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DeFiGaming & MetaverseInfrastructureMarketsNFTs
A Primer on Bitcoin's Wild West: Ordinals and BRC-20
Osgur Murphy O Kane
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Key Takeaways
13 min read

  • Ordinals allow for data to be inscribed into individual satoshis, essentially creating Bitcoin NFTs. Ordinal inscriptions are fully on-chain digital artifacts that can contain pictures, HTML code, videos, or GIFs, with a maximum data size of 4MB.

  • BRC-20s are fungible tokens built on Ordinals and have gained immense popularity as speculative vehicles on the Bitcoin blockchain, and rose to $1b market cap 2 months after launching. They require off-chain indexing in order to track their provenance.

  • Some have argued that because Ordinals differentiate sats, they reduce the fungibility of BTC. However, their impact on BTC's fungibility is likely negligible due to the vast number of sats. However, the potential impact of innovations on Bitcoin should be closely monitored.

  • Ordinals and BRC-20s have implications for Bitcoin's sustainability, transaction fees, state bloat, and the further innovations such as new token standards like ORC-20s. It will be worth observing how Bitcoin develops around this and beyond.

Ordinals

This story starts with Ordinals. They are Bitcoin’s version of NFTs and have attracted a new userbase to Bitcoin - those interested in NFTs and ‘digital artifacts’. But what are they and how are they different to anything we are familiar with?

Each BTC is divided into 100m sats. Ordinals can give each individual sat a unique number, distinguishing them and essentially making individual sats ‘Bitcoin NFTs’. These sats can be inscribed with arbitrary data up to 4MB, which are typically pictures. Data can take the following forms:

  • Pictures
  • HTML Code
  • Videos
  • GIFs
    Here is an example of an Ordinal inscription from the Taproot Wizard collection (#70). There is a supply of 2105 Wizards.

Naturally,...