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Bitcoin Ordinals – Driving innovation and competition in the crypto market

by Anamta bnn
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The cryptocurrency world is an intricate space of constant innovation, where new technologies, upgrades, projects, initiatives, and trends emerge regularly. This leads to the continuous growth and evolution of the crypto ecosystem. Obviously, certain developments bear more importance than others and therefore have a bigger impact on the progress of the crypto industry. Bitcoin Ordinals are one of the innovations that have captured the interest of crypto enthusiasts recently, making waves in the NFT market and the crypto sphere as a whole for the past year or so.

The new kid on the NFT scene

Until not so long ago, non-fungible tokens (NFTs) were largely conflated with Ethereum since the blockchain played a pivotal role in the creation and popularization of NFTs, owing to its smart contract feature. To this day, Ethereum remains the dominant platform for NFTs. But then Bitcoin Ordinals came into the picture, changing the game and bringing some much-needed competition to the NFT landscape.

As the first and most valuable cryptocurrency in the market, every change or development related to Bitcoin is bound to attract attention, especially since the blockchain is not exactly known for its innovative nature. In fact, Bitcoin is considered rather simplistic and static in terms of advancement, so the launch of Bitcoin Ordinals caused quite a stir in the community. Since then, many NFT supporters have jumped on the Bitcoin Ordinals bandwagon with Magic Eden Ordinals and other similar services, and Ordinals’ use seems to be on the rise.

Unsurprisingly, beyond the hype and the curiosity, reactions regarding the emergence of Bitcoin Ordinals were somewhat mixed. While some were excited about this new use case for Bitcoin, others questioned its viability and raised concerns about the impact it could have on the network’s scalability. Before you cast your views on the matter, it’s necessary to take a deeper dive into the intriguing world of Bitcoin ordinals and

What are Bitcoin Ordinals?

The first thing we need to clarify is what Ordinals are (and what they are not). Ordinals are often referred to as Bitcoin’s own version of NFTs and this description is not far from the truth. The first NFTs were created in 2014 but they only started to take off when Ethereum stepped in, which is why most of the action in the NFT space has been taking place on the Ethereum blockchain.

Bitcoin, on the other hand, steered clear from NFTs throughout the hype. However, this all changed in January 2023, when the Ordinals project was introduced. Recognizing the potential of NFTs, a team of developers led by Casey Rodarmor decided it was time for Bitcoin to finally get on board, and that’s exactly what they did when they created Ordinals, but they did it with a twist.

Ordinals represent a protocol that allows users to attach additional unique data to satoshis, the smallest unit of a Bitcoin, through a process called inscribing, and store the data on the Bitcoin blockchain. By assigning extra identifiers to satoshis, be it via text, images, videos, or other types of content, one can create one-of-a-kind digital assets that can’t be replicated or altered, as they sit on a decentralized platform. Therefore, the network’s inherent properties are passed on to them.

The creation of Bitcoin Ordinals implies several steps. The first step is choosing the data that’s going to be added to the satoshi. Then the data has to be altered and encoded so it can be uploaded on the blockchain. After completing this stage, the inscribed data is sent to the blockchain as any other transaction and gets stored in a block. As a final step, the inscription is allotted an exclusive Ordinal number that allows users to access the data on the blockchain. Bitcoin Ordinals possess the same attributes as Bitcoins, namely immutably, reliability, scarcity, security, and decentralization.

What makes Bitcoin Ordinals different from traditional NFTs?

Since we’re talking about a different breed of NFTs, a lot of people wonder what makes Ordinals different from conventional NFTs minted on blockchains like Ethereum and Solana. The main difference is the way the data is fixed to the NFT. In Bitcoin’s case, the additional data attached to the satoshis is stored directly on the blockchain, making Ordinals decentralized and censorship-resistant. For all other NFTs, the protocol is having metadata or a link that directs to an off-chain resource where the data is kept.

Another aspect that separates the two types of NFTs is what makes them valuable. Conventional NFTs are as valuable as the items that are attached to them and how rare these items are. While that also stands true for Bitcoin Ordinals, other influences might come into play as well such as the provenance of the satoshis, the minting period, and so on.

Lastly, the blockchains’ validation protocols add another distinction. While Bitcoin uses a PoW mechanism for minting and processing transactions, Ethereum and other networks underpinning NFTs use a PoS consensus model that is much more energy-efficient.

Should one invest in Bitcoin Ordinals?

While the inner workings of Bitcoin Ordinals and the incessant comparison with Ethereum-based NFTs are something every blockchain enthusiast should look into, what most people want to know is whether Bitcoin Ordinals are worth the time and money.

That really depends on each individual’s personal goals and their views on NFTs in general. Many claim that Ordinals represent the future for Bitcoin as they bring innovation to the table and open up new possibilities for the crypto leader. The recent jump in Ordinals trading volume also encourages this narrative, showing a growing interest in this area. This gives investors and crypto enthusiasts a good reason to keep their eyes on these assets or even add them to their portfolios.

On the other hand, skeptics argue that Ordinals are still relatively new and could further burden the Bitcoin network which already struggles with congestion and scalability issues. Whether Bitcoin Ordinals represent a good investment or not is for each person to decide.

Whatever view one might hold on this topic, it can’t be denied that the rise of Bitcoin Ordinals is a step forward for the NFTs market. As they pose a challenge to Ethereum’s dominance, the competition in the NFT arena is heating up, so it’s going to be interesting to follow Ordinals’ and NFTs’ evolution and see which one is going to come on top.