Ordinal Inscriptions vs NFTs: How Are They Different?
How much would you pay to own an NFT immutably and permanently recorded on the worldâs largest and probably most secure blockchain â the Bitcoin (BTC) network? This question might force many NFT enthusiasts to pause and think a bit. But one person didnât hesitate much before shelling out $450,000 in bitcoins in December 2023 for the right to own an Ordinal inscription â a unique digital artifact based on Bitcoinâs own implementation of NFT functionality. As of mid-February 2024, this stands as the most expensive Ordinal inscription sale in the brief history of Bitcoin NFTs.
Ordinal inscriptions, which allow you to attach pieces of data or media to individual satoshis, the smallest units in a BTC coin, have made it possible for creators to own unique, non-fungible assets on the Bitcoin chain. And unlike standard NFTs, which are typically based on blockchains like Ethereum (ETH), Solana (SOL) and Avalanche (AVAX), Ordinal inscriptions/Bitcoin NFTs donât require any smart contracts to operate.Â
Since their introduction in early 2023, Ordinal inscriptions have attracted both considerable interest and controversy in the Bitcoin community. However, one thing is certain â this niche is growing by leaps and bounds, and it may soon become a serious rival to the standard, smart contractâpowered NFT ecosystem.Â
What attracts people to Ordinal inscriptions on Bitcoin? And how are they different from NFTs on other blockchains? In this article, weâll take a look at both Ordinal inscription technology and standard NFTs, and detail their key differences.
Key Takeaways:
Ordinal inscriptions are non-fungible, unique NFT-like tokens on the Bitcoin network that feature custom data â such as images, text or video â inscribed onto them.
NFTs are smart contractâpowered, non-fungible, unique on-chain tokens used to certify ownership of digital artwork pieces normally stored off-chain.
The Ordinal inscriptions market is much younger and still less liquid than the NFT market, but inscriptions are quickly gaining the attention of creators and traders as a viable NFT alternative.
What Are Ordinal Inscriptions?
Ordinal inscriptions are digital assets created on the Bitcoin blockchain via attaching data such as images and videos to an individual satoshi. Theyâre as immutable as Bitcoin itself, as theyâre made and stored directly on-chain. This innovative feature allows crypto artists to embed creative content onto Bitcoin and establish direct ownership and proof of the authenticity of their artwork.
The Bitcoin blockchain, lacking any smart contract capabilities, has never featured the classic NFT functionality available on Ethereum and other smart contract chains. In December 2022, blockchain developer Casey Rodarmor ingeniously noted that every single satoshi â the smallest unit in a BTC coin â can be uniquely traced on the Bitcoin network, according to the chronological order in which itâs been mined. For example, the very first satoshi in the first mined block has the Ordinal number 0, the second satoshi in that block has the Ordinal number 1, and so on.
Rodarmor didnât stop at this observation. He realized that pieces of data â e.g., text, images, programming code or video â can be attached (or inscribed, per his chosen terminology) to a satoshi. The satoshi then becomes an identifiable, trackable and unique token with a piece of custom content inscribed into it, essentially an NFT-like asset.
Bitcoin Ordinals
In January 2023, Rodarmor launched the Bitcoin Ordinals protocol, which combined Ordinal theory and inscription methodology to facilitate the creation of unique NFT-like tokens on the Bitcoin network.
Media that can be inscribed onto an Ordinal NFT cannot exceed 4 MB, the limitation imposed by Bitcoinâs standard block size. In June 2023, Rodarmor introduced the concept of recursive inscriptions â a way of chaining Ordinal inscriptions that essentially removes the 4 MB size cap. Recursive inscriptions allow you to carry over data from previously created inscription tokens into a new inscription. By chaining together multiple inscription tokens in this manner, you can theoretically inscribe enormous amounts of media onto your Ordinal NFTs.
Since their introduction, Bitcoin Ordinals have been growing in popularity â and it hasnât taken long for other blockchains to join the race. Throughout 2023, many other chains have implemented their own variations of inscriptions. Some examples are Ethscriptions on Ethereum, Solinscriptions on Solana and Arbscriptions on Arbitrum (ARB).
What Are NFTs?
Non-fungible tokens (NFTs) are unique crypto tokens that reside on a blockchain and are typically used to certify ownership of a digital artwork. The actual artwork â be it an image, animation or video â is usually stored off-chain, while the NFT itself contains metadata confirming the ownership and other vital details.
