2022. By early 2023, Ordinals gained momentum, attracting significant attention and resulting in over 23 million Ordinals created within six months. This new breed of Bitcoin NFTs saw users spending large sums, generating substantial transaction fees for miners. To date, Ordinals transfers have generated over half a billion dollars in fees, with more than 66 million inscriptions.

Despite network congestion similar to Crypto Kitties on Ethereum, innovation prevailed. Many Ordinals users transitioned to Layer-2 networks like Stacks and Merlin Chain, which facilitate efficient transactions and trading of Ordinals.

The Unique Value Proposition

Ordinals stand out because their value is linked not only to the inscribed artwork but also to the history of each satoshi. Rodarmor’s system indexes “rare sats,” including those mined by Bitcoin’s creator, Satoshi Nakamoto, and others associated with significant Bitcoin events.

Traditional NFTs often rely on off-chain data for creator royalties, whereas Ordinals inscribe all data on the Bitcoin blockchain, making them more complete. This, combined with the concept of rare satoshis and unique traditional NFTs, positions Ordinals as the next evolution of digital assets. They offer enhanced value by incorporating Bitcoin’s history and greater decentralization, appealing to crypto enthusiasts.

Although Ordinals lack mechanisms for paying royalties to creators, grassroots community contributions have filled this gap, creating popular Ordinals collections.

Bitcoin: The Future of NFTs

Ordinals are reshaping the perception of digital art, paving the way for more distinguishable NFTs on Bitcoin. Their rapid rise has added new utility to Bitcoin, increasing on-chain activity and boosting its value.

Ordinals represent a transformative moment for Bitcoin, evolving it from a simple store of value and payment mechanism to a multifaceted network.