INTRODUCTION

Ordinals is a protocol launched in January 2023 by Casey Rodarmor. It runs on top of Bitcoin, and assigns individual satoshis unique numbers. This allows for data such as text, images or even video to be “inscribed” upon a single satoshi and then sent, exchanged or traded with other users.

WHAT ARE ORDINALS? HOW DO THEY WORK?

Ordinals can be understood as NFTs on Bitcoin. Ordinals are produced by a user making a transaction and including media or other content in the portion of the transaction reserved for 'witness data'. This process is known as 'inscribing', and will attach the 'inscription' content to a single satoshi.

A satoshi, or “sat”, is the smallest denominator of Bitcoin, and is equal to one hundred millionths of a bitcoin (0.00000001 BTC).

Ordinals are based on “ordinal theory”, which differentiates individual satoshis by numbering them in the order they were mined. Under the ordinals system, each satoshi is unique - and has its own number.

Being able to tell satoshis apart led people to speculate on ‘rare sats’ - satoshis perceived as more valuable than normal. Rodamor suggested a sequence of Common/Uncommon/Rare/Epic/Legendary satoshis based upon their creation at important moments in Bitcoin’s life cycle. An ‘Epic’ Sat was created at the Bitcoin Halving in 2024, and sold for 33.6 BTC - over 2 Million USD. Other bitcoiners created ‘categories’ such as ‘Vintage’, ‘Nakamoto’, ‘Block 9/78’, ‘Pizza’, ‘Hitman’ etc. Below is a ranking scale for satoshi rarity based on Rodamor’s system:

• Common: any satoshi that does not come first in a block and constitutes over 99% of all satoshis.
• Uncommon: any satoshi that comes first in a block, so every 10 minutes.
• Rare: first satoshis that come after a difficulty adjustment - occurs every 2,016 blocks which is equivalent to two weeks.
• Epic: first satoshi directly after each halving epoch - occurs every 210,000 blocks which is equivalent to every four years. There are currently four epic sats, and a total of 32 will be generated over the course of Bitcoin’s existence.
• Legendary: first satoshi of each cycle, i.e. every six halvings whereby the halving and difficulty adjustment coincide together. This is expected in the year 2032 and occurs approximately every 24 years. Total number of legendary satoshis would be a maximum of 5.
• Mythic: only one satoshi is mythic, and it is the first satoshi of the first Bitcoin block (genesis block).
• Pizza Sats: this is a category of satoshis associated with the first-ever public purchase using Bitcoin whereby Laszlo Hanyecz bought two pizzas with 10,000 Bitcoins in 2010.

Sat Categories:

• Vintage: These are satoshis mined in the first 1,000 blocks of Bitcoin’s lifespan.
• Nakamoto: These are satoshis mined by Satoshi Nakamoto.
• Block 9: These are satoshis mined in the 9th block, the oldest in circulation currently.
• Block 78: These are satoshis mined in the 78th block by Hal Finney, the oldest sats mined by someone other than Satoshi.
• Pizza: These are satoshis used in the first-ever public purchase using Bitcoin whereby Laszlo Hanyecz bought two pizzas with 10,000 Bitcoins in 2010.   
• Hitman: These are satoshis used by Ross Ulbricht to pay for a hitman in the following transaction: 4a0a5b6036c0da84c3eb9c2a884b6ad72416d1758470e19fb1d2fa2a145b5601

Some Ordinals, referred to as “cursed inscriptions”, pertain to Ordinals that ended up absent from wallets and marketplaces. This is due to the “Ord indexer”, a software responsible for tracking and registering inscriptions, overlooking these inscriptions.

THE MOST FAMOUS ORDINALS

Some of the most famous Ordinals collections include the following:

NODEMONKES

Originally sold in a dutch auction at 0.03 BTC each, NodeMonkes’ current floor is 0.3 BTC (~$24,000). They are known as the first 10K collection of Ordinals, originally inscribed in February 2023 between inscription number 83522 and number 111319. In March 2024, Nodemonkes recorded its highest single sale ever, with an especially rare monke fetching over $1M in Bitcoin.

Each NodeMonke has certain traits of varying rarity levels. These can include different items of clothing, different head and eye designs, headwear and/or accessories. The NodeMonke that sold for over $1M featured a combination of an especially rare body type (Alien) with a rare article of clothing (hoodie).

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TWELVEFOLD

In 2023, Yuga Labs launched their first Ordinals collection, auctioned over the course of 24 hours. The collection involves 300 pieces of experimental art as inscriptions that combine hand-drawn and 3D graphics. The total sales during the auction was estimated to be around 735 BTC, or $16M at that time, and the highest bid for an inscription was 7.11 BTC. 

