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How Ordinals Transformed Bitcoin Beyond Store of Value

08月29日 17:31

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Ordinals have created much utility on the Bitcoin blockchain.

Bitcoin users can now record assets with value on the blockchain.

The absence of interoperability on the <a href="/zh/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> blockchain retards the adoption of BTC ordinals.

Keywords: Bitcoin NFTs, BTC ordinals, Bitcoin ordinals, bitcoin based NFTs, Ordinals bitcoin 
## Introduction
Since its inception in 2009 Bitcoin has been regarded as one of the best stores of value that exists on the blockchain. The fact that the bitcoin blockchain is robust and unhackable makes it a preferred investment asset for crypto investors. However, for a long period some blockchains like <a href="/zh/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> had other use cases like registering assets of value in the form of non-fungible tokens which the Bitcoin network could not.

Things changed in December 2022 when Bitcoin developer Casey Rodarmor released the ORD software which shifted Bitcoin’s paradigm. People can now create Ordinals on the Bitcoin blockchain. This analysis looks at how BTC ordinals have created other use cases for the bitcoin blockchain other than using the coins as a store of value.
## Ordinals have Transformed the Utility of the Bitcoin Blockchain 
Since 2009 when the first bitcoin transaction was executed BTC had always been viewed as a store of value, a hedge against inflation as well as a peer-to-peer payment system. There were no other narratives about bitcoin technology apart from these.

As outlined prior, BTC ordinals have changed the essence of the bitcoin blockchain as people can create unique Satoshis. More specifically, bitcoin is no longer a technology that only supports peer-to-peer transfers as people can now use BTC for other uses like registering the value of assets. Due to this transformation bitcoin has a large community that supports its technology and functionalities.

The bitcoin based NFTs have also increased activity on the blockchain. As a result of Ordinals the network activity reached a two year high since over 23,4 million Bitcoin NFTs have already been minted on the blockchain. Currently, the ordinals are mainly used as non-fungible tokens and memecoins which are in the form of BRC-20 token standard. 
## What are Bitcoin Ordinals?
For a moment, let’s focus on [what BTC ordinals are](https://www.gate.io/learn/articles/what-you-need-to-know-about-ordinals-and-brc20/507 "what BTC ordinals are"). Bitcoin ordinals are programmable smart contracts created by attaching information to individual Satoshis. By the way, a Satoshi is the smallest unit of bitcoin which is equivalent to 0.00000001 BTC.

The ordinals exist fully on-chain and have similar security as bitcoins. Ordinal creators upload content like audios, videos or images on Satoshis. When an individual creator attaches content on a Satoshi the Bitcoin Ordinals protocol gives it a serial number and tracks it when the creator or owner transfers it. The process of adding extra data on Satoshis is called in_script_ion.

Interestingly, each BTC Ordinal has a single owner at a time due to its non-fungible nature. It is such explicit ownership which gives them much value and appeal in the digital world.

Ordinals do not rely on layer-2 solutions but they leverage seminal Bitcoin network developments which include Taproot and SegWit.

Read also: [Unpacking the Potential of Bitcoin's BRC-20 Tokens](https://www.gate.io/fr/blog_detail/2607/unpacking-the-potential-of-bitcoin-s-brc-20-tokens "Unpacking the Potential of Bitcoin's BRC-20 Tokens")
## The Potential Ordinals Bitcoin Bring to the Blockchain 
As stated earlier on, Ordinals bitcoin have brought more value to the blockchain than previously anticipated. This is because of their non-fungible nature which contrasts bitcoin which is fungible.

Bitcoin coins are fungible as they can be exchanged one-to-one with each other since they have the same value. In other words, bitcoin coins are interchangeable because they are identical. On the other hand, bitcoin ordinals are non-fungible as each of them is different from the rest. More specifically, there are no two BTC ordinals which are identical.

Despite criticisms from some sectors of the crypto industry Bitcoin ordinals have brought much value to the network. First, Bitcoin ordinals have enhanced the generation of more valuable blocks. This is because some users who mint the bitcoin NFTs buy much blockspace thereby ensuring that blocks fill up consistently which increases the BTC per block floor.

Read also: [Exploring Ordinals and BRC-20: A Revolution in Bitcoin and the Crypto Market](https://www.gate.io/blog_detail/2602/exploring-ordinals-and-brc-20-a-revolution-in-bitcoin-and-the-crypto-market "Exploring Ordinals and BRC-20: A Revolution in Bitcoin and the Crypto Market")

When this happens bitcoin miners accrue more transaction fees than otherwise, thus creating a healthy security budget. In other words, bitcoin based NFTs increase the revenue for miners which contributes significantly to the blockchain security. The following graph shows the increase in total fees attributable to BTC ordinals.
![](https://gimg2.gateimg.com/image/article/16933013871.png)
Increase in Transaction Fees between December 2022 and April 2023 - Grayscale

The graph shows a steady increase in transaction fees since December 2022 when bitcoin ordinals were introduced. 
## Criticisms of BTC Ordinals
As hinted above, there are several criticisms of bitcoin ordinals. For instance, some critics argue that the ordinals deviate from the objective of the peer-to-peer electronic cash system which Satoshi Nakamoto, the bitcoin inventor, envisioned.

The other argument is that the ordinals compromise bitcoin’s attribute of fungibility. Before the invention of ordinals Satoshis were fungible since people could interchange them easily. Now, by inscribing data on Satoshis they no longer remain fungible which diminishes their original purpose of being electronic currency.

