Understanding Bitcoin Ordinal NFTs: A Comprehensive Guide

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Over 200K Bitcoin Ordinal NFTs have been minted by a growing community of users, developers, and enthusiasts who are excited about the potential of native Bitcoin NFTs. But what exactly are ordinal NFTs, how do they work, and why are they different? This article will explore the potential of ordinal inscriptions, their impact on the Bitcoin community, and how to navigate the landscape securely.

The History of Ordinal NFTs

Launched on Bitcoin mainnet by developer Casey Rodarmor on January 20, 2023, ordinal NFTs are simply the latest way to create NFTs on Bitcoin. While non-fungible tokens (NFTs) on Bitcoin aren’t a new concept, with layer-2 networks on top of Bitcoin such as Counterparty and Stacks already enabling Bitcoin-based NFTs, ordinal NFTs feature a fundamentally different architecture to other Bitcoin NFTs.

While ordinal NFTs were truly unlocked through the conceptualization of ordinal theory, ordinal NFTs as they exist today were made possible by the Segregated Witness (SegWit) and Taproot updates to the Bitcoin Protocol, which took place in 2017 and 2021, respectively.

It’s important to note that these updates were not made for the specific purpose of enabling these new types of NFTs. But since each update enlarged the amount of arbitrary data able to be stored on-chain within a block—meaning there was now space for images, videos, and even games—Ordinal NFTs were unintentionally made possible as a result of their deployment.

What Are Ordinal Inscriptions?

Ordinals are means of creating Bitcoin NFTs by attaching data such as images, videos, and more to an individual satoshi on the base Bitcoin blockchain. Unlike their predecessors, ordinal NFTs don’t exist on a separate layer from Bitcoin. Rather, they use an arbitrary but logical ordering system called ordinal theory to give each individual Bitcoin satoshi a unique number. In this regard, ordinal NFTs are completely Bitcoin-native. They work without changes to the Bitcoin protocol, don’t require any extra layers, and are backward compatible with the network.

How Do Bitcoin NFTs Work?

To understand how ordinal NFTs work, it’s important to make a distinction between the terms “ordinals” and “inscriptions,” both of which are used to refer to this new type of Bitcoin NFT.

Ordinals are a system for ordering sats in a way that creates the “non-fungible” property necessary to create NFTs.

Inscriptions are the contents of the ordinal NFT itself—the image, text, video, or any other arbitrary data that a user would consider synonymous with an NFT.

These NFTs can be best understood by drawing a parallel to non-Bitcoin NFTs, which are unique, 1-of-1 tokens that generally have two components: tokenID and metadata

TokenID

Fungible tokens are interchangeable. For example, there’s no way to tell two different Ethereum coins apart, just like it’s impossible to distinguish one dollar from another. TokenIDs put the “non-fungible” in NFT—they provide each NFT with a unique barcode that enables users to differentiate tokens from one another.* A tokenID is what makes an NFT functionally unique.

*NFTs can have the same tokenID if they’re created by different smart contracts. In this case, the smart contract is how you differentiate one NFT from another.

Metadata

In non-Bitcoin blockchains, metadata is the optional attachment of arbitrary data to a non-fungible token. It’s used to represent and showcase the vast range of art, in-game assets, profile pictures, financial assets, and more that have become synonymous with the word “NFT.”

How Are Bitcoin Ordinals Different from NFTs?

The key difference between Bitcoin ordinals and more standard NFT types is their fluid nature. Because the Bitcoin protocol does not formally recognize ordinal theory, an ordinal can either be fungible or non-fungible. It depends completely on who owns the ordinal and whether they wish to preserve the individual satoshi.

For example, if a Bitcoin user does not recognize or care about an ordinal or the data attached to it, it can simply be used like any other Bitcoin. Ordinals are fungible in this way—they can be used to pay for network fees or sent as payment, though the arbitrary data will still stay attached. The same is not true of an Ethereum NFT. An Ethereum NFT is completely different from an Ethereum coin, and it’s impossible to mix up a fungible token with an NFT because the Ethereum Network treats each token type differently.