BITCOIN PUPPETS

This Ordinal collection was originally inscribed and sold for around $60 in Bitcoin each, with the current floor price at 0.18 BTC. Bitcoin Puppets  are known for their alternative sense of humor and wholesome community. The artist behind this collection goes by the username “lepuppeteerfou” on Twitter. Bitcoin Puppets are a larger collection based upon the original “O.P.I.U.M” collection by the same artist.

ORDINAL MAXI BIZ (OMB)

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Ordinal Maxi Biz is an ordinals collection by the artist Tony Tafuro @ohareyoufat and bitcoiner @ZK_Shark. The 100 original OMB were inscribed over 2 weeks between 14th February - 1st March 2023. 

The collection later expanded in subsequent waves of more inscriptions, with OMB now numbering over 5000 items in total. Different groups of OMB are defined by the color of their eyes, in chronological order: Red (100 items), Blue (100 items), Green (1900 items), Orange (3141 items).

OTHER NOTABLE ORDINALS

INSCRIPTION 0

Inscription 0 was the first Ordinals Inscription ever created according to the Bitcoin Ordinals protocol. It  was inscribed on 14th December 2022, and for more than a year was the only inscription known to be created by Casey Rodarmor.

It consists of less than 1KB of data, and shows a black-and-white pixelated image of a skull:

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TAPROOT WIZARDS/QUANTUM CATS

‘Taproot Wizards’ is a project created by the well-known bitcoiners Udi Werthenheimer, Eric Wall and 0xFAR, in reference to the 2013 Bitcoin subreddit image of a wizard advertising Bitcoin as “Magic Internet Money”. Certain Quantum Cats allow the holders to mint Taproot Wizards upon official release.

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HOW AND WHERE TO TRADE ORDINALS

Ordinals can be bought on a marketplace online or peer-to-peer on platforms like Discord or Telegram. On marketplaces, such as Magic Eden, traders can browse the listing and filter by rarity, volume and price. Though OTC (over-the-counter) trades are also common, there may be significant counterparty risk.

Marketplaces facilitate Ordinal Trading in an automated manner using PSBT’s - Partially Signed Bitcoin Transactions - to allow buying and selling, taking only a small fee. Bitcoin Ordinals are found on various marketplaces. Below are the top four marketplaces for trading Ordinals:

MAGIC EDEN 

A multi-chain NFT marketplace where users can mint and trade Ordinals after they have been sorted into collections by Magic Eden’s indexer. Magic Eden allows users to filter by trading volume, time frames and floor. In addition, they list certain rare sats by rarity level and category, such as “Vintage” or “Pizza” sats. Magic Eden supports Ordinal wallets such as Xverse, Unisat and Leather.

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UNISAT

UniSat supports trading on the Bitcoin network, for items such as Ordinals, BRC20 tokens and Atomicals. Trending Ordinal collections on UniSat are displayed first and users can filter by time frame, Ordinal collection name, and price range for example. Note that UniSat is still in Beta.

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ORDINALS WALLET

A community-funded marketplace, Ordinals Wallet allows you to trade Ordinals as well as inscriptions on Doge and Bells (a 2013 coin made by Billym2k, Doge founder, based on the currency in the Nintendo game Animal Crossing). Artists can easily inscribe new Ordinals by connecting their wallets and uploading their media. Moreover, users who wish to support this marketplace can donate in order to help fund more nodes to secure Bitcoin. Users also have the option to get project launch alerts by subscribing to their Email service. 

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GAMMA

A launchpad and marketplace, Gamma offers the possibilities to create, trade and auction Ordinals in a trustless manner. In just a few steps, an artist can create an NFT with zero coding requirement. Moreover, Gamma offers a Stacks marketplace where users can trade art on the Bitcoin Layer 2 “Stacks” using STX as the currency. On Gamma, users can also mint before the public if they are whitelisted. 

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WHERE TO STORE ORDINALS NFTs?

There are several wallets allowing users to store Ordinals as well as interact with marketplaces for trading. Some such wallets are even multi-chain, allowing users to trade on blockchains other than Bitcoin. Users may consider the type of wallet address used when storing and transferring ordinals, as some older styles of Bitcoin wallets are unable to recognize ordinals transactions. Accounts beginning with 1- or 3-, for instance, are unable to recognise SegWit (Segregated Witness) transactions, which are necessary for using Ordinals. Ordinals collectors prefer to use bc1q- or bc1p- prefixed accounts, as these will be able to store and recognize Ordinals outputs. Some of the most widely used wallets are discussed below:

XVERSE

A non-custodial and open source free wallet that allows users to connect to various marketplaces, such as Ordinals Wallet and Magic Eden. Xverse also supports Stacks NFTs as well BRC-20 tokens (fungible tokens on Bitcoin, such as ORDI and SATS). The wallet is available as a mobile app on Apple and Google Play, as well as a browser extension for Chrome. 

