bitcoin ordinals review

Something Huge happened.  NFTs came to Bitcoin. Yes it did happen. In fact BAYC founder Yuga labs already raised $16.5 million (735 Bitcoin) in just 24 hours of launching Bitcoin’s Ordinals based NFT collection. What are they about?

Are they exactly the same as an NFT available on OpenSea or Magic Eden? Hint: They’re not and not just because it’s on Bitcoin. What is Ordinals’ potential? What are the risks? How important is Stacks in all this? We answer these and more with our deep dive into Bitcoin Ordinals.

Introduction to Bitcoin’s Ordinals and Suscriptions

You can’t read or watch anything in crypto right now without seeing something about Bitcoin Ordinals. So what are they and why are they a big deal? The short answer is we have NFTs for Bitcoin now. But there’s more to it.

Well, we have 2 things. Ordinals and Inscriptions. And we need them both. Let’s start with inscriptions.

1) Inscriptions

Each 1 Bitcoin equals 100 million satoshis. It’s the smallest unit measurement in Bitcoin. With the Taproot update including the added space from SegWit (short for segregated witness), people can inscribe something into a block. An inscription can be:

  • Text.
  • Image.
  • Data.
  • Audio.
  • Video.

And you only need 1 satoshi to do that. Right now, 1 satoshi is 0.000236 or 2/100ths of a cent. So it’s cheap to do. This inscription now takes an ordinary satoshi and makes it NFT-like. I’ll get to why I say NFT-like in a second. I promise. So the inscription of the data now makes it an Ordinal.

2) Ordinals

Ordinals are the general term for any data stored on 1 satoshi on the Bitcoin blockchain. This means even though we are talking about it with NFTs, it does not have to be an image. Any inscription, like mentioned above, can become an Ordinal. The Bitcoin network secures the data once the block itself is confirmed, which you know is ~10 minutes.

So, Ordinals are part of a satoshi that are part of a block in the blockchain. This makes it a Layer 1 holding that is on-chain. Many NFTs on ETH are not held on-chain but on L2’s or as data files within compatible wallets.

Another important difference between Ordinals and standard NFTs is the data. The data of the image in the Ordinal is always linked to that satoshi. The data is part of the signature when signing a transaction to create the Ordinal. This doesn’t sound like a big deal. But it is. The image is FOREVER linked to that satoshi. ETH (and other chain) NFTs keep all the image data in a separate file.

You might be thinking who cares or this is getting too technical for me. But guess what else is in that separate data file? Your proof of ownership info to show that unique NFT is yours. And while it is rare, if your NFT storage has an outage and that data file can’t find the token it links to, then you can’t prove your NFT is yours. On the Bitcoin blockchain, that never happens as the link is only in 1 place, the satoshi. Not two places, the data file and the image itself.

Impact of Stacks

You may have noticed that Stacks is getting a lot of attention recently too. And Ordinals is one of the reasons why. In fact, a lot of the infrastructure that allows us to hold, sell, or trade Ordinals comes from the Stacks ecosystem. Like the Hiro Wallet, xVerse or Wise wallets. Or support from Gamma, who also has NFTs secured by Bitcoin.

So even though the Ordinal is on a satoshi on the Bitcoin blockchain, most of the added utility and functionality comes from Stacks and its supported apps.

Risks You Should Know About Bitcoin’s Ordinals

Let me start off by being clear. I like this new use case for Bitcoin and hope it is successful. Now that I’ve said that, there are risks you should understand when it comes to Ordinals. Because they are different from the ETH,SOL, or Polygon NFTs we know.

1) Ordinal’s Rarity is a Problem

When most of us think of the non-fungible part of the NFT, we usually think about 2 things. Uniqueness and rarity. If it’s not unique, then it is fungible in the same way you can trade any physical $1 bill for any other.

The rarity is similar but a little different. Most of the top valuable collections have rarity. Each Bored Ape (for example) is rare and unique. Each has a number and has unique characteristics. As you can see here. But let’s say I have a Bored Ape and I want to scam you. Each Bored Ape has its own characteristics written into its data file and on IPFS where most ETH NFT data sits in storage. If I sell on OpenSea, the Ape and all that data goes to you. No problem.

But not so on Ordinals. I can take my Ape and input its data onto 5 different individual satoshis and sell EACH one like it is genuine. Clever scammers will try to do this with NFTs that come from other platforms to sell on Bitcoin. So you absolutely positively must maintain a ‘Buyer Beware’ stance if you are doing a cross-chain NFT transaction.

Bitcoin-only collections like Taproot Wizards don’t have this problem because their number is known at the mint of the project. Plus, it’s easy to verify. You can look up exactly which Inscription has the Wizard you want to buy.

2) You Need a Special Bitcoin Wallet

Normal Bitcoin wallets are useless for holding Ordinals so you need a special wallet. In fact, I would get a wallet ONLY for Ordinals. For example, with Sparrow Wallet you don’t have to run a Bitcoin node. Some others you do. But why can’t your old hardware or mobile wallet do the job?

Standard Bitcoin wallets know that Bitcoin is fungible. So they do not differentiate between satoshis. This includes satoshis that have inscriptions on them AND those that don’t. In other words, a standard Bitcoin wallet could accidentally sell or send away your Ordinal when you are making a regular Bitcoin transfer. Don’t let that happen. Get a separate wallet to use for Ordinals. Here is an example:

3) Most Bitcoin Maxis HATE It

You may consider this a non-risk or even a benefit that many Bitcoin maxis seem to hate Ordinals. But you should understand. Some of Bitcoin’s biggest advocates, fans, degens, and loudest voices are going to be doing and saying lots of negative things about Ordinals. Some might even try to work towards Ordinal’s failure.

By now, most of us are used to negative talk about the crypto projects we like but this is something you should be aware of.

4) Not a Token

With other NFTs you take part in a mint of a fresh brand new token. Not so with Ordinals. As I mentioned earlier, the inscription takes place on an existing Satoshi and it stays there. Yes, you can buy, sell, trade, or hold that satoshi with your Ordinal on it. But it is not a new unique token. Instead the Ordinal makes an existing satoshi unique from other satoshis.

Once you understand these risks, I think you will agree that Ordinals are a great new use case for Bitcoin and are a plus for NFT collectors too.

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