Bitcoin Ordinals looks to be rising up and taking over the heyday of Web3. The market has been buzzing since software engineer Casey Rodarmor launched the protocol on January 21st. However, user reactions have been quite mixed, with some being excited about the new upgrade and others rejecting the order altogether.

Despite its notoriety, there are 90,000 Ordinals at the time of writing. So why are Ordinals so hard to swallow? .The vast majority of people have no idea how to buy them, let alone create them. The barrier to entry is higher, which means there are a lot of potential deep dive opportunities. But it also means more risks. If you're ready to seize the opportunity and realize the potential of Ordinals, Bitcoin Magazine will guide you on how to find, buy, and store them securely. First, we need to figure out what is a Bitcoin ordinal?

What are Bitcoin Ordinals?

Ordinals is a protocol created by former Bitcoin developer Casey Rodarmor. If NFTs on Ethereum have their own token standards ERC-721 or ERC-1155, Bitcoin NFTs do not have these standards.

Since each NFT is minted on one Satoshi (1 BTC = 100,000,000 Satoshi), 1 Bitcoin can generate up to 100,000,000 Bitcoin NFTs. These NFTs are traceable, transferable, and work natively on Bitcoin, requiring no layer 2 solutions. What’s even more striking is that these NFTs are hosted entirely on the Bitcoin network and not on the Bitcoin network. Other servers market like most NFTs. Ordinals also took advantage of Bitcoin’s SegWit 2017 upgrade and Bitcoin’s 2021 Taproot upgrade, a technology that helps the network gain authentication faster.

SegWit helps scale Bitcoin by developing a new data field in each block to contain “certificate data” – including signatures and public keys for Bitcoin transactions. However, the potential risks of this technology limited Bitcoin’s block size at the time. At the same time, Taproot was born to solve the loopholes of SegWit, lift the block size limit, and pave the way for large block NFT data to be uploaded to the chain.

Therefore, the new Ordinals protocol allows operators of Bitcoin nodes to write data to each sat, creating so-called Ordinals. Data recorded on Bitcoin can include smart contracts, which in turn makes NFTs possible. Roughly speaking, Ordinals are NFTs that you can mint directly onto the Bitcoin blockchain. To create Bitcoin NFTs, the community uses the term "write" because each NFT is created through the process of etching a picture into the tiniest part of a Bitcoin, called a satoshi.

This isn't entirely correct, but it's the most concise explanation. Of course, there are some important differences between NFTs and Ordinals that you need to understand.

How are Ordinals different from NFTs?

NFTs on Ethereum typically come from off-chain data on IPFS — a decentralized file storage system, much like a blockchain’s hard drive — that can be changed using dynamic metadata. Some NFT projects update the metadata of each NFT to improve image quality, and may even require the owner to click the "Refresh Metadata" button on OpenSea to get a new higher quality image.

The ability of this NFT to change metadata hints at a shortcoming that Rodarmor was trying to improve upon when creating the new protocol. In Rodarmor's estimation, NFTs are "incomplete" due to the many off-chain data requirements.

Ordinals, on the other hand, are “complete” in that all data is written directly on-chain. That’s why Rodarmor calls them digital artifacts, not Bitcoin NFTs. Additionally, NFTs often come with creator royalties, while digital artifacts do not. According to Rodarmor, an Ordinals was created to reflect what NFTs should be and sometimes are, and what the nature of inscriptions has always been.

Bitcoin Ordinals’ Environmental Impact

The energy consumption of blockchain is considerable. Bitcoin is the world’s largest blockchain by market capitalization. Additionally, Bitcoin uses a Proof-of-Work (PoW) consensus mechanism to validate transactions and add them to the chain, which is a very energy-intensive process. Due to its scale and PoW consensus mechanism, Bitcoin is far ahead of other blockchains in terms of energy consumption.

In August 2022, a U.S. government report estimated that Bitcoin consumed 60-77% of electricity. How big would this number be if converted into energy? It’s difficult to say for sure, but Digiconomist’s report suggests that Bitcoin and Ethereum’s combined energy use (before the Ethereum merger in September 2022) exceeds 317 TWh of energy. Annual electricity consumption, equivalent to that of Italy and the UK by 2022.

