For a long time, Bitcoin enthusiasts could shout from the sidelines that they thought NFTs were nothing, just another weird invention from altcoin projects. But that’s not the case anymore. Ordinal has made it possible for NFTs to be used on Bitcoin as well, and the community is divided on whether this is good or bad.
Before diving into this debate, let’s first provide some background on NFTs and the possibilities on Bitcoin. If you’re already familiar with this, feel free to skip the next two paragraphs.
What are NFTs? NFTs are blockchain tokens that can serve as proof of ownership for assets, including digital goods like images, videos, music files, memberships, and items in video games. NFTs have made billions in recent years, which is why nearly all blockchains want to have a marketplace where NFTs can be traded.
It all started on Ethereum, which provides the ability to create complex smart contracts and is perfectly suited for digital collectibles. Soon after, the leaders of Solana, Cardano, and many other blockchain projects announced that they too would do something with NFTs.
Bitcoin, Smart Contracts, and NFTs Bitcoin has no leadership and is not under a company. There is no charismatic leader using their marketing skills to convince the community to embrace NFTs. Even if Satoshi were to rise from the dead and want to sell NFTs, it would all be technically more difficult on Bitcoin.
This is because NFTs require smart contracts and they are very limited on Bitcoin. Smart contracts are essential for creating and linking ownership to new tokens. A smart contract updates the ownership when an NFT is bought or sold.
Despite the lack of a charismatic leader, Bitcoin’s development doesn’t stand still. It’s often individuals or project groups that build new things for Bitcoin. For example, Counterparty and Stacks have developed alternative solutions for smart contracts over the past few years, allowing tokens to be created and processed on the Bitcoin blockchain.
How Does Ordinal Process NFTs on Bitcoin? Ordinal was launched in January of this year. With Ordinal, users can view, send, and receive individual Satoshi and these SATS can carry data such as videos and images. A single Satoshi or SAT is the smallest unit of Bitcoin, or 1/100,000,000 of a BTC.
Number of NFTs on Bitcoin through Ordinal Adding data to individual Satoshi’s is called inscription, and this is stored in the signature of a Bitcoin transaction.
Ordinal would not have been possible without the Segregated Witness upgrade of Bitcoin and the more recent Taproot upgrade. Thanks to SegWit, Bitcoin has been scaled up a bit by the introduction of witness data, which are combined signatures and public keys for Bitcoin transactions.
Potential vulnerabilities forced developers to impose limits on the size of that data. When Taproot came, it solved those security problems, allowing for the old SegWit limits to be lifted, and for more data to be included in transactions.
Ordinal has taken advantage of these upgrades and the increased data capacity to allow for the creation and storage of NFTs on the Bitcoin blockchain. By using the Satoshi as the unit of measurement for NFTs, Ordinal has given Bitcoin users a new and exciting way to invest in and own unique digital assets.
In conclusion, the advent of Ordinal and the possibility of NFTs on the Bitcoin blockchain has created a division within the Bitcoin community.