Bitcoin Ordinals: A Simple Guide About Bitcoin NFTs For Beginners

The post Bitcoin Ordinals: A Simple Guide About Bitcoin NFTs For Beginners appeared first on Coinpedia Fintech News

NFTs are the most sensational digital assets in this digital era. They are created with the support of blockchain networks. These networks provide the underlying infrastructure and security for NFTs. Currently, Ethereum, Solana and Polygon are the dominant forces in the NFT marketplace. Bitcoin Ordinals, in simple terms, is Bitcoin’s attempt to enter the NFT space. Earlier, certain factors made it impossible to create NFTs on the Bitcoin blockchain, such as its basic architecture and lack of smart contracts. However, the network recently resolved the issue with the support of Ordinals Inscription and other layer 2 solutions. As a result, Bitcoin is poised to compete strongly in this sector. It would not be an exaggeration to say that Bitcoin Ordinals could reach a market size of $4.5 million by 2025.

1. Bitcoin Ordinals Explained 

Bitcoin Ordinals, also known as Bitcoin NFTs or Ordinal NFTs, are essentially Non-Fungible Tokens. What sets them apart is that they are built and secured on Bitcoin, the world’s largest, most reputable, blockchain network. Bitcoin, which initially could not support NFTs, gained this capability through two recent updates: Segregate Witness (SegWit) in 2017 and Taproot in 2021. 

SegWit: is a Bitcoin upgrade that separated transaction data from the witness data, improving storage efficiency and allowing for more transactions in each block.

Taproot: is a Bitcoin update that enhanced security and privacy by making all transactions look the same, introduced script flexibility, and increased block size limits for better scalability.  

1.1. Define Bitcoin NFT

In short, Bitcoin NFTs are unique digital assets created by associating information with individual satoshis (small units of Bitcoin) through a process called ‘inscribing.’ This innovation allows for the creation of rare and verifiable digital collectibles on the Bitcoin blockchain. 

1.2. How Do Bitcoin Ordinals Function

Bitcoin Ordinals function by assigning unique serial numbers to individual satoshis. This numbering, called ‘inscription,’ enables each satoshi to carry extra data, making them distinct. Ordinals use a two-fold numbering system: one based on the order of satoshi mining and the other on transaction inputs and outputs. Unlike traditional NFTs, which rely on smart contracts and may host assets externally, ordinals are directly inscribed onto satoshis and live entirely on the secure and immutable Bitcoin blockchain. 

1.2.1. Ordinal Theory: A Short Explanation 

Ordinal Theory proposes a way to identify and track individual satoshis through their entire existence, from creation to each transaction they are involved in. It becomes possible with the Taproot upgrade in 2021.

1.2.2. Ordinal Inscription: What’s It Really

Ordinal Inscription is the process of attaching unique information to individual satoshis within the Bitcoin network. Thanks to the Taproot upgrade, these inscriptions are secure and efficient, living directly on the Bitcoin blockchain.

1.3. Use of Bitcoin Ordinals 

A few use cases of Bitcoin Ordinals include:

• Digital Collectibles

Bitcoin Ordinals enable the creation of unique digital collectibles, much like rare trading cards, enhancing the value and provenance of virtual assets within the Bitcoin ecosystem. 

• Art and Media Preservation 

Artists and creators can immortalise their digital artworks and music on Bitcoin Ordinals, ensuring their authenticity and providing a means for royalties and fan engagement.

• Ticketing and Event Access

Bitcoin Ordinals offer a secure and transparent alternative to traditional tickets, simplifying access to events, shows and virtual experiences while reducing reliance on intermediaries.

• Metaverse Ownership

Bitcoin Ordinals can represent ownership of virtual lands and properties in the Metaverse, facilitating development and trading within the virtual real estate market.

• Identify Verification 

Bitcoin Ordinals can serve as secure identity tokens, granting users control over their personal data’s security and privacy, and simplifying authentication processes across applications and services. 

1.4. Unique Features of Bitcoin Ordinals 

What makes Bitcoin Ordinals special is its unique features. The top five features that sets the Ordinals apart are given below. 

• On-Chain Storage

Bitcoin ordinals store actual data on the Bitcoin blockchain itself, unlike NFTs that often reference external files. 

• Direct Inscription 

Bitcoin Ordinals inscribe data directly on the blockchain, while NFTs tokensise data by creating new tokens on various blockchains.

• No Smart Contracts 

Bitcoin Ordinals lack smart contract capabilities, making them challenging to trade without specialised platforms like OTC markets. 

• User Adoption 

Despite the absence of smart contracts, Bitcoin Ordinals have gained popularity due to their unique features.

• Concurrency Potential

Bitcoin Ordinals allow multiple inscriptions on a satoshi, potentially leading to complex multi-vector NFTs, unlike standard NFTs tied to specific assets. 

1.5. Bitcoin Ordinals vs. Traditional NFTs: Five Key Differences 

The below given table is a simple comparison between Bitcoin Ordinals and Traditional NFTs. To do the comparison, seven important aspects is used: On-chain storage, data inscription, smart contracts, trading accessibility, user adoption, concurrency potential and blockchain network.  

