Ordinals aka Bitcoin NFTs, are the most recent crypto asset category and one that is arguably set to disrupt the industry the most in 2024.
Even in their nascent stage, these somewhat controversial assets have put Bitcoin purists at odds with new evangelists looking to add utility to the Bitcoin network that was once deemed only viable as a store of value and payments.
NFTs or BTC Ordinals?
Critics argue that Ordinals use block space inefficiently and will ultimately cause Bitcoin transaction fees to increase and transaction times to get slower.
However, the creator of the Ordinals protocol, software engineer Casey Rodarmor, rejects naming these Bitcoin NFTs. He prefers referring to them as digital artifacts as they are, he says, “complete” as all the data is inscribed directly on-chain, whereas Ethereum or Solana-based NFTs are ‘incomplete’ as all of their data is separately stored off-chain.
Data Storage Debate
Bitcoin Ordinals’ advocates highlight how Rodarmor’s protocol could expand Bitcoin’s use beyond financial transactions and help introduce crypto to a broader audience.
The off-chain vs. on-chain data storage debate is ongoing. Still, for the purpose of provenance, all experts agree that on-chain storage provides the transparency and immutability that collectibles require.
The debate surrounding Ordinals will undoubtedly continue, but its growth tells its own story. Scarcely 11 months since their inception in January 2023, about 40 million Ordinals have been inscribed to date, according to a Nicehash report.
The Importance of Provenance
Rodarmor’s Ordinal theory gives them individual identities and allows their tracking, transferring, and imbuing them with meaning, but more importantly, it gives them the ability to determine their provenance.
“Provenance is important for art and a large part of how it derives its value,” Rodarmor said in his first mention of Ordinals on 15 November 2022. “We should have some notion of the provenance of an inscription.”
However, the Ordinals Protocol lacked the standard for on-chain provenance until Pull Requests (PR) were merged into its master branch on 7 September, introducing a standard for creating parent-child relationships between inscriptions, Twitter user and leading ordinals advocate and social media influencer @LeonidasNFT revealed on 7 September.
One of the first and best examples of inscriptions using this new model is the enigmatic and anonymous number 37,704,617, registered on 31 October, on the 15th anniversary of Satoshi Nakamoto’s Bitcoin whitepaper release. It includes 111 child inscriptions, each representing the burning of actual US notes, with a parent inscription with a poem alluding to the creator of the number one cryptocurrency.
The co-founder of OrdinalsBot, Brian Laughlan, posted, “The standout feature of ordinals is that the data is stored on-chain forever now with the introduction of parent-child inscriptions, provenance can now also move on-chain.”
“If you own an inscription, you can create ‘children’ inscriptions under it, thus making it the ‘parent’ of those inscriptions,” explained LeonidasNFT. “You do this by passing the sat of the parent inscription and the child inscription creation transaction. That establishes a trustless relationship that lives on-chain and can be viewed by anyone.”
LeonidasNFT said that from now on, “collections will inscribe all of their pieces as children under a single parent inscription. Then the collection creator could burn the parent inscription (for example, by sending it to Satoshi Nakamato’s address), guaranteeing that no more inscriptions can ever be added to the collection.”
“Let’s Think Bigger“
“What if child inscriptions could themselves have more children, thus creating a complex hierarchy?” asked LeonidasNFT.
“For example, an artist could create an inscription representing themself that could have child inscriptions representing their different collections that could then have child inscription representing the pieces in the collections,” he added.
He said that the PR integration also allows creators to establish different hierarchies or branches of rarity within a single collection, adding a new collecting dimension.
According to a recently released report, this asset class’ market size could grow to $231 billion from 2021’s $11.3 billion, fueled by adoption and developing use cases.
The BTC Ordinals and NFT space is one to watch as it regains traction.
