Ordinals: Introducing NFTs Onto the Bitcoin Blockchain?

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Bitcoin has come a long way since its inception, and now, with the introduction of ordinals, the possibilities for innovation and value storage are endless. But what exactly are ordinals, and how do they differ from traditional bitcoins or satoshis? In this blog post, we will delve into the world of ordinals and non-fungible tokens (NFTs) stored on the Bitcoin blockchain, exploring their benefits, drawbacks, and whether they are a worthwhile addition to the network. Join us as we discover the potential of this cutting-edge technology and how it can revolutionize the way we use and think about Bitcoin.

What are Ordinals?

Ordinals are a type of NFT that is based on the mathematics of Bitcoin and linked to individual satoshis. They serve as unique identifiers for each satoshi and consist of letters from A to Z, with shorter names representing satoshis mined later. Some ordinals may have special meaning or value due to their historical significance or mathematical properties. The ordinal community is dedicated to cataloging and collecting early NFTs. Ordinals can store digital artifacts such as text, images, and HTML code, on the Bitcoin blockchain. They use existing Bitcoin infrastructure, making it possible to broadcast digital files on the blockchain. However, potential drawbacks should also be considered before implementing this technology.

The Inscription Content Model

The Inscription Content Model is a crucial technology that enables the creation and transmission of digital files on the Bitcoin blockchain. It operates through a two-step commit and reveal process, where a taproot output is formed in the first phase. This output incorporates a script that holds the inscription content, which is then disclosed on the blockchain in the second step. These inscriptions consist of two components: an ord value to distinguish it from other envelope uses, and either plain text or multimedia data with a corresponding MIME type. The envelope enables multiple data inputs to be incorporated into an existing locking script without altering its meaning.

By utilizing inscriptions, users can store digital artifacts within the Bitcoin infrastructure, making it possible to preserve plain text or multimedia data with a designated MIME type. These inscribed sats, along with their accompanying metadata, provide developers with a robust platform to develop new applications. Although there is a limit of 520 bytes for each individual data input due to taproot restrictions, multiple data inputs can be utilized for larger inscriptions when necessary.

Security and Transparency in the Age of NFTs: The Advantage of Bitcoin

Bitcoin and Ethereum are both blockchain platforms that have different use cases. Bitcoin’s main use case is as a decentralized digital currency while Ethereum’s main use case is as a platform for decentralized applications. However, when it comes to NFTs (Non-Fungible Tokens), Bitcoin is a better candidate due to its superior blockchain.

Ordinal NFTs are unique digital assets with an assigned numerical value that can be used for various purposes such as verifying ownership or tracking transactions on the blockchain. The superiority of Bitcoin’s blockchain makes it a better candidate for NFTs compared to Ethereum because it offers higher security and transparency. With its decentralized structure, users have more control over their assets, and the use of ordinals makes it easier for developers to create solutions that track complex transactions in real-time.

Overall, the growing popularity of NFTs and their potential to revolutionize the blockchain industry highlights the importance of ordinal NFTs and the role they will play in shaping the future of blockchain technology.

The Pros and Cons of Introducing NFTs onto the Bitcoin Blockchain

The Pros of Introducing NFTs onto the Bitcoin Blockchain include:

  • Increased Security: By building NFTs on top of the Bitcoin blockchain, users are able to enjoy a higher level of security as each transaction is verified and stored in a distributed ledger. This makes it more difficult for any malicious actors to tamper with or manipulate transactions, allowing users to have greater peace of mind when dealing with their digital assets.
  • Improved Liquidity: By introducing NFTs onto the Bitcoin network, users can enjoy improved liquidity since tokens are tradable on multiple exchanges that support the crypto asset class. This allows for easier and more efficient transfer of value as compared to traditional fiat-based currencies.
  • Improved Provenance Tracking: Ordinals also allow for improved provenance tracking as they can store data such as images, text files, audio files, etc., which provides greater transparency and traceability when dealing with digital assets. This is especially useful for high-value items such as art pieces where authenticity is paramount.
  • Fractional Ownership: Ordinals also allow for fractional ownership of digital assets so that multiple people can own small portions of an asset without needing to purchase it in its entirety. This helps bring down barriers to entry for those who may not be able to afford the entire cost upfront but still wish to diversify their portfolio with digital assets.