Ensuring Preparedness for Bitcoin Ordinal NFTs: Mitigating Scams

As the popularity and adoption of Bitcoin ordinal NFTs continue to grow, it becomes increasingly important for individuals to be prepared and take precautions to safeguard themselves against potential scams and fraudulent activities. Here are some essential measures to consider in order to navigate the ordinal NFT landscape securely:

Education and Research: Stay informed about the fundamentals of Bitcoin ordinal NFTs and the associated technologies. Familiarize yourself with the underlying concepts, such as ordinal theory, as well as the technical aspects of Bitcoin and its protocol updates. Regularly follow reputable sources of information, including official project announcements, developer forums, and trustworthy industry publications, to stay up to date with the latest developments and best practices.
Thorough Due Diligence: Before engaging in any ordinal NFT transactions or investments, conduct comprehensive due diligence on the projects, platforms, and individuals involved. Verify the authenticity and reputation of the creators, developers, and marketplaces offering ordinal NFTs. Scrutinize their track records, community feedback, and reviews to assess their credibility and trustworthiness. Be cautious of potential red flags, such as unsolicited offers, vague or unrealistic promises, and unverified claims of exclusivity.
Authenticity Verification: Prioritize verifying the authenticity of ordinal NFTs before making any purchases or trades. Scrutinize the metadata, ownership history, and any accompanying certifications or proofs of authenticity provided by the creators. Leverage tools and services that enable blockchain analysis to verify the integrity and legitimacy of the ordinal NFTs, ensuring they have been minted on the Bitcoin blockchain and haven't been tampered with or counterfeited.
Trustworthy Marketplaces and Platforms: Exercise caution when utilizing ordinal NFT marketplaces and platforms. Opt for well-established, reputable platforms with robust security measures and transparent transaction processes. Thoroughly review the platform's terms of service, privacy policy, and dispute resolution mechanisms. Be wary of unauthorized or unofficial marketplaces, as they may be prone to scams or fraudulent activities.
Community Engagement: Participate in the Bitcoin ordinal NFT community and engage with fellow enthusiasts, developers, and experts. Active involvement in reputable forums, social media groups, and community-driven platforms can provide valuable insights, discussions, and alerts regarding potential scams or security risks. Collaborate with the community to share experiences, exchange knowledge, and collectively identify and report suspicious activities.
Exercise Caution with Financial Investments: If you intend to invest in ordinal NFTs as a financial endeavor, approach it with caution and adhere to sound investment practices. Conduct thorough research on market trends, historical performance, and the potential risks associated with ordinal NFT investments. Diversify your investments and set realistic expectations, being mindful of the inherent volatility and speculative nature of the market.
Secure Wallet Management: Ensure the security of your digital wallet, where you store your Bitcoin and ordinal NFTs. Utilize hardware wallets or reputable software wallets with robust security features and multi-factor authentication. Regularly update your wallet software and maintain strong, unique passwords. Avoid sharing sensitive wallet information or private keys with anyone and keep backup copies of your wallet offline or in secure locations.

Multi-Signature wallets like Orosign can provide an additional layer of security against hackers. Multisig wallets require two or more private keys to authorize a transaction, making it much harder for hackers to gain access to your funds. In addition, Orosign is completely open to support chains beyond Ethereum like Bitcoin or BRC20

Orosign is a Self-Managing Mobile App For Digital Assets that serves as an interface of Orochi Ecosystem, which can integrate multiple games and native decentralized applications. Orosign allows users to interact with all applications on Orochi Computation Layer and empowers customers to organize and manage their digital assets.

Orosign is designed for ease of use, even for non-crypto users. You can send, receive or store various cryptocurrencies and digital assets safely and securely with Orosign mobile app.

Currently, Orosign allows customers to create their own multisignature wallet with minimal cost as well as customize smart contracts to meet their own expectations. Off-chain signing and verification are used to secure the signing process. All proofs are verified independently with secp256k1, which is the most widely used elliptic curve in the blockchain space, thanks to its 256 bits security level. Thus, the fund is safe as long as the majority of private keys are safe

Conclusion

Bitcoin ordinal NFTs represent an exciting development in the world of non-fungible tokens. With their integration into the Bitcoin ecosystem and the ability to attach arbitrary data to individual satoshis, ordinal NFTs offer a unique and innovative approach to digital ownership and creativity. However, as with any emerging technology, it is crucial to approach ordinal NFTs with awareness and caution.

By understanding the fundamentals of ordinal theory, staying informed about updates to the Bitcoin protocol, and conducting thorough research on projects, platforms, and individuals involved in ordinal NFTs, individuals can mitigate the risks associated with scams and fraudulent activities. Furthermore, securing digital wallets, verifying the authenticity of ordinal NFTs, and utilizing trustworthy marketplaces and platforms are essential steps to ensure a safe and reliable experience within the ordinal NFT landscape.

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