In 2023 and 2024, bitcoin ordinals were one of the most hotly debated topics in the Bitcoin community. Supporters argued they were a revolutionary way to store data, and could help boost the Bitcoin network's security. Detractors called them wasteful and believed it strayed too far from Bitcoin's original intended use as a form of currency.
So why were ordinals such a big deal in the crypto community during this time? Let's dive into what they are and how they work.
What are bitcoin ordinals?
Ordinals are like serial numbers for bitcoin.
Every paper bill (e.g., a $100 bill) that the Department of the Treasury prints carries a serial number. If you still carry cash, look at a bill in your pocket and you'll notice a serial number printed twice on the front of any US bill. In a similar way, ordinals assign serial numbers to units of bitcoin in the order they were mined. The unit that's used is a "sat" (short for "Satoshi Nakamoto," the pseudonym used by Bitcoin's creator), which is equivalent to 0.00000001 BTC.
Ordinals were not part of the original Bitcoin vision, and are not a feature of the core Bitcoin network, which views all sats equally. Instead, they're an artificial add-on created by software engineer Casey Rodarmor, and run on special software separate from the core Bitcoin network.
What are bitcoin inscriptions?
Bitcoin inscriptions are pieces of data that are attached to individual sats.
They're a little bit like image captions. For example, when you upload a picture to social media, you might add a line of text as a description. In a similar way, bitcoin inscriptions allow you to attach text, images, audio, or even a digital game to individual sats.
Inscriptions are a key aspect of the ordinals discussion, because they combine with ordinals to create bitcoin artifacts. We'll talk about this below.
| ORDINALS | INSCRIPTIONS | |
|---|---|---|
| Use case | Tracking individual Satoshis | Storing data |
| Data type | Unique identifier | Various data types (text, images, etc.) |
| Analogy | Sports jersey number (e.g. #1) | Name, sponsors, and other content added to individual jerseys |
How do bitcoin ordinals work?
A popular usage for bitcoin ordinals and inscriptions is to create digital collectibles on the Bitcoin network called "artifacts." Think of them like traditional collectibles—for example, sports cards. A sports card can be valuable based on a variety of factors, including its creation date, commonly identified via a serial number (in many cases, the earlier it was printed, the more valuable it may be), and its rarity.
Artifacts are similar, only they use ordinals to establish a serial number, and inscriptions to attach an image. This allows creators to build collectibles on the Bitcoin blockchain. In addition to collectibles, use cases for artifacts have been used to support data storage and domain names, among other functions.
Potential advantages of bitcoin ordinals and inscriptions
Advocates believe ordinals and artifacts can become the world’s most secure way to store data. Supporters argue that the Bitcoin blockchain is the most decentralized network in existence. It’s verified and updated by millions of independent computers across the globe, and once a piece of data is recorded on its blockchain, it can’t be changed. Supporters say this makes it a reliable way to record a wide spectrum of information beyond just financial transactions.
Another point to note is that not everyone sees the increased transaction fees as a negative. In particular, miners benefit from higher fees as it increases the revenue they generate for updating the blockchain. Some advocates argue that this in turn increases the network’s security, because it incentivizes more miners to keep the system running properly.
Potential disadvantages of bitcoin ordinals and inscriptions
Critics see ordinals and artifacts as distractions from the original vision for Bitcoin. Some believe Bitcoin was created for a grand, humanitarian purpose: to build a decentralized financial system open to all. In the eyes of critics, use cases like digital collectibles and data storage are comparatively unserious, and believe slapping them on top of the Bitcoin blockchain could muddle its message.
Another critique is that the logistics of ordinals, inscriptions, and artifacts may add unnecessary complications to network operations. For example, the increase in artifact transactions has, at times, congested the Bitcoin network, driving up transaction fees and slowing processing times. Critics argue that if Bitcoin is meant to serve as a functioning financial system, it doesn’t make sense to bog it down for the sake of data storage.