UNISAT

UniSat is an open source Chrome browser extension only for inscriptions on Bitcoin. UniSat also supports ARC-20, a kind of fungible token setup on Bitcoin called Atomicals. Early supporters of UniSat received a “UniSat OG Pass” card which gives users a reduction in inscription and marketplace service fees. The passes may be traded between users and are limited to 189 cards as inscriptions on the Bitcoin blockchain. 

LEATHER

Formerly known as “Hiro”, this wallet is currently only available as a browser wallet that can be installed from browser official web stores. Soon, Leather will support LN (Lightning Network) transactions where users can swap instantly between Stacks and Bitcoin. This wallet is also non-custodial, open-source and audited in 2021. 

PHANTOM

Available on mobile (iOS and Android) as well as browsers (Chromium-based and Firefox), this multi-chain wallet is non-custodial and offers scam detection flags (notifications of malicious transactions). Users can fill in a form to request certain features, and their support is live 24/7 in case a user needs assistance. Though the wallet was first designed for use on Solana Blockchain in 2021, it now supports Ethereum, Polygon and Bitcoin. Users may trade, transfer and receive BTC, BRC-20 tokens as well as Ordinals using Phantom. There is also an extra protection for rare sats so that users don’t spend such sats by accident. Ordinal marketplaces that support Phantom are Magic Eden and UniSat. 

RUNES ON BITCOIN 

Runes is a protocol for tokens on Bitcoin developed by the same Bitcoin core developer behind Ordinals, Casey Rodarmor. Runes uses the Ordinals Protocol to create fungible tokens. This is similar to ERC20 tokens (Runes) vs. NFTs (Ordinal Inscriptions). The objective of Runes is to supersede the inscription-based BRC-20 token standard, resulting in fewer junk UTXOs (Unspent Transaction Outputs) and thus less congestion of the Bitcoin network. Runes launched to much fanfare in April 2024.

The Bitcoin Halving on April 20th 2024 resulted in massively increased fees for the few days after block 480,000. This was mainly due to people attempting to mint Runes tokens, which required a large number of transactions to be made, often tens or hundreds of thousands for each individual Rune token.

RUNESTONES AIRDROP

Founder of Ord.io and Twitter NFT influencer Leonidas, launched the largest Ordinals airdrop so far called Runestones on Bitcoin.

The Runestones airdrop began on March 14, 2024 and scored an initial daily trading volume of 170 BTC. Every wallet that owned more than 3 non-text inscriptions before 20th January 2024 was eligible, meaning that more than 112,000 wallets received Runestones - distributed in batches of 1,400. This was the first ever airdrop on Bitcoin including over 100,000 addresses in the distribution list.

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ORDINALS: CHALLENGES

Ordinals are controversial in the Bitcoin community. A significant portion of the Bitcoin community, including prominent Bitcoin core developer, Luke Dashjr, believes that Ordinals not only clog the Bitcoin mempool, but also lead Bitcoin away from the goal of a pure decentralized currency. Ordinals were eventually registered as a vulnerability on Bitcoin, under the name CVE-2023-50428. A CVE, which stands for "Common Vulnerabilities and Exposures" designated by the National Institute of Standards and Technology, indicates that a flaw in the codebase could potentially compromise security if exploited. The Bitcoin vulnerability is regarding the technique for preserving Ordinal inscriptions on Bitcoin. The exploit is described as "data carrier size restrictions can be circumvented by disguising data as code," which is precisely what Ordinal inscriptions do to embed images and various types of data directly into the blockchain.

However, this vulnerability has been disputed as some consider it to not be a bug in the code. Another Bitcoin core developer, Peter Todd, rejects Luke’s proposal to modify the code, stating “Censoring those transactions would simply encourage the development of private mempools – harmful to small miners – while making fee estimation less reliable.”

Finally, some Bitcoin community members, whether developers or traders, are against the removal of Ordinals because they argue it is a valuable innovation. Numerous artists were excited to display their art on Bitcoin for instance, and Bitcoin users no longer require other chains to trade art. Vastly increased transaction fees from Ordinals trading has also been suggested by some proponents as a possible long-term solution to the ‘fee problem’ - i.e. Bitcoin being able to continually incentivise miners, even after block rewards end. The future of Ordinals and the implication of its removal remain uncertain. Some anticipate strong support from miners because they make money on the Ordinal-fueled rise in transaction fees. Others speculate that if the ability to create Ordinals is removed, existing Ordinals will rise significantly in value due to the impossibility of producing more.

CONCLUSION

Ordinals is a protocol that has caused a great amount of discussion and furor since its inception in early 2023. Despite traders and investors valuing this sector of Bitcoin’s ecosystem at multiple millions of dollars, the wider Bitcoin community is still divided on what the future for Ordinals should be. Will Ordinals continue to see multi-million dollar auctions, and represent a continual presence of Bitcoin blockspace?