2. Easy Steps to Mine Bitcoin Ordinals 

Mining Bitcoin Ordinals is a seven-step process. 

• Prepare Your Environment

Ensure you have a computer with sufficient storage and processing power, and have a stable internet connection.

• Install Bitcoin Core

Download and install Bitcoin Core from the official website, selecting the version compatible with your operating system. 

• Sync the Blockchain 

Launch Bitcoin Core and allow it to download and synchronise the entire Bitcoin blockchain. 

• Set Up a Wallet 

Create a new receiving address in Bitcoin Core by navigating to “File” > “Receiving Addresses.” And, Enable the “core control” feature to manage Ordinal satoshis effectively.

• Fund Your Wallet 

Acquire Bitcoins from a cryptocurrency exchange or another source and transfer them to your Bitcoin Core wallet.

• Mint Your Bitcoin Ordinal

Access the “Console” tab in Bitcoin Core. Use the “inscribe” command to create your Ordinal, specifying your desired content. Then, confirm the transaction details, including the amount and recipient address, and pay the network transaction fee. Your Bitcoin Ordinal is created once confirmed.

• Verify Your Ordinal 

Confirm your Bitcoin Ordinal’s successful creation using blockchain explorers or your Bitcoin Core wallet. 

3. How to Trade Bitcoin Ordinals 

Trading Bitcoin NFTs is not complex. But there are some interesting things one should know. Bitcoin NFTs can only be traded using Taproot-compatible wallets, such as Ordinal Wallet. These specialised wallets ensure seamless compatibility with the unique features and security protocols associated with Bitcoin NFTs.

3.1. Simple Steps to Buy Bitcoin Ordinals 

Buying Bitcoin Ordinals is a simple seven-step process. 

• Create Wallet Account 

Sign up for a Taproot-compatible wallet to start your Bitcoin Ordinal buying journey.

• Secure Your Wallet 

Protect your wallet by saving the seed phrase and setting a strong password.

• Deposit Funds 

Add Bitcoins to your wallet’s address for purchasing Bitcoin Ordinals.

• Explore Collections 

Discover available Bitcoin Ordinal collections within your wallet interface.

• Choose Collection 

Pick the specific Bitcoin Ordinal collection you wish to buy from the list.

• Initiate purchase 

Click “Buy Now”  within the chosen Ordinal collection to start the purchase process.

• Complete Transaction

Confirm the purchase, and your acquired Bitcoin Ordinal will be securely stored in your wallet. 

3.2. Easy Steps to Sell Bitcoin Ordinals 

Like buying Bitcoin Ordinals, selling Bitcoin Ordinals is also a simple eight-step process. Both the processes have several similarities. At the same time, They do have some notable differences as well. 

• Create Account and Secure 

Register on a Taproot-compatible wallet, safeguard your seed phras, and establish a robust password for security.

• Deposit Funds

Transfer Bitcoins to your wallet’s address to have funds available for selling Bitcoin Ordinals.

• Access Ordinal Marketplace 

Visit platforms, such as OrdinalsBot, specialised for Bitcoin Ordinal transactions.

• Choose Inscription 

Select and upload your inscribed content specifying its details (text, image, etc.).

• Set Inscription Fee

Determine the fee, considering inscription size, and transaction processing speed.

• Add Recipient Address 

Enter the Ordinal recipient’s address within the marketplace.

• Complete Transaction 

Confirm and execute the transaction, inscribing the NFT on the Bitcoin blockchain.

• View on ordinalswallet.com

After inscription, your Bitcoin Ordinal becomes visible for viewing on ordinalswallet.com. 

4. Popular NFT Projects on Bitcoin 

Ordinal Punk, Twelve Fold, and Taproot Wizards are the most popular among the successful NFT projects on Bitcoin.

4.1. Ordinal Punks 

It is an NFT collection of 100 Bitcoin Ordinals inspired by CryptoPunks. It is unique for it uses an open-source algorithm to create profile pictures. (PFPs). Transactions are managed via Google Sheets and Discord by the project creators acting as escrow managers. 

4.2. Twelve Fold 

Twelve Fold is created by Yuga Labs, the parent company of Bored Ape Yacht Club. It is a collection of 300 generative NFTs. These NFTs feature art inscribed onto satoshis. Interestingly, they do not have any connections to other Yuga Labs projects. 

4.3. Taproot Wizards 

Created by Udi Wertheimer, Taproot Wizards is an NFT collection on the Bitcoin network. It begins with Inscription 652 and features unique NFTs, each hand-drawn by Udi. These NFTs leverage Bitcoin’s immutability to securely store artifacts. 

5. Endnotes 

Bitcoin Ordinals is a groundbreaking approach to introducing Non-Fungible Tokens to the Bitcoin blockchain. While NFTs have traditionally thrived on platforms like Ethereum, Bitcoin Ordinals leverages a unique method, called ‘Inscription,’ to embed exclusive data into the smallest unit of Bitcoin, the satoshi. This innovation reflects the growing interest in expanding NFT possibilities within the Bitcoin ecosystem. At present, the journey of the NFT innovation is in the beginning stage. For Bitcoin, it would be a tough journey, but definitely rewarding. 

6. FAQs