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The Ordinals Protocol Is the M...


The Ordinals Protocol Is the Main Driving Force Behind Bitcoin Innovation

The Ordinals Protocol Is the Main Driving Force Behind Bitcoin Innovation
The Silicon Review
23 April, 2024

It's more challenging to mint NFTs on Bitcoin than on Ethereum, or any other blockchain for that matter, due to its limited smart contract functionality. It records who owns what and allows users to send and receive BTC via UTXOs, which aren't permanent and, thus, have a limited lifespan. Secondary protocols built on top of Bitcoin enable developers to code more complicated smart contracts. The Ordinals standard was created in March 2023 to inscribe JSON files onto individual Satoshis and overcome the programmability limitations of Bitcoin. Developer Casey Rodarmor designed the Ordinals system, which inspired the creation of the Ordinals protocol that allows for the creation of semi-fungible Ordinal inscriptions. 

Ordinals make it possible to inscribe Satoshis with data, creating digital artifacts that can be stored in Bitcoin wallets and transferred just like regular cryptocurrencies. They use a logical ordering system referred to as the Ordinal theory that can be used without any changes to the Bitcoin network. Satoshis have value, so they can be collected and traded by those curious. An Ordinals marketplace allows users to inscribe, buy, sell, and browse inscriptions, which can take the form of art, digital collectibles, and rare Satoshis. Ordinals are Bitcoin-native, so they're backward competitive with the blockchain. 

The Introduction of Ordinals Has Sparked Renewed Interest in Bitcoin 

Technically speaking, Ethereum is more advanced than Bitcoin, as its blockchain technology is used to develop applications that go beyond enabling a decentralized payment network. Ethereum allows for the development and deployment of smart contracts and dApps. According to Franklin Templeton, one of the world's leading investment managers, the launch of Ordinals has sparked renewed interest in Bitcoin. NFTs on the Bitcoin blockchain lead to increased options in terms of creative expression, digital art, and collectibles; since the blockchain is secure and resistant to hacking, it's the perfect choice for asset inscription. Ordinals have captured the attention of various artists, collectors, and enthusiasts. 

It's A Considerable Evolution from Bitcoin's Original Use Case as A Cryptocurrency 

Bitcoin was created as an alternative to government-issued currency, with the goal to eventually become a globally accepted legal tender, easily accessible for people and businesses alike. The introduction of Ordinals has expanded Bitcoin's capabilities. Ordinals represent non-financial transactions that take advantage of the Bitcoin blockchain to attach metadata to Satoshis; inscriptions can be in any format under 4MB. Even non-technical users can create, manage, and trade Bitcoin NFTs. The Ordinals Magic Eden marketplace is a top choice for new and seasoned NFT traders. It's focused on the community, not just creating a platform. 

Adjacent to standard Bitcoin transactions, the emergence of Ordinals has opened up new horizons. Much like the ERC-721 technical standard used for NFTs on the Ethereum blockchain, the Ordinals protocol allows for the creation of digital artifacts on the Bitcoin network, harnessing its robust security and decentralized nature. The added functionality is of the essence as it grants developers new tools for building dApps. Ordinals can be transferred without much difficulty and are typically supported by various cryptocurrency exchanges, offering a more liquid and transparent way to trade. Attention must be paid to the fact that Bitcoin has a more straightforward scripting language, so minting Ordinals can take different approaches. 

Ordinals Creator Casey Rodarmor Is Launching Runes, His Own Take on NFTs 

Ordinal inscriptions are a slightly complicated method for generating NFTs within the Bitcoin network, so Casey Rodarmor, the long-time Bitcoiner and programmer who introduced the Ordinals protocol, will launch his own take on the fungible token standard. Runes, as it's called, enables transactions to mint and transfer digital commodities, operating within Bitcoin's native UTXO model to reduce on-chain footprint and maximize efficiency. It may uncover new use cases for Bitcoin-based fungible tokens, such as establishing an ecosystem of useful cryptocurrencies or facilitating the development of payment systems and solutions onto the Bitcoin blockchain. Let's not forget that Runes is interoperable with many of Bitcoin's scaling solutions, like the Lightning Network. 

Following Bitcoin's Recent All-Time High, Ordinals Entered a Trading Frenzy 

Bitcoin reached an all-time high in March 2024, topping the $70,000 mark for the very first time, which can be attributed to investor demand for spot exchange-traded crypto products. Market participants soon rushed to trade Ordinals, which surpassed Ethereum NFTs in weekly sales. Bitcoin Ordinals collections prevail in the NFT space in terms of trading volume and market capitalization. The most notable ones are Runestone, NodeMonkes, Bitcoin Puppets, and Bitmap; collectors tend to focus on the rarity of the Satoshis. The Quantum Cats digital images sold for more than $10,000 on the first day of trading. The point is that the NFT hype is no longer focused on Ethereum but on Bitcoin, the one for which blockchain technology was invented. 

Concluding Thoughts 

Bitcoin maximalists argue that Bitcoin should focus on doing what it knows best, namely being a store of value, and strongly believe Ordinals are detrimental to its primary function. What they refuse to understand is that the Ordinals protocol demonstrates Bitcoin's superiority, enabling functions not previously possible. Indeed, the Bitcoin blockchain is a remarkable piece of technology, but it does have its limitations. Experimentation brings more attention to the ecosystem and helps secure the network by increasing miner revenue. Bitcoin's future isn't backward; it's forward, so to speak. 

All in all, there are certain risks associated with the use of Ordinals. They might lose value and aren't insured against theft, fraud, and any other type of criminal activity. Ordinals have been criticized for inefficiency (i.e., the use of the JSON format) and network congestion (i.e., spiked memory usage). They could even be a gateway to cybersecurity issues, storing malware within the inscribed nodes. Only time will tell how true that is. If you have your heart set on Bitcoin NFTs, your Ordinals must be stored in a dedicated wallet to avoid accidentally sending your assets together with BTC transfers. Ordinals can be sent to any Bitcoin wallet.