Bitcoin, the first and most valuable cryptocurrency to date, has revolutionized the way we conceive money and online transactions. However, its utility is not limited only to the transaction of monetary value. Recently, a new phenomenon called "Ordinals" has rekindled interest in the first blockchain, leading many to wonder: is this the beginning of something bigger?
What are Bitcoin Ordinals?
Ordinals, also known as "Bitcoin's NFTs," are digital assets inscribed on a satoshi, the lowest denomination of a Bitcoin (BTC). Each satoshi has a unique ordinal number that allows its tracking, providing the possibility to trace its history and origin on the Bitcoin blockchain. In addition, Ordinals allow adding extra information to each minimum unit, what is called an "inscription" of an Ordinal. This extra information can be any type of digital asset, such as an image, video, or audio, which is stored in hexadecimal format.
How do Bitcoin Ordinals work?
Ordinals are a protocol that allows identifying and differentiating each satoshi on the Bitcoin blockchain through a numbering system that assigns a unique ordinal number to each of them. This means that instead of considering satoshis as fungible and indistinguishable units among themselves, each of them becomes a unique and transferable unit.
Inscriptions are arbitrary data packets and associated metadata, the latter indicating to a Bitcoin node how to represent such data. Inscriptions are functionally similar to calldata in Ethereum in the sense that they store read-only data. The data from the inscription is published on the Bitcoin blockchain as part of the witness data, the section of a transaction that stores the transaction's signatures, and is available to be decoded back into visible content by any full archive Bitcoin node running the ORD software.
Advantages and Challenges of Bitcoin Ordinals
Ordinals offer a way to create unique and exchangeable objects on the Bitcoin blockchain, opening new possibilities for collectors, artists, and cryptocurrency enthusiasts looking for a safe and reliable way to own and transfer unique digital assets. However, they also face some challenges, such as the possible overload of information on nodes and confusion about the fungibility of Bitcoin.
The Future of Bitcoin Ordinals
In the Bitcoin community, there are contradictory opinions about the proposal of Ordinals and Inscriptions. Some call for complete censorship or prohibition, while others believe that drastic measures cannot be taken without fostering worse consequences or preventing the deployment of novel use cases. Only time will tell if they become an important part of the Bitcoin ecosystem or if they are a passing fad.
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