Bitcoin has come a long way since its launch in 2009 as a somewhat obscure form of digital cash. The project would remain relatively unnoticed by the general public for several years, gaining popularity in 2013 and skyrocketing to become the largest asset class in the world.
In fact, although Bitcoin was the first cryptocurrency ever, its invention prompted thousands of new cryptocurrencies to follow suit, with complex use cases, expanded derivatives markets, and a growing list of added features. Bitcoin developers have also continued to innovate with the project, with the biggest update in recent years being Bitcoin Ordinals, which is rolling out in 2023.
What are the ordinal numbers of Bitcoin? Explaining Bitcoin arrangements
Bitcoin Ordinals are Bitcoin's answer to NFTs, allowing a way to record data on a specific satoshi (one millionth of a bitcoin) in a way that makes that satoshi distinct from others or non-fungible.
So why is this important?
Originally, Bitcoin was launched as a fungible form of digital cash. Like the US dollar, one is very similar to the other in terms of who deals with it. However, Bitcoin Ordinals allows users to collect satoshis from each other.
For example, a collector might be interested in owning a satoshi from a crucial moment in Bitcoin history, such as the Bitcoin halving that occurs every four years, and thus be willing to spend more than the market value of one satoshi to buy it.
This brings Bitcoin into the world of digital collectibles and non-fungible tokens (NFTs). The Ethereum NFT (non-fungible token) market exploded in 2021, with sales of over $24 billion worth of NFTs. These NFTs are typically digital assets on the Ethereum network with unique identification numbers and have been used to represent ownership of assets such as art and music.
Bitcoin Ordinals can be used for exactly the same thing, with the added benefit of being tied to the most popular and long-standing cryptocurrency on the market.
How do Bitcoin arrangements work?
Bitcoin Arrangements Assign a unique ID number to the satoshi in any given Bitcoin. Bitcoin developer Casey Rodarmor introduced the idea in 2023 and used Bitcoin's 2021 Taproot upgrade feature, which allowed data to be stored directly on the Bitcoin blockchain, to achieve this.
Rankings work by making each unit of a single bitcoin uniquely identifiable. When Bitcoin is mined, each million satoshis are assigned a number in the order they were created. Satoshis can be tracked individually across multiple wallets, meaning you can spend BTC while still tracking individual satoshis or Ordinals.
While Ethereum NFTs sometimes require metadata to be stored off-chain, sometimes on a traditional web2 website, all Bitcoin Ordinal data is stored on-chain, reducing the risk of data loss. Updates to SegWit and Taproot allow the Bitcoin network to store a lot more data this way.
Buy, sell and trade Bitcoin Ordinals
To purchase Bitcoin Ordinals, you will need to use a wallet compatible with Taproot addresses. Many of the most popular Bitcoin wallets, such as Trust Wallet, Mycelium, and Blockchain.com, do not support this feature. You can use wallets like Sparrow Wallet instead.
Taproot compatible Bitcoin addresses usually start with the letters “bc1p”.
How to buy Bitcoin Ordinals
After setting up your portfolio, you can visit markets like Ordinals Market or OpenOrdex to take a look at the ordinal numbers on offer. As with Ethereum NFTs, these arrangements are often associated with the sale of digital artwork or other assets.
Deposit your funds into the platform (at your own risk) or connect your BTC wallet. From there, bid on Ordinal or simply buy outright.
That's how it's done! You can also list arrangements for sale on the same platform or trade them peer-to-peer with other users.
Real-world examples and use cases
Bitcoin Ordinals can be used to represent the sale of digital or real assets, to serve as a collectible piece of BTC network history, or to permanently record data in an immutable blockchain as a form of censorship-resistant art, protest, or history. Preservation.
Right now, the main use case is in works of art, as is the case with Ethereum NFTs. The Bitcoin Ordinals market is relatively small, although it is not insignificant. BTC Ordinals sales reached over $170 million in March 2024.
Examples of Bitcoin Ordinals could include collecting “souvenirs” from history, allowing users to own a piece of Bitcoin from a specific moment in time, such as a major world event or just an interesting moment in Bitcoin mining history.
Potential challenges and drawbacks in Bitcoin arrangements
Of course, we've already seen a significant decline in the market for Ethereum NFTs in recent years, with the value of NFT collectibles declining by around 90% overall. Although the technology wasn't going anywhere, the market quickly became saturated with low-effort artwork, aggressive marketing practices, and questionable or abusive trading methods such as ghost trading to artificially inflate auction prices.
It is safe to say that the market has backed away from NFTs and that this muted sentiment may also carry over to Bitcoin Ordinals as well in the near future.
Another problem with Ordinals is the issue of privacy and surveillance. By allowing unique identification data to be recorded on a millionth of each Bitcoin, the fungibility and pseudonymical nature of Bitcoin is arguably threatened.
Rankings allow on-chain monitoring analysts to group portfolios and identify Bitcoin users more easily, which some people may disagree with.
Finally, there is potentially a risk of creating a derivatives market that could disrupt Bitcoin prices. If Ordinals takes off in a big way, there is a possibility that users who spend significant amounts of money on specific parts per million of Bitcoin could have unexpected impacts on the price of Bitcoin and the health of the market, although this is just speculation at the time of writing.
Whatever happens with Bitcoin Ordinals, the technology has been warmly welcomed by a large number of cryptocurrency enthusiasts, and the market appears poised to evolve further over the coming months and years.
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