Bitcoin suddenly becomes second-biggest NFT blockchain

Date: 2023-05-26T10:45:47+00:00


Ordinals, the latest incarnation of NFTs on Bitcoin since Counterparty’s Rare Pepes and operation code easter eggs, have catapulted into the industry. Although Ethereum still outranks all other blockchains in NFT transaction volume, Bitcoin has suddenly become the world’s second most popular blockchain for NFTs.

Over the last 30 days, Ethereum has processed $390 million worth of on-chain NFT transactions, and Bitcoin is approaching half that figure. During the same period, Bitcoin NFT transactions totaled $173 million — more than triple the $49 million on Solana.

Only a few months ago, no one would have predicted that Bitcoin would be processing nearly half as many NFT transactions as Ethereum. Since inception, Ethereum has processed a staggering 38 million NFT transactions — dwarfing Bitcoin’s 320,000. Nevertheless, the explosive popularity of Ordinals is reimagining the world’s oldest blockchain as a place for storing art, movies, collectibles, tickets, and even video games.

Of course, NFTs on Bitcoin is nothing new. Satoshi Nakamoto minted the first NFT in 2009, when they inscribed Ordinal #1 using operation code data on the genesis block: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” For over a decade, Bitcoiners have used simple text and hashes to inscribe memorabilia on-chain, including the Bitcoin whitepaper itself.

Bitcoin NFT ordinals versus inscriptions

Casey Rodamor’s Ordinals protocol assigns serial numbers to individual satoshis — the smallest subdivision of a bitcoin — using non-Bitcoin Core wallet software. The ex-Bitcoin Core developer wrote and debugged custom “ordwallet” software as a year-long passion project.

His ordering numbers are akin to serial numbers on dollar bills. Although all dollar bills are worth at least $1, speciality serial numbers imbue extra, numismatic value to rare bills.

The Bitcoin protocol itself will always value one satoshi at one satoshi, but Ordinals software allows collectors and NFT traders to pay extra to collect certain satoshis into their wallets. 

Although Ordinals typically only matter to curiosity-seekers and NFT traders, they have driven tremendous transaction fees to miners.

  • Rodamor intended the term ‘ordinal’ to refer to the sequential number of each satoshi, but NFT traders have co-opted the term.
  • The NFTs inscribed on an ordinaled satoshi is now commonly referred to as an ‘ordinal.’ 
  • Alternatively, some NFT traders use the ‘correct’ terminology and call each NFT an ‘inscription.’

Inscriptions can use just about any type of data. Thanks to Bitcoin’s Taproot upgrade, each inscription can use up to 4MB of data apiece using Bitcoin’s SegWit witness data discount (Luxor mined the first inscription over 3.9MB in size and dubbed it ‘The Big Wizard’).

Because most inscriptions are NFT-like digital art, many refer to inscriptions (or ordinals) as NFTs. Somebody inscribed a clone of the video game Doom onto one inscription.

Normal users might understand Inscriptions as similar to Star Trek fans drawing in Spock’s face on Canadian $5 bills. Suddenly, anyone could see which bills had been “Spocked” before they even scanned the serial number. The Bank of Canada called that practice “legal but inappropriate.”

BRC-20s use Ordinals

Other inscriptions aren’t NFTs at all, but rather traditional altcoins. Ordinals allow Bitcoin to use an experimental standard called BRC-20, which allows minting of non-BTC tokens on the Bitcoin blockchain. Its supporters say it’s similar to Ethereum’s popular ERC-20 standard. There are endless examples of ERC-20 tokens, including USDC, SHIB, BUSD, DAI, APE, and UNI. Today, the most popular BRC-20 token is the aptly named ORDI.

The BRC-20 standard allows token creators to attach them to Ordinals by adding a JSON file defining the token’s characteristics. Activity on OrdinalsWallet shows attempts to create BRC-20 tokens by adding the JSON file. BRC-20 supporters say the standard allows for DeFi, tokenization, and experimentation with new features directly on Bitcoin.

Read more: Bitcoin ordinals close to flipping Ethereum NFTs in daily volume

Using inscribed Ordinals requires a wallet capable of supporting them. Many wallets do not support them. Bitcoin Core does not recognize the standard by default, for instance.

Purists say Satoshi Nakamoto meant Bitcoin to be purely for peer-to-peer transactions. However, Nakamoto’s past statements indicate support for experimental features and applications like a theoretical BitDNS (later renamed Namecoin), a proposed registrar for DNS-like blockchain domain names. Nakamoto also proposed a way to handle BitDNS that sounded like merge-mining Drivechain.

Big numbers attract NFT traders to Bitcoin

Inscriptions have driven up the amount of data that needs to be processed on the Bitcoin network. Since inscribed Ordinals started becoming popular, the number of pending transactions in Bitcoin’s mempool has risen dramatically. Transaction fees reached $30 on some days this month.

Attracted to novelty and profit potential, traders have been flocking to Bitcoin Ordinals. Single inscriptions can sell for over 50 bitcoin. ORDI, an Ordinals-based BRC-20 token — non-existent one month ago — has its own $160 million market capitalization.

Inscribed Ordinals can spike in trading volume. One inscription collection, Bitcoin Frogs, briefly passed the Ethereum-based Bored Ape Yacht Club in trading volume. Three Ordinals collections briefly reached the top 10.

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