Ordinals aka Bitcoin NFTs: What’s That Now?
Introduction to Ordinals
As we will celebrate in 2023 the 15th anniversary of Bitcoin’s whitepaper release (October 31st), a lot has been said already about Bitcoin and how it changed the way we think about money and financial transactions in general. However, it’s also a reality that less than 5% of the world population actually own any satoshis (note: a satoshi is the smallest indivisible piece of a bitcoin, with 1 SAT = 0.00000001 BTC). One of the latest developments in the Bitcoin ecosystem might possibly help change that: the emergence of “Ordinals” aka Bitcoin NFTs could actually end up being a catalyst for its adoption…This concept has sparked a debate in the Bitcoin community (they do love a debate), and some maximalists quickly dismissed it as “stupid”. Are they missing the point, or are they the real defenders Bitcoin did not know it needed? Before going into that, let’s look into the technicalities of how Ordinals work.
To understand Ordinals, we will first quickly remind our dear reader about the concept of non-fungibility. Fungible assets are interchangeable – for example, one 20€ bill is equivalent to any other 20€ bill. On the other hand, non-fungible assets are unique – each one has its own characteristics and cannot be replaced by any other asset. A good example of a non-fungible asset is a house – each house is unique and has its own value. It also works with a picture you’d carry with you for instance; if we bump into each other and everything from our pockets falls on the floor, a picture of my son is not interchangeable with a picture of your granny, whereas whichever of our 50c coins are.
Ordinals take the concept of non-fungibility to the blockchain by “numbering” individual satoshis and making them distinguishable from one another. By assigning a unique number to each satoshi, each ones can become a non-fungible token (NFT) that is completely unique, different from other satoshis and which cannot be replicated. By comparison, on the Ethereum blockchain, NFT are created using smart contracts – a piece of code stored on-chain, which allows for the storage of more complex data.
A Frivolous Use-Case?
This may sound like a silly idea at first, and the gimmick “NFTs are stupid” has been a thing since 2020… But this is actually pretty useful, if not revolutionary, for things like digital art or collectibles, where the technical means to manage ownership of a specific digital item are a game-changer.
Despite the immense popularity / bubble of NFTs on Ethereum, and then Solana, Polygon, Tezos (to name only a few), some in the Bitcoin community are quick to dismiss Ordinals as a pointless endeavor at best, or a dangerous one at worst. They argue that Bitcoin is meant to be a currency, not a collectible, and insist that numbering satoshis doesn’t add any real value to the ecosystem. Even further, Ordinals are accused of adding unnecessary complexity to the blockchain and overloading the network. Whether this argument is valid or not is not our focus here, but it is amusing to remember that after all, one of the main use cases for gold is… jewelry! i.e. objects that are meant to be worn and admired, and also to show off, which rings a bell with how some CryptoPunks or Bored Apes are flexed. It’s also interesting to remember that gold is not used as a currency anymore since the Bretton-Woods agreement in 1944, after millenia being one of the main medium of exchange…
One potential issue with Ordinals is the risk of accidentally *spending* your Bitcoin NFT. This would be like accidentally paying for something with a rare old coin, golden earrings or a Rolex… This risk is mitigated by using wallet software that is specifically designed to handle Ordinals, but technically a numbered satoshi keeps working like any other satoshi! And it can typically be used to pay for transaction fees. Let’s be honest, the idea is kind of funny and would make a nice chapter 2 to the pizza anecdote, when in 2010 someone (willingly) spent 10,000 BTC to buy 2 pizzas in the first real-life transaction involving Bitcoin.
In conclusion, while Ordinals may seem like a strange and trivial concept, they definitely represent an interesting development of the Bitcoin ecosystem, and it won’t take long until more than one million are inscribed (you can follow the number on this website for example). While some may dismiss them as stupid, they offer a unique and interesting use case that might trigger a new adoption phase. And who knows, maybe someday owning a specific numbered satoshi will be just as valuable as owning a Number One Trainer Pokemon card – but hopefully without the risk of accidentally spending it on a baguette!