The Cons of Introducing NFTs onto the Bitcoin Blockchain include:

  • Potential Network Congestion: One of the main concerns surrounding NFTs on the Bitcoin blockchain is that they could lead to increased demand for block space due to their larger sizes compared to traditional tokens such as bitcoin itself. This could potentially cause congestion on the network leading to longer wait times and higher fees per transaction if usage levels become too high.
  • Increased Complexity: Another potential downside is that implementing ordinals onto the Bitcoin blockchain could add additional complexity due to its different structure compared with other crypto-assets such as Ethereum’s ERC-20 tokens which use smart contracts instead of native code within bitcoin’s protocol layer (distinct from consensus rules). Adding this extra layer could make it more difficult for new users or developers who are unfamiliar with these concepts and how they interact with each other within a single system.
  • Taint on Satoshis Concerns: Some stakeholders are concerned about “taint” on satoshis due to public history associated with transactions involving ordinals, which might discourage some users from using them altogether or prevent them from easily transferring funds between wallets depending on their privacy preferences/needs and risk tolerance levels/goals/concerns about being targeted by criminal elements or regulatory bodies for example (depending upon jurisdiction).
  • Cost & Hardware Requirements For Full Nodes: Lastly, there is also a concern that excessive usage of NFTs could price out smaller users by requiring full nodes with higher hardware requirements and prohibitively expensive feesfor transactions than what would otherwise be necessary if solely relying upon traditional UTXO-based coins such as bitcoin itself only without any smart contract enabled features involved whatsoever (e.g., lightning network dependent upon LN HTLC’s).

Potential Impact on Security, Fungibility, and Transaction Fees

The integration of Non-Fungible Tokens (NFTs) into the Bitcoin blockchain could have several potential impacts on security, fungibility, and transaction fees. While NFTs are designed to be more resistant to tampering and manipulation due to their improved provenance tracking capabilities, they can also potentially increase network congestion leading to longer wait times and higher fees per transaction. Additionally, integrating NFTs into the Bitcoin network could increase liquidity by making them available across different exchanges; however, this increased liquidity could lead to lower or higher transaction fees depending on how much data is stored in each token. Ultimately, it’s important for miners and other stakeholders to consider these potential impacts when assessing the current state and future impact of NFTs on the Bitcoin network.

Miners’ Compensation for Processing Ordinal Transactions

Ordinal transactions on the Bitcoin blockchain can have both positive and negative impacts on miner revenue. On the positive side, as the number of Ordinal transactions increases, it increases the amount of transaction fees received by miners, which can boost their revenue. On the negative side, the cost of running an archival node, which is responsible for storing all historical transaction data on the blockchain, can increase with a higher volume of Ordinal transactions. It should be noted that there is no real debate about how much compensation miners should receive for processing these transactions, as the free market and the Bitcoin fee market will determine what is a fair fee to include Ordinals. This allows for a self-regulating system, ensuring that the most efficient and profitable approach will be taken.


The integration of Non-Fungible Tokens (NFTs) into the Bitcoin blockchain could have a wide range of potential impacts on security, fungibility, and transaction fees. As more Ordinal transactions are added to the network, miners should be aware that this may increase their costs associated with running an archival node while also potentially increasing their revenue from higher transaction fees. Ultimately, it is important for stakeholders to consider all these possible implications when assessing how NFTs might impact the future development of the Bitcoin network. It’s clear that there is still much work to be done in order to fully understand how integrating smart contracts onto existing blockchains like Bitcoin will affect its long term success and sustainability.

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Disclaimer: The information provided on this blog is for informational purposes only and should not be taken as any form of advice.

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