Bitcoin Ordinals A Beginner Guide to Digital Artifacts on Bitcoin

Key Takeaways

• Bitcoin Ordinals assign unique numbers to every satoshi, enabling individual sats to carry inscribed data like images, text, and files directly on the Bitcoin blockchain.
• Inscriptions are stored fully on chain in the witness data section, making them permanent, immutable, and independent of any external storage systems.
• The Ordinals protocol was made possible by the SegWit and Taproot upgrades, which expanded Bitcoin’s transaction data capacity without requiring any protocol changes.
• Satoshi rarity categories (Common, Uncommon, Rare, Epic, Legendary, Mythic) create a collectibles layer that adds value based on when a satoshi was mined.
• Bitcoin Ordinals differ from Ethereum NFTs by storing data on chain, requiring no smart contracts, and benefiting from Bitcoin’s unmatched security and decentralization.
• BRC 20 tokens, built on top of Ordinals, proved that Bitcoin can support fungible token ecosystems, with tokens like ORDI reaching billion dollar market caps.
• Inscription costs vary based on file size and network congestion, ranging from a few dollars for small text to hundreds of dollars for larger images during busy periods.
• Critics argue that Ordinals cause blockchain bloat and higher transaction fees, while supporters highlight the new utility, miner revenue, and creative possibilities they bring.
• Always use Ordinals compatible wallets to prevent accidentally spending inscribed satoshis as regular transaction fees.
• The future of Bitcoin Ordinals includes the Runes protocol, Layer 2 integrations, institutional adoption, and rapidly improving developer tooling and marketplace infrastructure.

For years, Bitcoin was seen purely as a digital currency, a store of value, and a decentralized payment network. While other blockchains like Ethereum and Solana built thriving ecosystems of NFTs, smart contracts, and decentralized applications, Bitcoin stayed focused on its core mission of being “digital gold.” That narrative changed dramatically in early 2023 with the arrival of Bitcoin Ordinals.

Bitcoin Ordinals introduced a groundbreaking way to inscribe data, including images, text, audio, and even video, directly onto individual satoshis (the smallest unit of Bitcoin). For the first time, users could create NFTs that live entirely on the Bitcoin blockchain without relying on external storage, sidechains, or separate token standards.

Think of it this way: if Bitcoin is a massive, secure vault, Ordinals gave people the ability to engrave artwork, messages, and collectibles directly onto the gold bars stored inside. The engravings become permanently part of the gold itself, not printed on a separate piece of paper stored elsewhere.

In this in depth guide by Nadcab Labs, we will explore every facet of Bitcoin Ordinals, from how they work at a technical level to how you can create your own inscription, how they compare to traditional NFTs, and what they mean for the future of the world’s most valuable blockchain.

Bitcoin Ordinals are a system that assigns a unique serial number to every individual satoshi (sat) ever mined on the Bitcoin network. Since one Bitcoin equals 100 million satoshis, this numbering system, called the Ordinal Theory, creates a way to identify, track, and assign meaning to each tiny unit of Bitcoin.

Once a satoshi has a unique number, data can be attached to it through a process called inscription. This data could be an image, a piece of text, a video clip, a JSON file, or even a small application. The inscribed data becomes permanently embedded in the Bitcoin blockchain, stored within the transaction’s witness data section.

Imagine a stadium with 2.1 quadrillion seats (representing all the satoshis that will ever exist). Every single seat has a unique number printed on it. Now imagine that anyone can permanently engrave a tiny piece of art or a message onto their specific seat. That engraving becomes part of the stadium forever. Nobody can remove it, alter it, or move it to a different seat. That is essentially what Bitcoin Ordinals enable.

The magic behind Bitcoin Ordinals lies in the combination of two key Bitcoin upgrades: SegWit (Segregated Witness, activated in 2017) and Taproot (activated in November 2021). Together, these upgrades expanded the amount of data that could be included in a Bitcoin transaction, paving the way for inscriptions.

SegWit introduced a separate section in each transaction called the “witness data” area. Taproot further relaxed the size limitations on this witness data and introduced more flexible scripting capabilities. Casey Rodarmor’s Ordinals protocol cleverly leverages this expanded space to embed arbitrary data directly into Bitcoin transactions.

Here is a simple analogy: imagine sending a letter through the postal system. The letter itself is your Bitcoin transaction (the financial part). SegWit added a special compartment in the envelope where you could include extra notes. Taproot made that compartment much larger. Ordinals figured out how to use that compartment to include full photographs, poems, or even mini albums, all permanently delivered and stored by the postal system (the Bitcoin blockchain).

The beauty of this system is that it requires no changes to Bitcoin’s core protocol. Ordinals work entirely within the existing rules of the Bitcoin network, which is one of the reasons they gained adoption so quickly. No hard fork, no sidechain, no separate token, just pure Bitcoin innovation.

To truly understand Bitcoin Ordinals, you must first understand satoshis. A satoshi (often abbreviated as “sat”) is the smallest unit of Bitcoin. One Bitcoin equals 100,000,000 satoshis. Just as a dollar can be broken into 100 cents, a Bitcoin can be divided into 100 million sats.

