The introduction of the Ordinals Protocol in January 2023 revolutionized the world of NFTs by allowing users to attach data to individual satoshis on the Bitcoin blockchain. While some may have initially dismissed the idea as frivolous, others recognized its significance in expanding the use cases of Bitcoin beyond being a digital currency. Now, Bitcoin could also serve as a unique piece of digital art or music.
The concept of Ordinals, developed by Casey Rodarmor, involves assigning serial numbers to satoshis, giving each one a unique identifier that can be tracked across transactions. This allows users to attach additional data, or inscriptions, to the satoshis. Just months after the launch of Ordinals, an anonymous developer introduced BRC-20, a token standard that extended Bitcoin’s functionality by enabling the minting and transfer of fungible tokens through a protocol. This experimental standard, which utilizes Ordinals inscriptions, has been a revelation, with the market cap of the BRC-20 meme coin ORDI surpassing $1 billion in less than a year.
To date, there have been around 66.5 million inscriptions made on satoshis using Ordinals. However, considering that there are 100 million satoshis per bitcoin, there is still a long way to go before inscriptions equate to a whole coin. Nonetheless, the fees generated by Ordinals have already exceeded $417 million.
Since its official launch, Ordinals has achieved various significant milestones in less than 18 months. These include the debut of the first Ordinals Collection called Bitcoin Shrooms, the introduction of the first-ever inscription service called OrdinalsBot, and the opening of a Bitcoin NFT marketplace on Magic Eden. This marketplace has facilitated the trading of Bitcoin-based BRC-20 NFTs, reminiscent of the Ethereum NFT boom in 2021.
Comparing Bitcoin Ordinals to Ethereum NFTs, there are notable differences. Ethereum NFTs are created using smart contracts based on standards like ERC-721 and ERC-1155. This means that NFT data can be stored on different layers of the Ethereum blockchain or even on the InterPlanetary File System, providing greater functionality. On the other hand, bitcoin NFTs are recorded directly on the blockchain, resulting in higher transaction fees. Ethereum NFTs also benefit from smart contract-based royalties on re-sales, while Ordinals do not provide this feature. However, there are initiatives, like covenants, that seek to bring smart contract capabilities to Bitcoin.
Ordinals has learned from the previous NFT boom and has implemented features that preserve the value of its NFTs. Since inscriptions cannot be modified post-creation and bitcoin NFTs are inherently scarcer, they have a better chance of maintaining their value over time.
The success of Ordinals is closely tied to the rise of Bitcoin Layer-2s, secondary protocols built on top of Bitcoin to address scalability challenges and enhance utility. Similar to Ethereum, which saw the emergence of Layer-2s during the DeFi boom, Bitcoin has also seen the rise of Layer-2 solutions like Merlin Chain. Merlin Chain utilizes ZK-Rollup technology to compress transaction data and enable faster and cheaper transactions. It also features a decentralized oracle network, on-chain BTC fraud-proof modules, and compatibility with the Ethereum Virtual Machine. In a short period, Merlin has become the largest Bitcoin sidechain, surpassing Rootstock and Stacks in total value locked.
The team behind Merlin Chain previously developed BRC-420, a standard that allows Ordinals inscriptions to interact with each other, creating recursive inscriptions. BRC-420 also introduces a royalty standard, enabling developers to earn revenue from the usage of their creations. With the market cap of Bitcoin Layer-2 solutions exceeding $4.3 billion in less than 18 months since the launch of Ordinals, Casey Rodarmor can be proud of his achievements. Recently, Rodarmor launched Runes, a protocol for fungible tokens that leverages Bitcoin.
In conclusion, the integration of Ordinals into the Bitcoin ecosystem has expanded the possibilities of NFTs. It has opened up new avenues for creativity and expression, allowing Bitcoin to become more than just a digital currency. With the rise of Bitcoin Layer-2s like Merlin Chain, the scalability and utility of the Bitcoin network have been greatly enhanced. The future looks promising for the intersection of Bitcoin and NFTs, and only time will reveal the full potential of these innovations.
