What do non-fungible and fungible mean?

Before we dive into NFTs (of all kinds), it’s important to understand the “non-fungible” part of “non-fungible token.” When an item is fungible, it means it’s interchangeable with another of the same item. A classic example is a $1 dollar bill: you could swap dollars with someone, and you’d both still have $1.

Non-fungible, on the other hand, means the item is unique and therefore has its own unique value. For example, two cars of the same make and model might have different values based on how many miles are on the odometer, their accident records, or if it was previously owned by a celebrity.

What are Bitcoin ordinals?

Casey Rodarmor introduced Bitcoin ordinals on January 20, 2023. The developer used ordinal theory (the rule that items are numbered in sequential order) to facilitate the creation of Bitcoin NFTs on the Bitcoin mainnet. Rodarmor is not associated with Bitcoin, as no person is associated with it.

Rodarmor’s development of inscription as a method for creating Bitcoin NFTs is also noteworthy because traditionally, Bitcoin, as an L1 blockchain that is not smart contract compatible, outside of projects like Colored Coins, has not had NFT capabilities.

For context, smart contracts are automated computer programs that enforce their coded rules — using “if this, then that” logic, smart contracts power NFTs on the blockchain. NFTs are minted on smart contract-compatible L1 blockchains like Ethereum and Solana.

Using ordinal theory, Rodarmor pioneered the process that allows users to inscript NFTs (digital artifacts, as he dubs them) onto an individual satoshi, the atomic native currency of Bitcoin. 1 Bitcoin is equal to 100,000,000 satoshi and cannot be broken down further.

How do Bitcoin ordinals work?

An NFT (non-fungible token) is a unique digital item stored on a blockchain. NFTs can represent almost anything and serve as a digital record of ownership. Bitcoin ordinals operate under the same theory but differ from NFTs minted onto Ethereum and Solana in how they are created. 

Because Bitcoin does not have smart contract functionality, those who are creating Bitcoin ordinals use ordinals and inscriptions instead. 

Ordinals help give Bitcoin NFTs their non-fungible quality. They are unique and not interchangeable with any other NFT or cryptocurrency. 

Inscriptions are the data added to the first satoshi, where the NFT’s characteristics are permanently and immutably coded. 

Once a Bitcoin NFT is inscribed, it can be stored, sold, or purchased. Ordinals Wallet, Hiro Wallet, and Xverse Wallet support Bitcoin NFTs. Per Casey Rodarmor, to not lose Bitcoin NFTs, a crypto wallet must perform satoshi control.

What are the advantages of Bitcoin ordinals?

Bitcoin ordinals are a new use for Bitcoin blockchain technology. It opens NFT opportunities for those who want to use Bitcoin to bring their NFTs to life.

Immutable

‍According to ordinal theory, a Bitcoin Ordinal is immutable (or unable to be changed) once an inscription has been made.

On-chain

‍Smart contract-based NFTs typically contain off-chain components. The record of their existence is stored on the smart contract and blockchain, but their actual characteristics can be stored off the blockchain. Bitcoin ordinals are stored directly onto the blockchain itself.

Decentralized

‍No single entity owns public blockchains or the underlying technology (the way a central bank or corporation would). Instead, each blockchain is upheld by a multitude of computers (“nodes”) that validate transactions. Consensus mechanisms ensure a blockchain’s security.

What are the current disadvantages of Bitcoin ordinals?

Hashkeys only

‍A site called Ordinals has launched in Alpha and, given its relative newness, still has not developed capabilities for NFTs to operate under unique names. Their landing page hosts a running list of all the hashkeys of new Bitcoin NFTs. 

Lack of provenance

Bitcoin ordinals’ technology is still quite new and cannot easily determine the author of an inscription, making it more complicated to sell and validate ownership of a Bitcoin NFT.

What are popular Bitcoin Ordinal use cases?

Rodamar Bitcoin Ordinal was the first Bitcoin Ordinal ever. It is a pixel art of a skull inscribed in December 2022. 

Since its introduction in January 2023, noteworthy Bitcoin Ordinal collections include Bitcoin Shrooms, which include 210 unique digital artifacts, TwelveFold by Yuga, a limited edition, experimental collection of 300 generative art pieces inscribed onto satoshi, BTC DeGods, and Ordinal Punks (playing off the famous CryptoPunks NFT collection), which is a PFP collection of 100 ordinals.

At the time of writing, Bitcoin ordinals are less than six months old, and their technology and utility are ever-evolving.