Bitcoin NFTs Are Here? All About Crypto Ordinals & BRC-20 Tokens
Today we’re expanding our crypto dictionary with Ordinals and BRC-20 tokens, while also shedding a bit of light on the Bitcoins supposed NFTs and the controversy behind them.
We’ll start with a few important terms for this article.
Key Terms
BRC-20 — a term coined to refer to an experimental standard of tokens created on Bitcoin’s blockchain network by an anonymous developer called Domo. The term BRC-20 refers to ERC-20, a standard of tokens created on Ethereum’s network, but of course, BRC relates to Bitcoin’s network. What’s important is that BRC-20 tokens are created thanks to the Ordinals protocol.
The Ordinals protocol — is a numbering system of BTC’s smallest units – satoshis that makes it possible to inscript them with additional data to make them unique, similarly to NFTs.
Bitcoin is made up of 100 million satoshi (sats). So 1 BTC = 100, 000 000 satoshi, and 1 satoshi = 0.00000001 BTC that can be made unique with the Ordinals protocol.
💡 An NFT token (non-fungible token) is a non-changeable & unique kind of token.
With the Ordinals protocol, each satoshi gets a serial number induced in it to help identify it & track it. But, most importantly, the Ordinals protocol makes it possible to infuse each satoshi with additional data, such as images, audio, or video, to make it unique, similarly to NFTs, but on Bitcoin’s blockchain. That process is called the inscription.
More on Ordinals
We’ve already established that the Ordinals protocol is a numbering system used to track, identify, and enrich individual Bitcoin satoshis with additional data to make them unique.
💡 Fun fact — Satoshi, the smallest unit of BTC, has been named after the anonymous BTC creator, Satoshi Nakamato.
But to tell you more about the way Ordinals work, we’re going to refer to the actual theory they use. Ordinals use the Ordinal Theory, which states that the satoshis marked by the Ordinal protocol are identified using ordinal numbers.
Now, the numbering scheme for satoshis relies on the order they have been mined in, whereas their transfer scheme relies on the order of transaction inputs and outputs.
All this relying on order and ordinal numbers gives us the inspiration for the protocol’s name — the Ordinals protocol.
“Ordinal — relating to a thing’s position in a series.”
Now, each Bitcoin is made up of 100 million satoshis (smallest units), which as we already mentioned, can be infused with additional data.
The process of infusing additional data within Bitcoin satoshis is called inscription, which is actually possible thanks to the update made to the Bitcoin’s network called the Taproot.
Taproot entered Bitcoin’s network on 14th of November, 2021.
More on the BRC-20 Token Standard
The BRC-20 token standard was launched on March 9th, 2023 by an anonymous developer called Domo.
BRC refers to Bitcoin Request for Comment, and as said by Domo, the BRC-20 token standard is an experimental standard that allows users to deploy, mint, and transfer tokens on Bitcoin’s network.
What Does It All Mean?
Having all the terms and theory out of the way, we can focus on what it actually means for Bitcoin’s future.
Since the Ordinals protocol allows users to embed additional data to the smallest units of Bitcoin, making them unique, it means that we may be entering the era of Bitcoin’s NFTs.
Let’s first take a closer look at the differences between regular NFTs we’ve been using up until now, and the new Ordinals-created NFTs.
Regular NFTs vs Bitcoin NFTs
Regular NFTs are created with smart contracts on different blockchain networks, such as BNB Smart Chain or Ethereum’s blockchain.
Ordinals on the other hand, embed the additional data within satoshis directly in a block within Bitcoin’s main blockchain. So Ordinals make it possible to create NFTs directly on-chain, essentially eliminating the use of smart contracts.
Unlike regular NFTs, Ordinals function fully within blockchain, meaning that they don’t need a separate token or even a separate blockchain (sidechain) to operate.
This makes Ordinals take on the simplicity, non-changeability, security, and durability of Bitcoin itself.
Moreover, the Ordinals protocol gave Bitcoin a whole new function for creating new tokens within it. Up until now, the primary function of Bitcoin was simply transfers of BTC units, right now we can also count in minting and deploying new tokens.
And that change is getting quite some traction — in February, 2023, the number of satoshi inscriptions already passed 100 000.
The Controversy
As Eminem once said, we need a little controversy.
And the controversy when it comes to Bitcoin NFTs and the Ordinals protocols lies particularly within the idea of Bitcoin’s inherent simplicity.
Some believe that Bitcoin’s simplicity prior to the Ordinals era was the main advantage to this network. Others say that Bitcoin should evolve and gain new functionality, which of course, may lead to its losing the simplicity.
But that’s not all.
Another sour area lies within, you guessed it, money.
Since expanded satoshis take more space than regular satoshis, the fees for the transactions are more expensive.
And again, some believe that’s good, while others not so much. Those in favor state that since transferring Bitcoin is more expensive, the rewards for the miners will also be higher, which in turn may make them more motivated to secure the network, which is better for everyone involved.
Those that disapprove of Bitcoin’s higher transaction fees simply don’t want it to be more expensive in transfer. 🤷
Finally, the hype of Ordinals and BRC-20 tokens made the Bitcoin’s network a bit stuffed, to say lightly. The queue of unprocessed transactions got a little out of hand, which in turn made the fees go higher for those that wanted the transaction to be processed fast.
As a reminder, the transaction fees are there to help incentive the miners to support and maintain the network. Given the fact that people were willing to cover a higher fee for their transaction to be processed faster, those that didn’t had to be really patient and wait until the miners had the time to process their operations. Yet, the lower the fee, the weaker the incentive.
As of now, the situation got slightly better, but the network still suffers a bit from stuffiness, with around 300k transactions left to be processed.
Useful Links
We’ll end this article with a few links that may come in handy for following the Ordinals and BRC-20 evolution.
🔗 https://brc-20.io — similarly to coinmarketcap, the BRC-20.io website shows us all the BRC-20 tokens along with their market capitalization.
As of now, the total market capitalization of BRC-20 tokens is estimated to be X, while the total amount of BRC-20 tokens created sits at X.
🔗 https://ordimint.com/ — that’s the place to mint your BRC-20 token and wallet.
🔗 https://unisat.io/inscribe — that’s the place to mint and keep your BRC-20 tokens in a wallet. Unisat works similarly to the Metamask browser extension.
🔗 https://mempool.space/ — the spot to check on the number of transactions to be processed on Bitcoin’s network.
Bonus Paragraph: Satoshi Worth More Than Bitcoin?
While researching the topic of Ordinals and BRC-20 tokens, we couldn’t help but think about one theoretical scenario in particular.
Namely, the irony of one satoshi becoming more expensive than a whole Bitcoin.
And just to remind ourselves, a satoshi is just 0.00000001 of BTC.
While that scenario is pretty unlikely to actually happen, we have to mention its possibility, out of sheer excitement.
To get to the meat of how this could happen.
We already have marketplaces for BRC-20 tokens in place. Meaning that you can buy unique satoshis.
So let’s say someone sells a satoshi for $100k, because they believe that this part of Bitcoin is worth it.
In that case, this sole satoshi would be worth much more than one whole Bitcoin!
Just for the sake of highlighting the unrealisticness of the whole situation, Bitcoin currently costs $27k. And again, while it may not actually happen, it is pretty interesting to see how Bitcoin’s network evolves and the possibilities it gives us!