Feb 23, 2023
Introducing Ordinals, the NFTs of Bitcoin
Ordinals are the latest advancement in NFT technology and to keep you up to date we have broken down what they are, how they are different from the status quo, and why they may matter.
What are Ordinals?
To start, an Ordinal is simply a bitcoin based NFT. Each Ordinal is tied to a single Satoshi which is the smallest unit of a bitcoin (similar to how a cent is the smallest unit of USD). Tying each ordinal to a unit of bitcoin ensures that all data of the NFT including the image is inscribed on the blockchain thus giving permanence to the data. Ordinals use bitcoin as the blockchain that tracks their ownership where other NFTs would use either Ethereum or Polygon.
Ordinals differ from Ethereum based NFTs in several ways. The first and most important is they are extremely new so there is not as much infrastructure surrounding the purchasing or transferring of these tokens. Ordinals trade peer to peer. So you cannot go to a marketplace like Curios or OpenSea to purchase one. Instead you have to find a seller on your own. Discords like Ordinal’s official discord provide a place to find sellers and to notify other members that you would like to buy an Ordinal.
An additional difference is that selling an Ordinal requires a bitcoin node, or a way to communicate with the Bitcoin blockchain. In the ethereum based ecosystems, Curios and several other companies handle this communication layer for you so you can just focus on collecting. With Ordinals, this is not the case. As a result usually the project creator of an Ordinal holds the private keys for an Ordinal and is the main transactor. Currently, a project creator is the individual who will send you your Ordinal after a purchase is made, and they will send the Ordinal to a new buyer if you were to sell the NFTs.
Project creators currently serve the role of a marketplace and offer an escrow service, by holding the private keys they are able to see that payment was made for an NFT and then they can transfer the NFT to a user's wallet. The other benefit this serves is usually the project creator is trusted and this makes peer to peer, anonymous transactions made over discord actually feasible. While this seems to pose a security risk for a high dollar NFT, you have to remember that Ethereum based project creators also have this power when they have admin rights to a smart contract, so its not different than the majority of ETH based NFTs.
Another difference between Ordinals and Ethereum based NFTs are the data inscription. On Ethereum, the image and information behind an NFT is hosted on IPFS, which is a decentralized file storage system. This requires two networks to be functional and operation for your NFT to work correctly. Ordinals, through its inscription on a Satoshi puts the information directly on the Bitcoin blockchain which has never gone down or been hacked, giving a NFT the most security available on the internet today.
The last major difference is the wallets are bitcoin based so you will not be able to use a metamask but instead will have to use something like Taproot or Sparrow.
Ok, so this may seem completely ridiculous, and honestly it is. You need to find an anonymous stranger online who is willing to sell you this NFT, then reach out to the creator of said NFT to help you escrow this high dollar transaction with an anonymous stranger, all so you can own a bitcoin based NFT. So this begs the question, why are they popular?
Ordinals are gaining popularity fast, despite these hurdles. According to data from Dune Analytics, over 122,500 Ordinals have been created (or minted) so far, with a 40% increase from the 88,000 inscriptions recorded on February 7. On February 8, there was a peak of over 21,000 inscriptions, and Wednesday Feb 15th was the second-highest day with over 17,7000 inscriptions.
The answer to why they are popular is completely unknown, and we can only speculate. Some speculation is that as Bitcoin is the original blockchain and is the most secure chain, all these early NFTs will have high historical significance. Add on the difficulty in acquiring them and you get both rare and historical provenance and now you have some major potential upside in the collector world.
Additionally the NFT space for digital collectibles and memberships with scarce supply caps is one of momentum. Momentum and hype drive tons of volume and Ordinals are proving no different.
The billion dollar question is whether the recent momentum for Ordinals means they will replace or consume some of Ethereum’s market share. This of course remains to be seen.
However, as mentioned above the Bitcoin NFT space is still in its early stages compared to Ethereum and Solana. These two ecosystems have a significant advantage in terms of infrastructure, communities, and trading platforms and collections. In the last 30 days, Ethereum's NFT sales volume increased by 35.5% to $860 million, with over 178,000 buyers, while Solana's volume fell by 15.6% to $114.6 million, with over 80,000 buyers, according to CryptoSlam data.
Ethereum has the network effect, but at this point the entire space is still so early that majority share could easily flip from Ethereum at any given time. Adding smart contracts to a blockchain as robust and secure as Bitcoin and adding NFT technology will have its benefits and we at Curios are excited to see and power these advances.