Are Ordinals Here to Break the New Internet (or Bitcoin)?

In the events leading to Bitcoin Halvening, conversations revolve around a fascinating topic: Ordinals and their significance within the cryptocurrency landscape, especially in the Bitcoin ecosystem. In March, we conducted X Spaces on the topic “Are Ordinals Here to Break the New Internet (or Bitcoin)?” with a stellar lineup of speakers building on Bitcoin. There was palpable excitement highlighting the importance of discussing Ordinals, especially for those new to the Bitcoin network. They acknowledged the remarkable progress made in the past year, particularly in terms of user interface improvements and the development of various projects within the Ordinals ecosystem.

So, what exactly are Ordinals, and why are they generating so much buzz? Ordinals play a crucial role in representing the order in which satoshis are mined on the blockchain (a satoshi or a “sat”, as it is commonly known, is the lowest possible unit of a Bitcoin). In addition to this, progress made on the BTC network facilitated many new Token standards. One of them, made it possible for individual satoshis to be “inscribed” with text, code, images, songs & even videos. Essentially creating Fungible & Non-Fungible Tokens in the process. Now, the token gets its value not just by what’s inscribed on it but also on the metadata of the underlying “sat”. Akin to drawing an image on a penny or dollar cash bill. An image drawn on a penny minted during World War I would be more valuable than one on a more recent mint! This technical aspect of Ordinals combined with the fact that the artwork lives on-chain, is what differentiates it from NFTs on other chains like ETH & SOL. 

There are 21 million Bitcoins and each Bitcoin has 100 million sats. The very first sat of the very first Bitcoin that was mined is extremely valuable but is not in circulation. Block 0 was the very first block of Bitcoin ever mined. Block 0 to 8 have sats which are not in circulation. The rarest sats in circulation are Block9 450x which is said to have been mined by Satoshi Nakamoto. These are also the oldest sats in circulation. There are other sats that derive their rarity based patterns like palindromes, prime numbers or any other numerical patterns that collectors would like to collect. There are other fun sats like pizza sats - which are sats from the famous Bitcoin pizza transaction of May 22 2010 where Laszlo Hanyecz purchased 2 Papa John’s pizza for 10,000 BTC!

There has been considerable progress made in the past year in the Bitcoin Ordinals space. As early as March 2023, there were no Ordinals market places where one could buy and sell Ordinals. It was all done over-the-counter using spreadsheets. Even the wallets were not intuitive to use. Since then, there have been multiple wallets (Xverse & Unisat) & multiple marketplaces like MagicEden, OKX and OrdZaar that support Ordinals with great improvement in User Interface and User Experience. In addition, there’s been a plethora of Projects launching on Bitcoin including decentralized exchanges, bridges & other tokens. This fast rate of progress has only been possible due to the existing knowledge base within the Bitcoin community. 

In contrast with the pace of development on Ethereum a few years ago, the pace of development on Bitcoin is stark (the size of the market notwithstanding). For instance, there was a DEX on ETH called Ether Delta which was complicated to use & did not support wallet extensions. It took 2 years for them to come up with wallet extensions by way of Meta Mask. On Bitcoin, in 3 months wallet extensions started popping up. Now there are multiple marketplaces for Ordinals, Runes & sats. There are thriving DEXes, Bridges, Lending & Borrowing protocols (OmniBTC, Mubi, Velar Ordbit), Analytics platforms (Doggfather Analytics) & many more. With the Runes upgrade, there will soon be an easier way to trade Fungible Tokens (memecoins included!)

What are Runes? Runes protocol is a fungible token standard on Bitcoin just like BRC-20. Rune Protocol is a UTXO based model where the token balance is tied to your UTXO set whereas in the BRC-20 token standard the token balance is tied to your BTC address. Runes are compact & require a single transaction for all operations compared to the complicated implementations & multiple transactions required by BRC-20 tokens. This makes Runes cost-effective while utilising the same BTC network.

Overall, the discussion highlighted the rapid growth and diversity of projects within the Bitcoin ecosystem, emphasizing the importance of education and community support for newcomers to navigate its intricacies. Both Ordinals & Runes symbolize a commitment to Bitcoin's principles of decentralization and empowerment, while simultaneously bringing new use cases to the grand-daddy of all blockchains - Bitcoin.

In conclusion, Ordinals and Runes represent exciting developments within the cryptocurrency space, offering new avenues for innovation and exploration. As the ecosystem continues to evolve, it is essential for enthusiasts and experts alike to collaborate and share their insights, driving forward the progress of decentralized infrastructure & products on the Bitcoin blockchain.