Ordinals were first launched on the Bitcoin mainnet on January 20, 2023. They are the latest way to create NFT assets on Bitcoin.
Ordinals are means of creating Bitcoin NFTs by attaching data such as images, videos, and more to an individual satoshi on the base Bitcoin blockchain.
A “satoshi,” or “sat,” is equivalent to 1/100,000,000 of a single Bitcoin, the smallest possible denomination of Bitcoin.
They use an arbitrary but logical ordering system called ordinal theory to give each individual Bitcoin satoshi a unique number. In this regard, ordinal NFTs are completely Bitcoin-native. They work without changes to the Bitcoin protocol, don’t require any extra layers, and are backward compatible with the network.
Ordinals are a system for ordering sats in a way that creates the “non-fungible” property necessary to create NFTs.
The key innovation of ordinal NFTs is that they provide a system for numbering each individual sat. The result: A unique ID for every single satoshi on the Bitcoin blockchain. Each ordinal, in its most basic form, is simply a satoshi that has been assigned a unique number.
Ordinals assign number values to individual satoshis allowing for uniqueness. With a Full Bitcoin node a user can add data ( inscriptions) to a Bitcoin transaction and tie the data to an individual Satoshi (ordinal).
Ordinals enable data to be inscribed into individual satoshis on Bitcoin. They use a logical ordering system called ordinal theory to give each individual satoshi a unique number. Then, arbitrary data can be inscribed into each individual satoshi.
Satoshis are numbered in the order in which they’re mined, and transferred from transaction inputs to transaction outputs first-in-first-out. Both the numbering scheme and the transfer scheme rely on order, the numbering scheme on the order in which satoshis are mined, and the transfer scheme on the order of transaction inputs and outputs. Thus the name, ordinals.
This data inscribed to satoshis can range from images, video, audio, text, and even entire applications such as a simplified version of the video game DOOM. BRC-20 tokens are essentially ordinal inscriptions with a specific type of text embedded into them, providing a set of rules and specifications for creating and managing the tokens.
In non-Bitcoin blockchains, metadata is the optional attachment of arbitrary data to a non-fungible token. It’s used to represent and showcase the vast range of art, in-game assets, profile pictures, financial assets, and more that have become synonymous with the word “NFT.”
Ordinal NFTs don’t have a designated spot for metadata like their non-Bitcoin counterparts. Instead, the metadata for ordinal NFTs is held within the witness data of a transaction.
This is also where the term “inscription” comes from—the data attached to a specific satoshi is “inscribed” within that specific part of a Bitcoin transaction. To inscribe a specific satoshi with data, and create an ordinal NFT, users must send a transaction of an individual satoshi to a Taproot-compatible wallet and attach the desired metadata as part of the transaction.
BRC20
Initially launched on March 9, 2023, BRC-20 tokens use an experimental standard to create fungible tokens natively on Bitcoin. Notably, the BRC-20 standard does not use smart contracts like popular token standards on EVM blockchains—it enables users to store a script file on Bitcoin and use that to attribute tokens to individual satoshis. BRC-20 tokens embed JSON data into ordinal inscriptions to enable users to deploy, mint, and transfer tokens.
Built on the Bitcoin Ordinals protocol it allows for the creation of fungible tokens on the Bitcoin network.
Meanwhile, ordinals infrastructure providers, such as wallet services and marketplaces, have started to integrate BRC-20 to enable their users to mint and exchange BRC-20 tokens.
BRC20 tokens have limited functionality and use cases when compared to intricate and smart-contract-capable ERC20 tokens.
The comparison between BRC-20 and ERC-20 stands in name only. ERC-20 is a fungible token standard on Ethereum using smart contracts, while BRC-20 is a clever way to create semi-fungible tokens using ordinal inscriptions on Bitcoin. BRC-20 is simpler and more constrained than ERC-20 due to the purposely limited programmability of the Bitcoin blockchain.
To mint a BRC20, you create a ‘mint’ NFT with the amount to be minted, in competition with others via a priority gas auction
To transfer/sell an BRC20, you create a new ‘transfer’ NFT with the amount to be transferred/sold
These ‘transfer’ NFTs can listed just like NFTs where buyers purchase the fixed batch amount (while the ‘mint’ NFT always stays in the original minter’s wallet)
All of these receipt notes then have to be indexed/interpreted off-chain to get current account balances
Any comparison to ERC20 is in name only, given they work completely differently (ERC20 is just modifying a fungible balance variable)
It would be as if you have to create a new ERC721 every time you want to make a transfer or trade of an ERC20.
Additional readings on Ordinals and BRC20:
https://grayscale.com/can-ordinals-unlock-new-potential-for-bitcoin/
https://domo-2.gitbook.io/brc-20-experiment/
https://blocmates.com/blogmates/what-is-brc-20-bullish-or-bearish-for-bitcoin/
How to Mint Ordinals
Charts:
https://vaultx-interface.vercel.app/
Inscription/Sat Checker:
https://bitpunks.io/Explorer/Inscriptions
BRC20 guide:
https://www.brc20.guide/getting-started/introduction
Wallets
Inscription Services
https://ordinalswallet.com/inscribe
https://ordkit.xyz/inscriptions-hub
Marketplaces
https://ordinalswallet.com/collections
Aggregators
https://ordspace.org/collections
Explorers
BRC-20 Price Tracking
Analytics Inscriptions
https://dune.com/dgtl_assets/bitcoin-ordinals-analysis
Analytics Marketplaces