On January 21, 2023, Bitcoin Core contributor Casey Rodarmor introduced the Ordinals protocol in his blog post. The protocol introduces the concepts of ordinals and inscriptions, which gave rise to the first NFT on the Bitcoin network.
Blog post link: https://rodarmor.com/blog/ordinal-theory/
The Ordinals protocol leverages two upgrades of the Bitcoin network—Segwit (2017) and Taproot (2021)—to enable the recording of arbitrary data (images, videos, texts, etc.) on the Bitcoin blockchain, making it possible to create digital artworks or NFTs.
The process works as follows: NFTs are inscribed onto BTC. The total supply of Bitcoin is 21 million, with its smallest indivisible unit being sat (satoshi), where 1BTC = 100 million sats, or 1 x 10^8 sats. Rodarmor proposed the ordinal theory, which assigns numbers starting from 0 based on the order in which sats are mined. For example, the ordinal number of the first sat in the first block is 0, the second sat's ordinal number is 1, and the last sat's ordinal number is 99,999,999. This gives each sat an ID attribute. By doing so, each sat is artificially assigned a sequence number between 0 and 2,100,000,000,000,000, and then these sequence numbers are linked with other information such as images, text, videos, and code, thereby giving each sat the characteristics of indivisibility, non-fungibility, and traceability. These unique sats can be "inscribed" with any content, such as text, images, or videos, creating "inscriptions." Inscriptions represent the concept of metadata in Bitcoin NFTs, stored in taproot scripts on-chain.
For example, I issued an NFT: this image/image/png was inscribed on the 1,933,499,650,574,652th sat.
The Ordinals link is: https://ordinals.com/inscription/ff8af66c6b85de009df4d4943ac581b8f8d220bdad839ac3ed5dc7035f193227i0
So, can we mint tokens similar to ERC-20 through Ordinals? On March 8, 2023, domo proposed using Ordinals inscriptions in JSON data format to deploy token contracts, mint coins, and transfer funds.
The original Twitter link is: https://twitter.com/domodata/status/1633658974686855168.
The article link is: https://domo-2.gitbook.io/brc-20-experiment/
The experimental Bitcoin network fungible token protocol BRC-20 has emerged, along with the issuance of the first BRC-20 token - $ordi, with a total supply of 21 million (a tribute to BTC), available on a first-come, first-served basis, and free for everyone to mint. The free-to-mint ordi token (which was reportedly given away at Hong Kong web3 events) reached a peak price of over $20 per token.
A few days ago, I minted 1,000 Doge BRC-20 tokens (not valuable 😮💨), the format is as follows: {"p":"brc-20","op":"mint","tick":"doge","amt":"1000"}
The logic is to inscribe the above JSON onto my 1,933,499,651,462,652 sat.
The link is: https://ordinals.com/inscription/27b188202960667c405c5862a8d9b136139d0c2b2c2a7354e13a38c003f982e2i0
Currently, the best tool for inscriptions is Unisat: https://unisat.io/. It's said that this team was highly sought after by investors recently. Indeed, this product iterates quickly, and the wallet, inscription, and Marketplace functions are all quite simple and easy to use.
Of course, there are also many negative voices. For example:
Some developers believe that Ordinals pose a security risk and could be used to store malicious code on the Bitcoin blockchain; BRC-20 tokens currently lack practical application value, somewhat resembling the act of writing numbers on a blank sheet of paper as checks; Non-financial uses of Bitcoin block space may crowd out "legitimate" financial transactions. If an entire block is occupied by witness data from inscription transactions, it could delay the confirmation of "legitimate" financial transactions, thereby damaging Bitcoin's reputation as a reliable financial network.
For example, yesterday JAN3 CEO Samson Mow told Cointelegraph in an interview that the latest hype around Ordinals and BRC-20 tokens is unsustainable and will fade within months. He explained that these tokens essentially involve paying large fees that go directly to Bitcoin miners, which is not sustainable. Mow believes that as people realize these tokens are not worth the high fees, they will eventually disappear.
Despite the various opinions, overall, the emergence of the Ordinals protocol and the BRC-20 token protocol has provided more possibilities for digital art and token issuance on the Bitcoin network, while also bringing more innovation to the Bitcoin ecosystem.