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Ordinals


In early 2023, there was a lot of talk about Ordinals in the crypto community. Let’s take a closer look at what Ordinals are.


Released on the Bitcoin mainnet by developer Casey Rodarmor on January 20, 2023, ordinal NFTs represent a new method of generating NFTs on Bitcoin. Even though Bitcoin-based non-fungible tokens (NFTs) have existed before, with layer-2 platforms like Counterparty and Stacks facilitating such NFTs, the structure of ordinal NFTs is distinct from other Bitcoin NFTs.


Since their introduction, more than hundreds of thousands of ordinal NFTs have been produced by an expanding group of users, developers, and aficionados who are eager about the possibilities of native Bitcoin NFTs.


Ordinals offer a method to produce Bitcoin NFTs by associating data, like pictures, videos, and other content, directly to a single satoshi on the core Bitcoin blockchain. So in essence, it’s like an inscription on a satoshi, which is 1/100,000,000 of a Bitcoin, the smallest possible denomination of a Bitcoin. Distinct from earlier versions, ordinal NFTs aren't found on a distinct layer outside Bitcoin. Instead, they employ a specific and reasoned numbering system known as ordinal theory, assigning each individual Bitcoin satoshi a distinct identifier. In this context, ordinal NFTs are purely rooted in Bitcoin. They operate without needing modifications to the Bitcoin protocol, eliminate the need for additional layers, and maintain backward compatibility with the network.


Before we go on, this is not the first time that we have had ordinals.


The realization of ordinal NFTs was fundamentally rooted in the introduction of ordinal theory. However, the existence of ordinal NFTs today can be attributed to the Segregated Witness (SegWit) and Taproot amendments to the Bitcoin Protocol, implemented in 2017 and 2021 respectively.


It's vital to understand that these modifications weren't specifically tailored for the advent of these novel NFTs. Yet, with each update expanding the capacity for random data that could be accommodated on-chain within a block—thereby creating room for content like images, videos, and even games—ordinal NFTs inadvertently became feasible following their integration.


Segregated Witness (SegWit)


Introduced in 2017, SegWit was an upgrade resulting in a soft fork within the Bitcoin blockchain. This revision separated a Bitcoin transaction into two segments by integrating a “witness data” section, capable of holding miscellaneous data.


The creation of witness data initially served to:


  • Overcome the strict blocksize limit constraints.

  • Facilitate optional data transmission of diverse nature.

  • Eliminate unintended transaction malleability.


From a technical perspective, with the introduction of SegWit, transactions weren't obliged to encompass witness data (typically the sender's digital signature). Instead, a designated space for this data emerged as an isolated structure at a block's conclusion. This space, which allowed miscellaneous data transmission, came with a reduced “block weight.” This design smartly contained larger data volumes within Bitcoin’s blocksize limit, averting a potential hard fork.

This innovation set the stage for ordinal NFTs by broadening the scope of random data that could be embedded in a transaction.


Taproot


Activated in November 2021, Taproot emerged as a comprehensive upgrade, aiming to bolster Bitcoin's confidentiality, scalability, and security features. Consequently, Taproot introduced a more streamlined mechanism for lodging arbitrary witness data and eased the restrictions regarding the volume of miscellaneous data within a Bitcoin transaction. Primarily, this amendment was conceived to augment Bitcoin-oriented smart contracts, like those with time constraints, typically detailed in witness data.


Such modifications acted as a catalyst for the emergence of ordinal NFTs, which save NFT data within Taproot's script-path spend scripts. This update simplified the arrangement and storage of arbitrary witness data, paving the way for the “ord” standard. Given the more lenient data criteria, it became plausible for a singular transaction to potentially occupy an entire block with both its transaction and witness data, up to the blocksize threshold of 4MB. This enhancement considerably diversified the types of content that could be incorporated directly into the chain.


Now, let’s get back to how these Ordinals work. Just to clarify, Ordinals serve as a method to sequence satoshis, instilling the "non-fungible" characteristic essential for crafting NFTs. Inscriptions refer to the core content of the ordinal NFT—be it an image, text, video, or any diverse data that a user associates with an NFT.


Bitcoin is fungible, meaning one bitcoin is indistinguishable from another, just like a dollar bill is indistinguishable from another. This is where the concept of ordinal theory emerges.


The groundbreaking aspect of ordinal NFTs lies in their ability to systematically assign a unique number to every individual satoshi. Consequently, each satoshi on the Bitcoin blockchain possesses a distinct ID. At its core, an ordinal is essentially a satoshi paired with a one-of-a-kind number. Here's the mechanism behind it.


Within the scope of ordinal theory, each satoshi receives a number based on the sequence they were mined. The inaugural ordinal corresponds to the very first satoshi produced, tracing its roots back to 2008. Whenever a satoshi is moved, its sequence remains intact through a first-come, first-served approach, determined by the transaction sequence.


Importantly, ordinal theory maintains Bitcoin's inherent fungibility. The Bitcoin protocol doesn't officially acknowledge or put any significance on this innovative satoshi sequence - just like the serial number on a dollar bill doesn’t make it have more or less value. Instead, it's a passionate community of ordinal aficionados who have chosen to attribute value to this numbering structure and have developed utilities that respect this system.


On blockchains other than Bitcoin, metadata refers to the optional inclusion of miscellaneous data to a non-fungible token. This metadata is leveraged to depict a wide variety of art, gaming assets, avatars, financial instruments, and other entities that have become emblematic of the term "NFT." In contrast, ordinal NFTs lack a specific location reserved for metadata, as seen in non-Bitcoin NFT platforms. For ordinal NFTs, the associated metadata resides in the transaction's witness data.


The term "inscription" originates from this concept—the information affixed to a particular satoshi is "engraved" or "inscribed" into that specific segment of a Bitcoin transaction. For inscribing data onto a specific satoshi, thereby generating an ordinal NFT, users are required to transfer a single satoshi to a Taproot-friendly wallet and incorporate the intended metadata within the transaction. Additionally, they need to be cautious about the sequence of the transaction to guarantee the selected satoshi isn't allocated for network fees. Software tools designed to streamline this procedure mitigate such concerns, simplifying the experience for those less technically inclined.


So in a way, it’s like looking at a dollar bill with a little doodle drawn on the serial number. The ordinal theory is the concept of having a serial number on the dollar bill at all, and the inscription is that doodle itself.




 
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