Metadata associated with an NFT includes detailed information such as the artwork's title, the artist's name, a description, the unique identifier, the date of mint and potentially other relevant details (for instance, edition number or properties specific to the blockchain where it's hosted). The process of minting an NFT requires using smart contracts and paying gas fees to the underlying blockchain.
NFTs experienced a boom in 2021. The most expensive NFT, "The Merge", sold for a whopping $91.8 million. Other famously expensive NFTs include Beeple's "Everydays: the First 5000 Days", which fetched $69.44 million, and "CryptoPunk #5822", which sold for $23.7 million.
Differences Between Ordinal Inscriptions and NFTs
Ordinal inscriptions and standard NFTs used on smart contract chains share one fundamental commonality â both are used to facilitate the creation of, and trade in, uniquely identifiable, non-fungible crypto tokens. Yet their resemblances end pretty much there. Behind their similar façades, Ordinal inscriptions and NFTs are actually very distinct technologies. Let's take a closer look at the critical differences between them.
Smart Contract Use
The most apparent technical difference between Ordinal inscriptions and NFTs concerns the use of smart contract technology. NFTs require smart contracts. Without these, NFTs canât be minted or transferred. In contrast, though often referred to as Bitcoin NFTs, Ordinal inscriptions don't use smart contracts at all. In fact, they couldnât, given the Bitcoin networkâs lack of smart contract functionality. Rodarmor's ingenuity lies in being able to implement NFT-like functionality on Bitcoin without the need for any smart contracts whatsoever.
Media Storage
Ordinal inscriptions store all the media or artwork inscribed onto a satoshi token right on the Bitcoin chain. In contrast, most NFTs store only the metadata associated with the artwork on-chain. The actual media is stored off-chain, often on centralized platforms such as Google Drive, Dropbox or other Web 2.0 cloud solutions.
Options also exist to store your NFT-related digital assets on decentralized storage platforms, such as the InterPlanetary File System (IPFS) or Arweave (AR). However, even in these cases, the NFT token typically resides on a different platform from the one on which its artwork is hosted. For example, many NFTs are stored on Ethereum or Solana, while their associated artwork is kept on IPFS.
Essentially, an NFT token residing on a blockchain serves only as a pointer or reference to the media it describes. This is the typical implementation of NFT technology, and stems largely from the fact that most blockchains donât have the optimal technical environment for storing anything other than small-size data.
There are ways to store your NFT and all the media associated with it fully on-chain. Some platforms even facilitate the process of creating fully on-chain NFTs for users. However, file size limits and transaction efficiency are still limited in these cases. As of early 2024, the most common way of creating and storing NFTs involves the use of off-chain storage environments.
Costs for Users/Creators
As of mid-February 2024, the costs of inscribing a satoshi on Bitcoin are significantly higher than the costs of minting an NFT, perhaps aside from NFTs on Ethereum, a chain known for its scandalously high fees.
Most creators use third-party platforms like OrdinalsBot or Gamma to inscribe Ordinal tokens. These platforms make it easy to handle the whole inscription process without requiring the user to dive deep into technicalities. While technically adept users can inscribe directly on the chain without the use of third parties, the technical details of the process are far from trivial.Â
With that in mind, weâve calculated how much it would cost to inscribe a token for a typical non-technical user via the OrdinalsBot platform, one of the most popular and affordable services for Ordinal inscriptions. Using the platformâs interface, we first submitted a tiny 9 KB image file to be inscribed, and requested the most affordable (lowest priority) setting, which takes several days to complete the whole inscription process. We received a quote of $11. When we asked for the normal priority, which takes one hour to process an inscription, the price rose to $23.
However, 9 KB is hopelessly small for any serious image-based artwork, so we decided to use a more realistically sized image of 300 KB, still not a large file by any stretch. This is when the costs exploded! On the economy setting, which takes several days to process, the quote we received was $179, while the normal priority (one hour to process) was $529.
Even on Ethereum, well-known for its high transaction fees, the typical cost to mint an NFT is between $50 and $200, somewhat lower than the cost of getting an Ordinal inscription on Bitcoin. Moreover, most other NFT-capable chains feature minting costs that are orders of magnitude lower than the amounts above. For instance, minting on Polygon (POL) will set you back by just a few cents, while creating a Solana-based NFT normally costs $2â$4 these days.