Many companies and industries consume more energy than countries. Blockchain is not unique in this regard. Ultimately, Bitcoin’s energy consumption ranks low among relatively small mining industries like copper and zinc. Bitcoin’s total annual energy consumption is also far less than the demand for the world’s residential air conditioning units, and less than the energy demand for the world’s data centers (just look at Apple, Google, and Amazon).

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Of course, this is not to say that blockchain and NFTs have no environmental impact. But harsh criticism is often exaggerated and lacks necessary context.

The most famous Ordinals series

The Ordinals’ rise didn’t take long. Just a few weeks after its launch, the collection has taken off, selling in huge numbers, with some pieces selling for hundreds of thousands of dollars. Ordinals Punks were one of the most famous projects to come out of the early days. In homage to CryptoPunks, Ordinals Punks are a set of 100 Bitcoin NFTs minted out of the first 650 inscriptions of the Bitcoin blockchain – the highest-numbered inscription in the series occupies position 642.

Then we have to mention Taproot Wizards. Starting with Text #652, this project is an Ordinal collection of hand-drawn NFT wizards created by Web3 developer Udi Wertheimer. Why is this project getting so much attention? It is said to be the largest block in Bitcoin history, with a capacity of a staggering 4MB, 4 times higher than the usual 1MB limit. As expected, almost the entire block size is taken up by transactions containing NFTized images. It is said to be the largest Bitcoin block in history and the heaviest Bitcoin transaction in history.

Next is a collection based on Ethereum OnChainMonkey (OCM). With Inscription 20,219, the team minted 10,000 Ordinals into an Inscription, making it one of the first series of 10,000 Ordinals on Bitcoin. The OCM team noted that the size of the inscription is less than 20,000 bytes. This makes their approach a scalable model for other collectibles to create NFTs on Bitcoin without clogging the network.

However, the inscription of Ordinals was still in its infancy. As the Ordinals market matures, we're likely to see many other innovative series emerge.

How to Buy and Trade Ordinals

Step One: Choose the Right Wallet

You can’t yet save Ordinals in browser wallets like MetaMask. You must set up a Bitcoin wallet that allows enough customization to receive the usual inscriptions. Sparrow is currently a pretty good choice.

Step 2: Set up your wallet

Sparrow Wallet is a desktop application and requires some preparation to be compatible with Ordinals. After downloading Sparrow, follow the detailed guide on Github to create an Ordinals-compatible wallet. Please note, however, that you should not send BTC to or from this Ordirals wallet. This wallet is only used to receive orders. If you send BTC from this new Ordinals wallet, you may accidentally send BTC and Ordinals at the same time.

Now that you have your wallet set up, you have three ways to receive Ordinals 👍

1. Run a node and manually write an Ordinals

2. Find Ordinals owners and buy directly from them.

Use a service to burn ordinal numbers without running your own node.

We won't go into the technical details of running a Bitcoin node. Let's focus on the other two options, remember this is new and full of risks. There is no major market for Ordinals yet, so proceed with caution.

Step 3a: Find the Ordinals you want to buy

The Ordinals market is purely OTC.

  • To find casual items, join the Discord Ordinals channel.

  • Go to your channel, link your project, and see what projects are there.

  • Choose your favorite Ordinals and buy

IMPORTANT NOTE: Purchasing Ordinals OTC will require you to connect with people on Discord, make a deposit before receiving your Ordinals, trade live with others, etc. Remember to research carefully and choose a reputable seller. And be careful and only risk what you can trade.

Step 3b: Use the service to record Ordinals for you

If you want to create your own Ordinals but don't want to run a Bitcoin node, use an alternative service to burn Ordinals for you.

  • The Ordinals Satoshibles NFT team has created the Ordinals Bot which will rate Ordinals on your behalf.

  • Gamma also has an Ordinals logging service

These services will ask you to provide the BTC address to which you would like to receive serial numbers. You will use the address from the new Ordinals wallet you created in Sparrow. They will also provide you with the number of sats you owe on the transaction as well as the service fee, as well as the address to which you will send the BTC. Transaction amounts range from less than $50 BTC to several hundred dollars, depending on the size of your file. Typically, it takes a few hours or days to receive your Ordinals after depositing.

Boring, adventurous, full of potential

As you can see, if you want to get into the Ordinals market early, you'll have to string together tedious tasks to make it happen. But the opportunity may be worth it. Be careful when venturing forward and find out what you are facing.

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