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Macro Research

Bitcoin Ordinals: Satoshi’s Unexplored NFT Frontier

Latest updates: Apr 12 2023

Key Takeaways

  • Bitcoin Ordinals, a new form of NFTs, have emerged on the Bitcoin network, thanks to technological upgrades like SegWit and Taproot, which allowed for the creation of ordinals by inscribing data on satoshis within a transaction.
  • Bitcoin Ordinals are fully on-chain (FOC), unlike most of the NFTs that are typically stored on centralized servers, making them more secure and resistant to hacking or censorship.
  • The popularity of Bitcoin Ordinals has led to a surge in inscription numbers and increased gas fees on the Bitcoin network. As a result, block sizes have grown, making the network more resource-intensive.
  • Controversies surrounding Bitcoin Ordinals include concerns about fake or illegal content being stored on the Bitcoin blockchain and differing perspectives on whether ordinals align with the original vision of Bitcoin as a P2P electronic payment system or as a settlement network.
  • Despite challenges, the Bitcoin Ordinals ecosystem is flourishing, with new products and marketplaces emerging, plus notable NFT collections and major players from other blockchains migrating their NFTs to Bitcoin. The total addressable market for Inscriptions is projected to reach $4.5 billion by 2025.


“Bitcoin is dead.”

“Bitcoin can only facilitate payments.”

“Bitcoin is boring. It doesn’t have any use cases besides a store of value compared to other blockchains.”

Those were some of the reactions toward Bitcoin pre-2023. Bitcoin has been generally perceived as an “inflation hedge” and a “diversifying asset” since its launch. However, these two narratives were challenged by the harsh reality of the market recently, when Bitcoin price action became heavily correlated to the US stock market performance and witnessed the same impacts caused by Fed’s decision to raise the interest rate to the highest level since 2008.


To move beyond the HODL mentality and overcome stagnation, Bitcoin needs a fresh narrative. A change is necessary for Bitcoin to attract 10x more people.

And things began to shift on February 1st, 2023. A "Cinderella's night" moment was witnessed as block [774628], with an unusually large size of 4MB (compared to the regular block size of 1MB), was successfully added to the BTC blockchain. It was Luxor Mining, a prominent mining pool, who inscribed a wizard image to the block, further cementing the moment as a landmark event. Since then, all eyes have been on this hype, starting a new era for Bitcoin NFTs.

What Are Bitcoin Ordinals?

As you already know, the Bitcoin blockchain is built without smart contract functionality, meaning creating NFTs was previously impossible. However, the SegWit upgrade in 2017 and Taproot in 2021, particularly the Tapscript proposal (BIP342), have paved the way for Casey Rodarmor to leverage these advancements to attach NFT credentials to transactions, thus creating Bitcoin NFTs.

The Ordinal founder Rodarmor, a former Bitcoin developer himself, developed the ORD to run on top of the Bitcoin Core full node. This open-source software allows everyone to inscribe computer files (pictures, gifs, videos) into a satoshi (sats) within a Bitcoin transaction, effectively creating an NFT - or “ordinal” (Galaxy Research). The process of inscribing sats is called Inscription.

Reminder: 1 Bitcoin = 100,000,000 (or 10^8) Satoshi (sats) By that logic, there will be a total of ~2.1 quadrillions (10^15) sats, and each has a unique identifier (integer, decimal, degree, percentile and name)


Source: Galaxy Research

Simply put, ordinals represent individual sats. Satoshis are assigned numbers based on the order in which they are mined, and when transferred between transactions, they maintain the same numerical sequence. The term "ordinal" is derived from "Ordinal Theory," which Rodarmor coined to describe the concept of labelling and tracking individual satoshis throughout Bitcoin’s supply (Galaxy Research).

As an analogy by @huuep, Bitcoin Ordinals are like stamps and stamp collecting. Everyone can print whatever stamps they want, own and trade them. Some stamps will be more valuable than others depending on their traits and rarity. Sats, based on Ordinal Theory, are classified as follows: Common, Uncommon, Rare, Epic, Legendary and Mythic (Ordinals docs).

To your surprise, long before gaining popularity on Ethereum in 2021, the NFT culture already began within the Bitcoin ecosystem back in 2012 with a project called Colored Coin. It’s worth looking back at the history and acknowledging the milestones that lead to the event of inscriptions/ordinals.


Differences between Bitcoin NFTs/Ordinals and Regular NFTs

The key distinction between Bitcoin NFTs and regular NFTs is their fully on-chain (FOC) nature. Bitcoin NFTs, once inscribed on sats, remain immutable on the blockchain forever. In contrast, most of the NFTs typically exist in a hybrid form. While the NFT token’s metadata is stored on the blockchain, the actual content (images, videos or audio files) is hosted on an off-chain server or decentralized storage platform like IPFS, leaving them vulnerable to hacking and data alteration.

Other differences are illustrated below:


The Impact of Ordinals on the Market

Although Ordinal inscriptions began in December 2022, the trend only took off with the inscription of the Taproot Wizard image on a Bitcoin transaction. As of writing, almost 600,000 inscriptions have been created, with the most prevalent types of which being images and text. In line with PFP trends on other blockchains, images remain the most popular NFT category on Bitcoin as well.

Source: Dune @dgtl_assets (Data as of March 25th, 2023)

In the second week of March 2023, Sats Names, a standard for representing names on the Bitcoin network using ordinals, comprised 59% of all inscriptions (Messari). This text-based naming system aims to emulate the hype of Ethereum Name Service (ENS) on the Ethereum blockchain. To date, approximately 70,000 unique Sats Names have been minted.

