NFTs are Non-Fungible Tokens. An object is fungible when it can be exchanged with a similar object. A 10-dollar note can be interchanged with another 10-dollar note, so a 10-dollar note is fungible. But a non-fungible token cannot be interchanged with another non-fungible token.
NFTs exist on a blockchain and they have a unique token ID. NFTs are similar to domain names in uniqueness. NFTs have many attributes which are embedded into their metadata. These attributes make them rare and the rarer the NFT, the higher will be its value.
NFTs have been first introduced on the Ethereum blockchain. One of the most popular NFT collections on Ethereum is Cryptopunks. They were launched in 2017 and one of the Cryptopunk NFT was sold for $7.58 million. Bored Ape Yacht Club, Mutant Ape Yacht Club, Doodles, and CloneX are some other popular NFT collections.
NFTs on Ethereum are ERC-721 token standard and cryptocurrency tokens on Ethereum use ERC-20 token standards. Each NFT has a unique token ID on the blockchain and an image, video, or object is associated with it. The NFT itself is not the image. The token ID of an NFT is associated with the image somewhere in a decentralized storage like IPFS. Ordinals have changed the way NFTs exist. Continue reading to know more.
What is a Satoshi?
Satoshi is the smallest sub-division of Bitcoin. 1 Bitcoin can be divided into 100 million satoshis or 100 million satoshis are equal to 1 BTC. Satoshis are also referred to as sats.
1 satoshi = 0.00000001 BTC or 1 BTC = 100,000,000 sats
The current circulating supply of Bitcoin is 19,302,106. So there are 19,302,106 x 100,000,000 satoshis in existence. However, bitcoins and satoshis are not different, satoshis are just a unit of bitcoin.
What are Ordinals?
Ordinals are a numbering system for satoshis that allow tracking and transferring of individual satoshis. Satoshis are numbered in the order in which they are mined. And when a transaction happens, these satoshis are transferred from transaction inputs to transaction outputs, like whichever comes first gets out first. That's why the name Ordinals.
An artifact is something that has some historical significance. A digital artifact is something that can have an owner, unlike current NFTs, it shouldn't point to off-chain content on IPFS, and should be permissionless, uncensorable, and immutable.
Now ordinals can track and identify an individual sat, and users can connect that satoshi to a digital file or any arbitrary content and broadcast it to the Bitcoin blockchain, just as a transaction is broadcasted. Taproot upgrade in 2021 enabled the storage of arbitrary data in a Bitcoin block, using Opcodes, an executable script in a transaction.
What are Inscriptions?
Inscriptions are digital artifacts on the Bitcoin blockchain. Inscriptions are NFTs on Bitcoin. Inscriptions inscribe satoshis with arbitrary content, which can create Bitcoin-native digital artifacts. The content can be anything, like an image, video, or text file. Inscription content is entirely on-chain.
Rarity of Ordinals
Ordinals themselves have rarity based on when the sats are created. There have been some events going on in the Bitcoin blockchain since the creation of Bitcoin. The frequency of events decides the rarity of these events. These events include the creation of new blocks, this event occurs every 10 minutes, mining difficulty adjustments, which occur every 2016 blocks, bitcoin halving which occurs every 210,000 blocks, and a conjunction, which occurs every 6 bitcoin halvings when a bitcoin halving and difficulty adjustment coincides, this is yet to occur.
Rarity Levels:
- common: Any sat that is not the first sat of its block
- uncommon: The first sat of each block
- rare: The first sat of each difficulty adjustment period
- epic: The first sat of each halving epoch
- legendary: The first sat of each cycle mythic: The first sat of the genesis block
If you can inscribe any content on these sats, then it's a LAMBO.
How do Inscriptions(Ordinal NFTs) Differ from Traditional NFTs?
Inscriptions are immutable
Not all NFTs on Ethereum are immutable. Someone must have a good knowledge of EVM and smart contracts to determine whether a contract is immutable. But this is not the case for inscriptions, once an inscription is created, even the owner cannot modify it.
Inscription content is always on-chain
Inscription on the Bitcoin blockchain means the content cannot be lost as long as the Bitcoin exists and as long as a single node exists. There are both on-chain and off-chain NFTs on Ethereum, but the most popular ones are off-chain and are stored on platforms like IPFS and Arweave. These platforms cease to exist if there is no incentive to maintain them in the future.
Inscriptions are simple, secure, and scarcer
The technology behind inscriptions is as simple as the functioning of the Bitcoin blockchain. Transferring inscriptions is more transparent and users don't need to depend on third-party apps to exchange or transfer them. Users can see exactly which inscriptions they are transferring while signing a transaction. And inscriptions are as scarce as Bitcoin while thousands of Ethereum NFTs can be created in a single transaction.
Popular Ordinal Inscriptions So Far
1. Ordinal Punks
Ordinal punks are a generative PFP collection of 100 punks as a tribute to the Cryptopunks. The current floor price of Ordinal punks is 5.15 BTC.
2. Taproot Wizards
Taproot wizards are hand-drawn NFT wizards inscribed on Bitcoin, starting from Inscription 652. Only a few NFTs are inscribed from this collection so far.
3. Bitcoin Rocks
Bitcoin Rocks are inspired by the early NFT project Ether Rocks. The collection is limited to 100 NFTs. The first NFT of this collection is inscribed on Inscription 71. The lowest ask is about 42.21 BTC and the highest bid is 3.6 BTC.
Most of these NFTs are traded through Google sheets and OTC deals. There is no marketplace for trading Ordinal NFTs as of now. We are yet to see a meaningful NFT project on the Bitcoin blockchain.
Conclusion
Bitcoin has enabled freedom of speech through Ordinals and Inscriptions, but we do not know what it means for the future of the Bitcoin network. Consumption of block space will be beneficial for Bitcoin miners. This could also lead to higher transaction fees on the Bitcoin blockchain. We are very early to comprehend anything as it has only been a month since Ordinals were launched.
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