The Ordinal Theory created by Casey Rodarmor assigns each satoshi a unique number based on the order in which it was created (mined). The very first satoshi ever mined in the Genesis Block on January 3, 2009 has the ordinal number 0. The second has ordinal number 1, and so on. This numbering continues across every block ever produced.

This creates a fascinating concept of satoshi rarity. Based on when a satoshi was mined, it can fall into different rarity categories:

Think of it like collecting coins. A regular penny is “common,” but a penny from a specific historical year might be “uncommon” or even “rare.” A penny from the very first batch ever minted would be “legendary.” Ordinal Theory applies this same collector mindset to satoshis.

Inscriptions are the actual content attached to a satoshi through the Bitcoin Ordinals protocol. They are the “NFT” part of the equation. While Ordinal Theory handles the numbering and tracking of satoshis, inscriptions handle the creative payload, the images, text, audio, video, or code that gets permanently embedded onto the blockchain.

The inscription data is stored within the witness data of a Taproot transaction. This is significant because the witness data section benefits from a fee discount (SegWit’s weight unit system), making inscriptions cheaper than they would be if stored in the regular transaction data section.

What makes inscriptions truly special compared to most NFTs on other blockchains is that the data is stored fully on chain. On Ethereum, most NFTs only store a link (URL) pointing to an image hosted on IPFS or a centralized server. If that server goes down, the NFT’s image disappears. With Bitcoin Ordinals, the actual image data is written directly into the Bitcoin blockchain. As long as Bitcoin exists, the inscription exists.

One of the most common questions in the crypto space is: how are Bitcoin Ordinals different from NFTs on Ethereum, Solana, or other chains? The differences are more significant than most people realize.

The biggest advantage Bitcoin Ordinals hold over traditional NFTs is true decentralization and permanence. Since Bitcoin is the most secure and decentralized blockchain in existence, Ordinal inscriptions benefit from the highest level of immutability and censorship resistance available in the crypto world.

Creating your own Bitcoin Ordinal inscription might sound complex, but the process has become increasingly user friendly thanks to dedicated tools and platforms. Here is a step by step walkthrough of how to inscribe your first piece of data onto the Bitcoin blockchain.

Step 1: Set Up an Ordinals Compatible Wallet. You need a wallet that supports Taproot addresses and can handle ordinal inscriptions. Popular choices include the Ord Wallet (command line), Xverse, Unisat Wallet, and Hiro Wallet. These wallets can recognize and manage inscribed satoshis separately from regular Bitcoin.

Step 2: Fund Your Wallet with Bitcoin. You need Bitcoin to cover the inscription fee and the network transaction fee. The total cost depends on the size of your file and current network congestion. For a small image, you might need anywhere from $5 to $50 or more.

Step 3: Choose Your Content. Decide what you want to inscribe. This could be a JPEG image, PNG artwork, text file, SVG, HTML page, audio clip, or even a small video. Keep in mind that larger files cost more to inscribe because they require more block space.

Step 4: Use an Inscription Service. Platforms like Gamma.io, OrdinalsBot, and Unisat make the inscription process simple. Upload your file, pay the fee, and the platform handles the technical details of creating the Taproot transaction with your embedded data.

Step 5: Wait for Confirmation. After submitting, your inscription transaction enters the Bitcoin mempool and waits to be included in a block. Depending on the fee you paid and network activity, this could take anywhere from 10 minutes to several hours.

Step 6: View Your Inscription. Once confirmed, your inscription is permanently on the Bitcoin blockchain. You can view it using block explorers like ordinals.com or through your Ordinals wallet.

The Bitcoin Ordinals ecosystem has grown rapidly, and several specialized tools have emerged to make creating, managing, and trading inscriptions easier. Here are the most important ones to know.

Since the launch of Bitcoin Ordinals, several notable collections have emerged that showcase the creative and cultural potential of inscriptions on Bitcoin. These collections have attracted significant attention from collectors, investors, and the broader crypto community.

The innovation of Bitcoin Ordinals did not stop at NFTs. In March 2023, an anonymous developer known as “domo” introduced the BRC 20 token standard, which leverages ordinal inscriptions to create fungible tokens directly on Bitcoin. This was a watershed moment that proved Bitcoin could support an entire token economy beyond just BTC.

BRC 20 works by inscribing JSON data onto satoshis that define a token’s name, total supply, and transfer rules. Unlike Ethereum’s ERC 20 tokens that rely on smart contracts, BRC 20 tokens use ordinal inscriptions as their underlying mechanism. Every mint, transfer, and balance update is recorded as an inscription on the Bitcoin blockchain.

Think of it like writing IOUs on gold coins. The gold coin (satoshi) already has value, and by inscribing specific text onto it, you create a new layer of information that represents a different kind of token. A special indexer reads all the inscriptions and calculates who holds how many tokens, similar to how a librarian tracks book checkouts using written records.

The introduction of Bitcoin Ordinals has had a profound and sometimes controversial impact on the Bitcoin network. The surge in inscription activity has affected block space demand, transaction fees, miner revenue, and the broader debate about what Bitcoin should be used for.

