In brief
Each bitcoin consists of 100,000,000 satoshis (sats). The Ordinals protocol allows each individual satoshi to be identified and traded with additional data attached (through a process called carving).
The Ordinals Protocol has created another use case beyond simple value transfers for Bitcoin, making Bitcoin NFTs a reality.
Introduce
Until recently, NFTs were mainly minted and used on blockchains such as Ethereum, Solana, and BNB Smart Chain. However, the team behind Ordinals believes that non-fungible tokens also have a place on the Bitcoin blockchain. This therefore led to the emergence of the Ordinals project.
History has proven that changing a piece of Bitcoin code is extremely difficult. This problem is mainly due to the fact that the decentralized network consists of nodes and developers do not want to risk the security of the network. Therefore, there is not much incentive to develop Bitcoin NFTs. However, the growth of the cryptocurrency ecosystem has opened the door for more creative minds, who see the creation of Bitcoin NFTs as part of the future of Web3.
Since February 2023, engravings using Ordinals have exceeded 100,000 with countless users pouring images, video games and other content online. Let's see how this mechanism works.
Bitcoin ordinals là gì?
The Ordinals Protocol is a satoshi numbering system that gives each satoshi a serial number and tracks them across transactions. Simply put, orders allow users to create individual satoshis by attaching additional data to them. This process is called inscription.
A satoshi – named after Bitcoin's pseudonymous creator Satoshi Nakamoto – is the smallest denomination of bitcoin (BTC). A single BTC can be broken down into 100,000,000 satoshis, meaning each satoshi is worth 0.00000001 BTC.
Satoshis are numbered based on the order in which they are mined and transferred. The numbering scheme is based on the order in which satoshis are mined, while the transfer scheme is based on the order of input and output of transactions. Therefore, it has the name "ordinal".
While traditional NFTs are similar to Ordinals in some ways, there are a few key differences. NFTs are typically made using smart contracts on blockchains like Ethereum, Solana, and BNB Smart Chain, and sometimes, the assets they represent are stored elsewhere. In contrast, Ordinals are recorded directly into individual satoshis, which are then included in blocks on the Bitcoin blockchain. Ordinals reside entirely on the blockchain and do not require a sidechain or separate token. In this sense, ordinal engravings inherit the simplicity, immutability, security, and durability of Bitcoin itself.
Theory of Order and Etching
In the realm of Bitcoin, Ordinal Theory is a proposed method for identifying individual satoshis through their serial number and tracking them in the Bitcoin supply, from the first minting all the way to the end. their transaction lifecycle. This process is called "etching". Therefore, engraving creates digital assets similar to NFTs, which are recorded on a satoshi in the Bitcoin network. This process is possible thanks to the Taproot upgrade, released on November 14, 2021. Therefore, order engraving does not require a separate sidechain or token.
Since Order Theory allows tracking and transferring individual satoshis, it also opens up the possibility of collecting them. Based on the total supply of Bitcoin, the following ranks have been prescribed to represent the rarity of different satoshis:
Common: any sat other than the first sat in its block (total supply is 2.1 quadrillion).
Uncommon: first sat of each block (6,929,999 total supply).
Rare: first sat of each difficulty adjustment stage (total supply 3437).
Epic: first sat after each halving (total supply 32).
Legendary: first sat of each cycle* (5 supplies total).
Mythic: first sat of the genesis block (1 total supply).
*The cycle represents the time period between intersections, which occurs when the halving and difficulty adjustment coincide. In theory, this happens every 6 halvings, but the first combination has not yet happened (it is expected to happen in 2032).
Advantages and disadvantages of Ordinals
The Ordinals protocol has created another use case for the Bitcoin network beyond simple value transfers. However, this protocol has been met with controversy because it causes a fundamental problem in the Bitcoin community. On one side are those who believe that Bitcoin's relative simplicity in its limitations to the storage and transfer of value should be preserved. On the other side are those who believe that Bitcoin should evolve to include new features and use cases.
Engraved satoshis now compete for block space with regular BTC transactions, which increases network fees. This has caused some controversy in the Bitcoin community, but some Ordinals advocates argue that this could be positive because fees are an important incentive for miners to secure the blockchain. In the future, as block rewards decrease over time, network fees will become the main driver for committing hashing power to Bitcoin. The cryptocurrency community seems divided on the subject, but the project has certainly brought innovation to the Bitcoin space.
summary
Ordinals is changing the world of blockchain art by providing a completely new way to store information on Bitcoin transactions. They are adding more utility and have increased the number of non-zero Bitcoin addresses to an all-time high. We are witnessing a unique moment in Bitcoin's history where innovation is generating network activity beyond the typical use cases of investing and remittances. Does this mean the Ordinals Protocol will continue to grow? Nothing can guarantee this. Time will give us the answer.
Read more:
What are NFTs?
What Is Taproot And Its Benefits For Bitcoin
Bitcoin Halving Countdown
Disclaimer and Risk Warning: This content is presented to you on an "as is" basis for general information and educational purposes only, without representation or warranty of any kind . It should not be construed as financial, legal or other professional advice, nor is it intended as a recommendation to purchase any specific product or service. You should seek your own advice from appropriate professional advisers. In cases where articles are contributed by third-party contributors, please note that the views expressed belong to the third-party contributor and do not necessarily reflect the views of Binance Academy. Please read our full disclaimer here for more details. Digital asset prices may fluctuate. The value of your investment may go down as well as up and you may not get back the amount you invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.
