What Are Bitcoin Ordinals?
A protocol that assigns a unique serial number to each individual satoshi, enabling them to be tracked and associated with arbitrary data inscribed directly onto the Bitcoin blockchain. Launched in early 2023.
Why It Matters
Ordinals introduced a new use case for Bitcoin: digital artifacts and inscriptions. By assigning unique identities to satoshis and allowing data to be inscribed directly on-chain, Ordinals enabled NFT-like functionality on Bitcoin. This sparked significant debate—supporters see it as an important extension of Bitcoin's utility, while critics argue it bloats the blockchain and increases fees. Ordinals did increase Bitcoin's transaction volume and fee pressure, pricing some users out of on-chain transactions. However, it also demonstrated Bitcoin's flexibility and attracted new users interested in on-chain digital artifacts. Whether Ordinals are valuable or problematic depends on your view of Bitcoin's purpose.
How It Works
Ordinals work by assigning each satoshi a sequential number starting from the Bitcoin Genesis Block. The first satoshi ever created is "Ordinal 0," and every satoshi that exists has a unique ordinal number. Users can "inscribe" data (images, text, code) directly onto satoshis by embedding that data in a transaction. The data becomes part of the blockchain permanently. This allows tracking specific satoshis as they move through transactions, similar to how NFTs track unique digital objects. Inscriptions use Bitcoin's Taproot witness data to store data efficiently, though they still consume block space and contribute to transaction fees.