Bitcoin Ordinals: Exploring the Potential of Individual Satoshis
Published On: 7/17/2023
What are BTC Ordinals & what role could they play in the future of crypto?
In early 2023, the crypto space was introduced to a novel concept, which paved the way for the creation of Bitcoin Ordinals – otherwise known as BTC NFTs.
Let’s take a look at what exactly Ordinals are, how they differ from traditional NFTs and what’s in store for the future.
The Mechanics of Ordinals
Bitcoin Ordinals are unique identifiers inscribed onto individual satoshis (the smallest unit of BTC). Four unique identifiers define each Ordinal:
- The index of the satoshi in the block
- The cycle number
- The index of the block within the difficulty adjustment period
- The index of the block in the halving epoch
This distinctive identifier system ensures that each inscription is unique and potentially valuable, depending on when it was minted.
Though Ordinals are often labeled as Bitcoin's version of NFTs, they differ from Ethereum-based NFTs. Instead of storing off-chain data through pointers, they inscribe raw file data directly onto the Bitcoin blockchain. Here's a breakdown of how Bitcoin NFTs differ from the more familiar Ethereum-based alternatives.
Ethereum NFTs: An Ethereum-based NFT is essentially a smart contract conforming to standards like ERC-721 or ERC-1155. These standards record ownership and transfer tokens but don't necessarily contain any "content" or "data." Instead, they typically reference (or point to) the content stored on a separate system, such as IPFS. Bitcoin NFTs: Bitcoin Ordinals introduce a different method, inscribing the actual content/data within the blockchain transaction itself rather than referencing an external storage location.
BTC vs ETH NFTs: Pros & Cons
Depending on your perspective, the differences between NFTs on Bitcoin and Ethereum could be seen as an advantage or disadvantage. Ordinal data is stored directly on the blockchain, ensuring it's immutable and always accessible as long as the blockchain exists. While this sounds like a further step towards decentralization, it has led to bloating of the Bitcoin blockchain, as storing data directly takes up more space than just recording a pointer to off-chain data. During its peak adoption in May, there were noticeable slowdowns in block confirmation and transactions, leading to discord among Bitcoin developers.
Adoption Potential: BTC NFT Flippening?
Recent times have seen a decline in Ethereum-based “blue chip” NFTs. The floor price of one of Ethereum's most notable collections, Bored Ape Yacht Club, has fallen from its 2021 all-time highs of over 120 ETH to below 35 ETH.
Another popular collection, Azuki, recently witnessed a 42.8% price drop, falling from a 16.25ETH to 6.98ETH floor in a matter of days following technical difficulties during the mint of its latest collection, “Elementals”.
With the majority of floor prices down significantly from all-time highs, many are questioning the state of Ethereum's NFT market and its long-term sustainability.
Could Ordinals present a more decentralized and profitable solution?
The rising popularity of Ordinals has led to significant growth in inscriptions, with over 16.53 million currently recorded.
This has also led to a spike in sales across the Bitcoin NFT market. Over the past 30 days, Bitcoin NFT collections, Uncategorized Ordinals, and $FRAM BRC-20 NFTs have been ranked in the top 10 collections by sales volume, outperforming many major Ethereum counterparts.
Zero Network and the Potential of BTC NFTs
Currently, Ordinals are inscribed directly onto the Bitcoin blockchain. Yet, their potential applications extend far beyond the Bitcoin ecosystem.
zeroDAO aims to facilitate secure and efficient bridging for BTC and other non-EVM cryptos to interact with Ethereum and other blockchains. This opens up the possibility for Ordinals to be utilized across the broader crypto ecosystem.
For instance, with Zero's bridging solutions, Ordinals could theoretically interact with smart contracts on Ethereum and participate in Ethereum's NFT ecosystem.
The unique data inscribed onto each Ordinal could also be securely and efficiently transferred across chains. This paves the way for opportunities, such as using the unique attributes of Bitcoin Ordinals within Ethereum-based dApps or other applications on EVM and non-EVM networks.
The Journey Ahead for Bitcoin Ordinals
While the introduction of Bitcoin Ordinals has stirred challenges within the Bitcoin network, such as noticeable slowdowns in block confirmation and transactions, it also ushered in an era of fresh perspectives for Bitcoin utilization.
However, it is undeniable that Bitcoin Ordinals have brought a fresh perspective to the way Bitcoin is utilized. With the upcoming launch of the Zero Network, cross-chain utility for Ordinals is closer than ever, potentially broadening their market and use cases across different crypto ecosystems.
This can bring about a whole new level of interactions between Bitcoin and other blockchain technologies, opening up a world of possibilities that go far beyond what we currently understand as the potential of NFTs.
Could a Bitcoin NFT flippening be on the horizon? With cross-chain interactions, the answer might be closer than we think.
Join the conversation on the zeroDAO Discord channel and share your thoughts on the future of Ordinals and what they could mean for the adoption of the NFT and crypto markets.
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