Crypto Gloss

Bitcoin Ordinals

Bitcoin Ordinals is a numbering scheme and data inscription method for Bitcoin that launched in January 2023, enabling Bitcoin-native NFTs (“inscriptions”) for the first time without requiring any modifications to Bitcoin’s base protocol. Created by software engineer Casey Rodarmor, Ordinals works by exploiting Bitcoin’s Taproot upgrade (activated November 2021) and SegWit witness discount to embed arbitrary data (images, text, JSON, even small video files) directly in Bitcoin transactions — permanently inscribed on the Bitcoin blockchain. The launch sparked the largest fee revenue event for Bitcoin miners since 2017 and a contentious debate about Bitcoin’s purpose.

The Ordinal Theory

Ordinal numbers for satoshis:

The protocol assigns a serial number to every satoshi (the smallest Bitcoin unit = 0.00000001 BTC):

  • Satoshis are numbered in the order they are mined (first sat mined = ordinal 0)
  • This creates 2.1 quadrillion uniquely identifiable satoshis
  • Certain “rare” sats have special ordinal significance:
    The first sat in a block = “uncommon”
    The first sat in a difficulty adjustment period = “rare”
    The first sat in a halving epoch = “epic”
    The first sat ever (genesis block) = “legendary” (Satoshi’s sat)

Tracking ownership:

UTXO-based ordinal tracking follows satoshis through transactions using first-in-first-out (FIFO) accounting within outputs. This creates a chain of custody for specific sats on-chain.

Inscriptions (Bitcoin NFTs)

Taproot witness data:

Bitcoin’s Taproot upgrade allows “Tapscript” data in transaction witness fields. SegWit witness data is discounted (1/4 the base cost per byte). Rodarmor exploited this:

  1. Inscriptions embed data in a “fake” Tapscript in the witness field
  2. Bitcoin nodes validate and store the data (it’s part of a valid transaction)
  3. The data is linked to a specific satoshi via ordinal tracking
  4. The inscription is permanently part of the Bitcoin blockchain forever

What can be inscribed:

  • Images (JPEG, PNG, SVG, WebP, GIF)
  • Text (plain text, JSON)
  • HTML (fully interactive web pages inscribed on-chain)
  • Small video clips (MP4)
  • JavaScript executables
  • Limit: ~4MB per inscription (SegWit block weight limit)

Why “native” Bitcoin:

Unlike Counterparty (2014’s attempt at Bitcoin assets) or Stacks (Bitcoin L2), Ordinals inscriptions:

  • Require no second layer
  • Use only standard Bitcoin transactions
  • Are stored directly in Bitcoin’s UTXO set (witness data)
  • Are permanent (Bitcoin data is never pruned from archival nodes)

BRC-20 Tokens

In March 2023, developer @Domodata created BRC-20 — a fungible token standard on Bitcoin using Ordinals inscriptions:

Mechanism:

  • JSON objects inscribed to satoshis define token deployments, mints, and transfers
  • All indexers must interpret the JSON to track BRC-20 balances
  • Not enforced by Bitcoin protocol itself; requires off-chain indexers

How it works:

  1. Deploy inscription: {"p":"brc-20","op":"deploy","tick":"ORDI","max":"21000000","lim":"1000"}
  2. Mint inscription: {"p":"brc-20","op":"mint","tick":"ORDI","amt":"1000"}
  3. Transfer inscription: {"p":"brc-20","op":"transfer","tick":"ORDI","amt":"500"}

ORDI was the first BRC-20 token and reached a $1B+ market cap at peak. SATS (representing ordinal-numbered satoshis) was another major BRC-20.

Activity: BRC-20 minting created millions of Bitcoin transactions in April-May 2023, driving Bitcoin fees to multi-year highs and clogging the mempool — several exchanges temporarily paused withdrawals.

Key Wallets and Infrastructure

  • Ord wallet: Casey Rodarmor’s own CLI tool for creating inscriptions and tracking ordinals
  • Unisat: Browser extension wallet for Bitcoin Ordinals and BRC-20 trading; like MetaMask for Ordinals
  • Magic Eden: Extended to Bitcoin Ordinals marketplace in 2023; largest Ordinals NFT trading venue
  • OKX Wallet: Added Ordinals support; significant Asian market coverage
  • Gamma.io / Ordinals.com: Ordinals NFT marketplaces

The Bitcoin Debate

Ordinals triggered Bitcoin’s fiercest ideological debate in years:

Anti-Ordinals (Bitcoin purists):

  • Bitcoin’s block space should be reserved for financial transactions, not JPEGs
  • Ordinals “spam” the blockchain, increasing transaction fees for regular users
  • Core developers should filter inscription transactions (they did not; this would require a soft fork)
  • Inscriptions are “harmful” to Bitcoin’s original purpose

Pro-Ordinals:

  • Bitcoin miners benefit from inscription fees (extends security budget post-halving)
  • Bitcoin’s censorship resistance means it cannot and should not filter valid transactions
  • Ordinals prove Bitcoin’s block space has value beyond payments
  • Bitcoin NFTs should exist; Bitcoin’s security is the best in crypto

Bitcoin Core developer Luke Dashjr proposed a soft fork to limit inscription size; received no consensus support. Bitcoin is permissionless — the “debate” is non-actionable.

Research

Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer Electronic Cash System. Bitcoin.org.

Wuille, P., et al. (2020). BIP340: Schnorr Signatures for secp256k1. Bitcoin Improvement Proposals.

Thibault, L. T., Bhatt, T., & Bhatt, A. (2022). Blockchain Scaling Using Rollups: A Comprehensive Survey. IEEE Access.

Ante, L. (2021). Non-Fungible Token (NFT) Markets on Ethereum. Economics of Networks.

Binance Research. (2023). Bitcoin Ordinals and the Emergence of Bitcoin NFTs. Binance Research Report.