Liquidity and Market Maturity
The NFT market is much older and more established â and features higher liquidity levels â as compared to the nascent Ordinal inscriptions market. The first NFT was minted back in 2014, and by 2017, the CryptoKitties blockchain game had led to an explosion of interest in NFTs. By 2021, the NFT niche was a multibillion-dollar market, and an essential subcategory of the broader crypto market.Â
While the NFT market has declined from its heyday of 2021, it still features considerable trade volumes. In fact, in the last 30 days to Feb 18, 2024, total NFT sales were slightly over $1 billion.
On the other hand, the Ordinal inscriptions market has recently celebrated its first anniversary. And yet, its market already features trading volumes similar to those found in the NFT sphere. In January 2024, the total trading volume of the Ordinals market was measured at $335 million, quite a number for such a new area. While the price of inscriptions may not have quite reached that of NFTs at their peak, the highest inscription sale price was already recorded at 10.4 BTC (around $450,000 at the time of sale in December 2023) for a Bitcoin inscription from the Honey Badgers collection, named âInscription #8â.
Security
Being fully on-chain, Bitcoin Ordinals arguably feature a higher security level than that of NFTs, most of which have their actual artwork stored off-chain. The blockchain's built-in cryptographic security mechanism and decentralization play a crucial role in protecting on-chain assets, including Ordinal inscription tokens.
In contrast, NFTs often rely on centralized Web 2.0 platforms that might be more vulnerable to security hacks than blockchains. Moreover, Bitcoin â the home of Ordinals â is often cited as one of the industry's most secure (if not the most secure) decentralized blockchain networks.
Where to Buy Inscriptions
Ordinal inscriptions are a fledgling technology, with a market thatâs still in initial development. Among the pioneering platforms where you can trade inscriptions is the Bybit Inscription Marketplace, on which you can trade Bitcoin inscriptions and similar inscription tokens from various other blockchains.
The Bybit Inscription Marketplace also facilitates a trade in inscribable, fungible cryptocurrencies, fungible cryptos based on the same inscription technology as their non-fungible counterparts (Ordinal inscriptions). On Bitcoin, theyâre based on the BRC-20 token standard that leverages the Ordinals protocol to facilitate the launch of fungible and inscribable crypto assets. The Bybit Inscription Marketplace features a variety of BRC-20 tokens, as well as similar tokens from other blockchain platforms.
Where to Buy NFTs
Since NFTs are a much more mature technology than Ordinal inscriptions, theyâre available on a broader variety of centralized and decentralized platforms. Some popular NFT marketplaces include OpenSea, Rarible and SuperRare, among many others.
Bybit is also among the leading providers in the NFT market, with two marketplaces for NFT-focused trade â Bybit NFT Marketplace and NFT Pro â to cover the needs of all segments of NFT creators and traders. Both marketplaces allow you to list and trade NFTs. Meanwhile, NFT Pro offers a couple of additional, innovative features, one of which is the ability to aggregate NFT data and offers from different external marketplaces. Moreover, NFT Pro allows you to synchronize your bids with all aggregated marketplaces.
The Bottom Line
Ordinal inscriptions have brought the concept of NFTs to the Bitcoin chain, albeit in a unique way thatâs not based on smart contracts. Now, you can have your unique artwork represented on the worldâs first, largest and arguably most secure blockchain â a privilege that wasnât available to NFT enthusiasts in the past. For digital collectible investors, there are also opportunities in the Bitcoin NFT niche. The Ordinal inscription market, although relatively new and lacking the volumes seen in the NFT market, is growing fast, and with a less developed market come unique opportunities for returns.
NFTs also continue to be a thriving area of the crypto market. Although their trade volumes are down, compared to the days of the 2021 NFT mania, the NFT concept isnât going anywhere. Perhaps the emergence of Bitcoin Ordinal inscriptions was something that the NFT market needed in order to experience another spike in interest from creators and traders alike. People are talking NFTs again â and this time, itâs thanks to Ordinal inscriptions.
If youâre a creator of digital artwork or trader whoâs interested in digital collectibles, when youâre choosing between standard NFTs and Bitcoin Ordinal inscriptions, take into account that there are some fundamental differences between the two. Sometimes, it pays to try both so you can compare and contrast what works better for your individual needs.
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