ENS is a decentralized domain system that allows users to assign names to addresses and content, simplifying interactions within the Ethereum ecosystem. ENS is a wildly-used utility for NFTs and experienced a surge in trading volume during its peak in May 2022.

However, inscribing data comes with a cost. Users need to pay fees to miners to include their data in a block. As inscription numbers have surged, gas fees paid on the Bitcoin network have also skyrocketed over the past three months, amounting to nearly $4Mn in total.


March 24th witnessed the highest gas fee paid in a single day at $375K (Credit: @0xsurferboy)

While Ordinals generate traction for the Bitcoin network, there is a trade-off: an increase in block size. Due to technological upgrades, blocks can now be up to 4MB, deviating from Satoshi's original design of 1MB per block. The average block size has risen to 2MB, marking a 50% increase compared to pre-Inscription times.


Source: Blockchain.com

An increase in block size makes the Bitcoin network more resource-intensive, requiring miners to continually update their hardware to meet the evolving technical demands. On the other hand, a busier network implies that miners will earn more transaction fees. With each halving event reducing Bitcoin mining rewards by half, Bitcoin NFTs present an additional opportunity for miners to gain incentives, further motivating them to engage in the mining process.

Controversies and Concerns

Bitcoin's permissionless nature allows anyone to inscribe sats and store any content on-chain. And that’s concerning. This means there is a significant challenge in tackling fake or illegal content and trademarked images being uploaded on the Bitcoin blockchain. This ongoing issue will require the community's attention and solutions in the future.


Source: Reddit (r/CryptoCurrency)

Following the advent of Inscriptions, two distinct perspectives have emerged among Bitcoin maximalists and Ordinal supporters. Some OG Bitcoiners express reservations about Ordinal, arguing that the core purpose of Bitcoin is to facilitate P2P electronic payments. They view the addition of JPEGs as an attack on Bitcoin, potentially posing a threat to the network. Conversely, the other side believes that Bitcoin was always intended to function as a settlement network (a system that finalizes and secures value transfers between parties), eventually incorporating all forms of economic activities. From this perspective, inscriptions align with the vision of Bitcoin as a settlement platform (Galaxy Research). Regardless of the debates, the introduction of Ordinals has successfully revitalized the Bitcoin ecosystem and garnered significant attention for the network.

Some Developments Around the Bitcoin Ecosystem and Its Opportunity

You might be surprised by the thriving ecosystem of the Ordinals ecosystem below. Despite encountering obstacles, this nascent technology presents immense potential for tech-savvy individuals to create novel products in the Bitcoin ecosystem, restoring its robustness. Many emerging products replicate those in Ethereum’s ecosystem, including NFT collections, marketplaces and wallets.


Previously, trading ordinals remained problematic and posed a high barrier to entry due to a lack of marketplace infrastructure. Early ordinal transactions primarily occurred over-the-counter (OTC) and P2P taking place across Discord and Telegram communities. Nevertheless, this inconvenience has been addressed, and there are now several platforms for users to trade Bitcoin NFTs such as: Ordinals Market, Ordswap, Ordinals Wallet and Magic Eden (please exercise caution and trade at your own risk).

The NFT ecosystem on Bitcoin is flourishing at the moment. Numerous prominent NFT collections and major players from other blockchains capitalize on this momentum by migrating their NFTs to Bitcoin. For example, Yuga Labs issued a collection of 300 NFTs called TwelveFold on the Bitcoin network, featuring generative art combining time, math, logic, and blockchain in unique 3D artworks. This collection raised 735.7 BTC in an auction on March 6, 2023. Additionally, DeGods, a popular collection initially released on Solana, expanded to the Bitcoin network on March 14, 2023, transferring 535 previously burned NFTs in a single block. These NFTs quickly sold out, priced at 0.333 BTC each (Coin68).


With the gradual migration of NFTs from other chains, the total addressable market (TAM) for Inscriptions is increasingly attractive and expansive. In the base case scenario, by 2025, the Inscriptions TAM could reach $4.5 billion, with $1.6 billion in trading volume. This valuation is derived from a combination of bottom-up assumptions regarding the variety and quantity of collections deployed (Utility, Metaverse Items, PFP), as well as a top-down analysis of global art market trading volume (for details, see: Galaxy Research). In short, Bitcoin can be great again!

Closing Thoughts

The emergence of Bitcoin Ordinal is akin to a refreshing shower amid a drought for Bitcoin. Previously perceived as a neglected landscape, the Bitcoin network is now experiencing a sign of green with the introduction of Inscriptions and Ordinals, as evidenced by the increased trading volume. However, there are still ongoing debates around the true purpose of Bitcoin and its future security. This controversy could potentially result in a hard fork to eliminate Ordinals entirely if a consensus is not reached.

Regardless of the viewpoint, Ordinals represents a fresh narrative that many have eagerly anticipated. This development serves as a catalyst for attracting 10x more people, driving new use cases, and fostering increased interest and adoption.


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  • Key Takeaways
  • Intro
  • What Are Bitcoin Ordinals?
  • Differences between Bitcoin NFTs/Ordinals and Regular NFTs
  • The Impact of Ordinals on the Market
  • Controversies and Concerns
  • Some Developments Around the Bitcoin Ecosystem and Its Opportunity
  • Closing Thoughts