Block Space Competition: Inscriptions compete for the same limited block space as regular Bitcoin transactions. During peak inscription periods, this has caused significant congestion, pushing regular transaction fees much higher than normal. In May 2023, Bitcoin transaction fees briefly exceeded those of Ethereum due to the BRC 20 frenzy.

Miner Revenue Boost: The increased demand for block space has been a major windfall for Bitcoin miners. Transaction fees from ordinal inscriptions have at times accounted for over 40% of total miner revenue, providing a much needed supplement to the ever decreasing block reward due to halving events.

Blockchain Size Growth: Since inscriptions store data directly on chain, they have contributed to a noticeable increase in the size of the Bitcoin blockchain. This raises questions about long term storage requirements for node operators.

Community Debate: The Bitcoin community is divided. Supporters argue that Ordinals bring new utility, users, and revenue to Bitcoin. Critics believe inscriptions are “spam” that clogs the network and distract from Bitcoin’s primary purpose as a monetary system.

Understanding the cost structure of Bitcoin Ordinals is essential before creating or purchasing inscriptions. The fees can vary dramatically based on network congestion, file size, and the method you use.

A practical example: if you want to inscribe a small 10KB pixel art image during a low congestion period, you might spend approximately $10 to $20 total. However, inscribing a high resolution 100KB image during a busy period could cost $200 or more. It is like shipping a package — a small envelope costs much less than a large box, and express shipping during the holiday season is always more expensive.

Bitcoin Ordinals bring a unique set of advantages that differentiate them from NFTs on any other blockchain. These benefits stem directly from the unmatched security and decentralization of the Bitcoin network.

Despite their innovation, Bitcoin Ordinals have faced significant pushback from parts of the Bitcoin community. Understanding these criticisms provides a balanced view of the technology.

While Bitcoin itself is exceptionally secure, interacting with the Ordinals ecosystem introduces its own set of security considerations. Protecting your inscriptions and Bitcoin requires awareness and good practices.

Navigating the Bitcoin Ordinals space comes with a learning curve. Here are the most frequent mistakes newcomers make and how to avoid them.

The Bitcoin Ordinals ecosystem is still in its early stages, yet the trajectory of innovation suggests it will continue to play a significant role in Bitcoin’s evolution. Several trends point to an exciting future.

Runes Protocol: Also created by Casey Rodarmor, the Runes protocol launched in April 2024 as an improved alternative to BRC 20 for creating fungible tokens on Bitcoin. Runes uses a more efficient UTXO based model that reduces blockchain bloat, addressing one of the biggest criticisms of early ordinal token implementations.

Layer 2 Integration: Projects are building Layer 2 solutions specifically for Ordinals trading and interactions. These solutions aim to reduce on chain congestion while maintaining the security guarantees of the Bitcoin base layer. Technologies like the Lightning Network may eventually support ordinal transfers.

Institutional Interest: As the Ordinals market matures, institutional players and established art platforms are beginning to take notice. Major auction houses and galleries have expressed interest in Bitcoin native digital art, potentially bringing mainstream credibility to the space.

Improved Tooling: The developer ecosystem around Ordinals is growing rapidly. Better wallets, marketplaces, analytics tools, and inscription services are being built every month, making the technology more accessible to non technical users.

According to data tracked by Dune Analytics, cumulative inscription fees have generated hundreds of millions of dollars for Bitcoin miners, proving that there is genuine and sustained demand for this technology. As noted by CoinDesk’s coverage of the Ordinals protocol, Bitcoin Ordinals have fundamentally expanded the conversation about what Bitcoin can be used for beyond simple financial transactions.

Want to Build on Bitcoin Ordinals or Launch Your Own Collection?

From custom inscription tooling and marketplace development to BRC 20 token launches and Runes protocol integration, Nadcab Labs provides end to end blockchain development services to help you harness the full power of Bitcoin Ordinals.

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Bitcoin Ordinals represent one of the most significant innovations in Bitcoin’s history since the introduction of SegWit and Taproot. By enabling users to inscribe images, text, and data directly onto individual satoshis, Ordinals have opened up entirely new possibilities for what the world’s most secure blockchain can do.

Whether you see Ordinals as a brilliant expansion of Bitcoin’s utility or a controversial use of precious block space, there is no denying their impact. They have generated billions of dollars in trading volume, provided crucial fee revenue to miners, inspired new token standards like BRC 20 and Runes, and attracted an entirely new wave of creators and collectors to the Bitcoin ecosystem.

At Nadcab Labs, we view Bitcoin Ordinals as a testament to the power of open, permissionless innovation. Nobody needed permission to build Ordinals. No committee approved it. It was created by a developer who saw an opportunity within Bitcoin’s existing rules and built something remarkable. That spirit of innovation is what makes blockchain technology truly transformative.

As the ecosystem continues to evolve with better tooling, improved standards, and growing mainstream adoption, understanding Bitcoin Ordinals today positions you at the forefront of where Bitcoin is heading tomorrow. Stay curious, stay cautious, and explore the possibilities responsibly.