In connection to this [Grayscale said](https://grayscale.com/can-ordinals-unlock-new-potential-for-bitcoin/ "Grayscale said"), “If a substantial number of satoshis are inscribed, Bitcoin’s fungibility will diminish, potentially affecting its primary use case as electronic currency.”

Although the in_script_ion of satoshis decreases fungibility it is estimated that it will take about 238 years to mint ordinals that use “~0.24% of the total terminal BTC supply.”

Also, inscribing data on satoshis will increase the size of the bitcoin blockchain which makes it more difficult to download. Others say that the in_script_ions result in cluttering the blockchain with unnecessary information.

Another challenge which bitcoin ordinals face is the absence of interoperability on the bitcoin blockchain. There is interoperability if a blockchain communicates with another blockchain. Right now, the bitcoin blockchain cannot interact with other networks. This limits the [potential of BTC ordinals](https://www.gate.io/learn/articles/what-are-bitcoin-ordinals/508 "potential of BTC ordinals").

Some blockchains interact with others using several options such as layer-2 solutions, atomic swaps and cross-chain bridges. Currently, none of these solutions enable the bitcoin network to interact with other blockchains.

Interoperability may bring many benefits to the bitcoin blockchain. For example, it may enable cross-chain Ordinals lending. It may also improve its scalability through layer-2 protocols which could reduce traffic congestion on the network.

Read also: [Bitcoin Blockchain Size is revised upwards Due to the Explosion in Ordinals](https://www.gate.io/blog_detail/2669/bitcoin-blockchain-size-revised-explosion-ordinals "Bitcoin Blockchain Size is revised upwards Due to the Explosion in Ordinals")
## Advantages of Ordinals: A Bullish Perspective
Ran Neuner’s perspective on Bitcoin and Ordinals helps us to appreciate their value. Neuner, a former altcoin maximalist, became a bitcoin enthusiast after the launch of bitcoin ordinals. The reason is that he believes that the BTC ordinals have endowed the bitcoin blockchain with functionalities similar to Ethereum.

[Neuner said](https://beincrypto.com/bitcoin-ordinals-transformed-the-network/ "Neuner said"), “Bitcoin has pivoted from being a store of value only to being a competitor to Ethereum.” Also, he believes that it is best to invest in bitcoin and its technology rather than focusing on lesser-known altcoins.

With regards to this, Neuner added, “We have really, really, really gone into a new era now on Bitcoin… Would I rather be investing in small altcoins somewhere else? Or would I rather be investing in amazing infrastructure being built on the Bitcoin ecosystem?”

There are many other crypto enthusiasts like Michael Saylor, the former CEO of MicroStrategy, who believe that Bitcoin ordinals have created much utility for the blockchain. As an example, [Saylor said](https://beincrypto.com/bitcoin-ordinals-transformed-the-network/ "Saylor said"), “What happened with Ordinals and NFTs is we crossed this chasm from what was a bearish scenario to a bullish scenario. If I was a miner I would be ecstatic.”

Although NFTs that exist on the Ethereum blockchain and other networks have unique purposes, BTC ordinals are different because they are scarcer and exist on hack proof and time-tested blockchain.

It is a real fact that [BTC Ordinals have transformed the bitcoin blockchain](https://nftandgamefi.com/2023/04/17/bitcoin-ordinals-explained/ "BTC Ordinals have transformed the bitcoin blockchain") from a network that only supports a peer-to-peer electronic system to one that is full of open possibilities. This new utility is likely to push the price of Bitcoin beyond its 2021 all-time-high. 
## Conclusion 
The Ordinals protocol has enabled people to create Bitcoin NFTs which have generated much utility for the blockchain as individuals can register assets with value on the network. These non-fungible tokens have helped to increase activity on the blockchain. They also enhance its security system through enabling miners to generate more profit which incentivize them to secure the network. 
## FAQs about Bitcoin Ordinals 
### What are Bitcoin Ordinals? 
Bitcoin ordinals are satoshis where data like videos, images and audios has been inscribed. Content creators are able to inscribe data on satoshis using the Ordinals protocol which also tracks their transfers. 
### What is the ordinals number of a bitcoin? 
The ordinal numbers are like serial numbers used for tracking individual satoshis where data has been inscribed. Basically, the ordinals number is  assigned to a  satoshi when it is mined and transferred in transactions. 
### Are ordinals good for Bitcoin?
Ordinals are good for bitcoin since they increase the transaction fees which go towards rewarding miners for securing the network. As a result of the BTC ordinals bitcoin has a large community that supports it. 
### Where to buy bitcoin ordinals? 
You can purchase bitcoin ordinals on various cryptocurrency exchanges that include Gate.io, Binance and Coinbase. You will need a bitcoin wallet to store your BTC ordinals.

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<a href="/zh/how-to-buy/iotex-iotx" target="_blank" class="blog_inner_link">how to buy IoTeX</a>Author:** Mashell C.**, Gate.io Researcher
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Introduction

Ordinals have Transformed the Utility of the Bitcoin Blockchain

What are Bitcoin Ordinals?

The Potential Ordinals Bitcoin Bring to the Blockchain

Criticisms of BTC Ordinals

Advantages of Ordinals: A Bullish Perspective

Conclusion

FAQs about Bitcoin Ordinals

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