Amidst their surging popularity, a new entrant, Bitcoin Ordinals, has stirred the blockchain community, introducing a novel way of inscribing blockchain transactions with metadata, mainly images, eliminating minting a separate token, as with NFTs.   

Non-fungible tokens are unique tokens that prove ownership and authenticity, and in the case of NFT art, collectibles, and other creative digital content point to a set of data, usually a URL where a picture is hosted. 

These assets rely on a token standard called ERC-721 on Ethereum, which has shaped the NFT industry. This standard guarantees that each NFT is unique and traceable, enabling artists and creators to digitize their work. 

As mentioned above, storing metadata is an issue for NFTs. These digital assets store the actual artwork or content off-chain, with the blockchain only containing a link to the data. 

This setup raises concerns about the reliability and permanence of these assets, as well as their true ownership and longevity.

What are Ordinals?

Bitcoin Ordinals provide a new approach to what many NFT projects have been aiming to do so far: create uniquely identifiable art & collectibles stored in the blockchain itself using the highly secure and robust Bitcoin blockchain to ensure the immutability and security of digital assets. 

The Ordinals protocol gives unique identities to each Satoshi, the smallest unit of Bitcoin, making each one a distinct and non-fungible entity. 

This is achieved through inscription, where lightweight metadata can be permanently embedded in the satoshis.

The Ordinals protocol assigns natural numbers to transacted Satoshis. This helps with tracking and creates a unique identifier for each Bitcoin inscription. 

The closest comparison for the novel user would be NFTs, but they are quite different, as the key feature of Bitcoin Ordinals is their on-chain presence. 

Ordinals guarantee that all digital content is directly and immutably inscribed on the Bitcoin blockchain.

Comparing Ordinals and Traditional NFTs

The key distinction between the two lies in their data storage and representation methods. 

Ordinals use an on-chain approach that provides greater immutability and security compared to traditional NFTs, which rely on off-chain storage, making them more vulnerable to attacks. 

Another significant difference between the two is in their creation and trading processes. Inscribing data onto satoshis, the smallest unit of Bitcoin, is technically complex while minting NFTs on platforms like Ethereum has a more mature process. 

The uniqueness and rarity factors of Ordinals and traditional NFTs also differ depending on their respective blockchain protocols and inscription methods. 

Ordinals are unique because they are tied to a specific satoshi on the Bitcoin blockchain. The rarity of an ordinal can be determined by its number or the content it holds. 

Traditional NFTs, on the other hand, determine rarity based on the attributes of the artwork or the scarcity of the token's supply. 

Cost and Environmental Impact

The cost implications of creating and trading Ordinals may differ from traditional NFTs, especially when considering the proof-of-work mechanism of the Bitcoin network.

It's worth noting that Ordinals have a greater environmental impact due to the energy-intensive nature of the Bitcoin blockchain. 

Since Qtum is using PoS, inscribing ordinals on its blockchain does not equal to higher energy costs and would be a suitable and fitting use case for this novel idea of inscribing transactions. 

What's next?

New technologies and creative approaches will likely significantly shape the digital art and collectibles market.

While Ordinals and traditional NFTs share the same basic principle of digital asset tokenization, they are different in their technical implementation, impact on their blockchains, and market perception. 

As the landscape of digital art and collectibles evolves, Ordinals are expected to bring about notable changes, potentially reshaping the market and opening new avenues for digital asset creation and ownership.

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