Ordinal Fundamentals

What are ordinals, inscriptions, and ordinal theory?

On Bitcoin, ordinal theory is a way to assign unique identifiers to and track individual satoshis ('sats"). Satoshis are the smallest unit of Bitcoin, with one bitcoin containing 100,000,000 satoshis. This assignment is done by numbering/naming each satoshi in the order that it was mined starting from the genesis block back in 2009.

Paired with this, the protocol allows users to attach (colloquially referred to as “inscribe”) arbitrary data, such as images, videos, text, and more to an individual satoshi on the Bitcoin blockchain. This data is stored in the witness field of a Bitcoin transaction during the inscription process, somewhat analogous to a unique iteration of a non-fungible being minted. Because of how this data is inscribed, it lives completely on-chain in its native format.

There are a handful of differences between Bitcoin inscriptions and the current standard for NFTs on other chains. The largest difference is that NFTs elsewhere are minted and treated as unique digital objects that live on their own contracts and behave independently of the native currency and fungible tokens. On Bitcoin, the content that you’re inscribing is tied to a unit of bitcoin the currency itself and there is not notion of smart contracts.

What are digital artifacts?

Generally speaking, outside of generative art and a small selection of other types of work, artists have long not been able to put their artwork on-chain, at least in a cost effective way. Because of this ability to inscribe any arbitrary data as an ordinal, artists of all sorts are able to put their work fully on-chain. This includes .HTML, .PNG, .SVG, .MP4, and all other files types put on-chain in their entirety without have to rely on other permanency solutions such as IPFS or Arweave.

Building on this idea is what a “digital artifact” means and how it differs from what one might think of “NFT” in the traditional sense. In the official ordinal documentation, true inscriptions and, more broadly, digital artifacts are likened to that of physical coins and have properties that extend the idea of true ownership:

• Digital artifacts can have owners, meaning unique assets can be verifiably owned

• Digital artifacts are complete, meaning there are no outside (read: off-chain) dependencies

• Digital artifacts are permissionless, meaning the creator nor anyone else has the potential to exert any form of control over the owner’s inherent right to hold or transact it

• Digital artifacts are uncensorable, meaning the contents cannot change or be updated from an outside source

• Digital artifacts are immutable

The above criteria, and ordinal inscriptions, seek to extend what NFTs currently are to what they can and arguably should be.

On-Chainness

Unlike traditional NFTs where on-chain data is stored in a smart contract, the data being inscribed is stored within the witness data section of a Bitcoin transaction, which was expanded with the Taproot upgrade in 2021.

When you're transferring a satoshi that has an inscription on it, the data associated with that satoshi is not being transferred. The Ordinals protocol is the method by which we can keep track of what data in what Bitcoin transactions is associated with what satoshis; just the associated satoshi is what you own and what is transferred.