Bitcoin and NFTs… Who would have thought? Well, they've been around for quite a while, but with Bitcoin Ordinals, it's like witnessing their inception all over again.

The first Bitcoin NFTs came into existence with the creation of Colored Coins in 2012. These were small amounts of Bitcoin that were “colored” with additional information, allowing them to represent assets such as tokens or even property.

Although Colored Coins are commonly regarded as the early groundwork for NFTs on Bitcoin, they were limited by Bitcoin’s technical constraints and didn’t become as popular as NFTs on other platforms.

The concept of Bitcoin NFTs took a significant turn with the introduction of Bitcoin Ordinals in January 2023. This breakthrough has expanded the functionality of the Bitcoin network and opened up a whole new realm of possibilities for creators and collectors within the crypto space.

Let’s take a look at this new phenomenon and examine where and how it can be used, how it operates, and what sets it apart from typical NFTs on other blockchains.

What are Bitcoin Ordinals and how do they work?

Bitcoin Ordinals are a concept that allows for unique pieces of data, such as artwork, text, or code, to be embedded directly onto individual satoshis — the smallest units of Bitcoin. This method transforms these satoshis into one-of-a-kind digital artifacts. By inscribing data onto a satoshi, it becomes an Ordinal — a unique digital collectible or piece of art that lives on the Bitcoin blockchain.

So, how do Bitcoin Ordinals this really work?

It all starts with the process of “inscription.” When someone inscribes an Ordinal, they’re embedding data into a transaction on the Bitcoin blockchain. This was made possible with the introduction of the Taproot upgrade, which allows for more complex data to be included in transactions.

Each inscribed satoshi is then cataloged in a sequential order, based on its position in the blockchain. This ensures that every Ordinal is unique, with its own “digital DNA” that can be traced back to its original inscription.

Unlike traditional Bitcoin transactions that are focused on sending and receiving currency, inscribing an Ordinal is about embedding and immortalizing data on the blockchain.

Beyond the Ordinals protocol, the Bitcoin ecosystem also supports the creation of NFTs through layered solutions built on top of the Bitcoin blockchain like Liquid, Stacks, and Lightning. With these layers, developers can create NFTs that inherit the security and decentralization of Bitcoin while offering features like faster transactions, improved scalability, and enhanced privacy.

What are the possible utilities of Bitcoin NFTs?

Leveraging the security and decentralization of the Bitcoin blockchain, Bitcoin NFTs offer a wide array of utilities, such as:

Digital art ownership and provenance — Bitcoin NFTs can serve as a digital certificate of ownership, ensuring that the provenance and authenticity of digital art are verifiable and immutable. In this way, artists can monetize their work directly and securely.
Gaming and collectibles — Unique in-game assets can be tokenized as NFTs on the Bitcoin blockchain. This enables true ownership of digital collectibles, improved interoperability between games, and enhanced potential for assets to appreciate in value.
Real estate and asset tokenization — Physical assets, including real estate, can be represented as Bitcoin NFTs, facilitating fractional ownership, reducing barriers to investment, and streamlining transactions through smart contract development.
Identity verification and access control — Bitcoin Ordinals can be used as a secure and immutable method to verify identity and grant access to online services, memberships, and gated communities.
Music and intellectual property rights — Musicians and creators can use NFTs to sell music, albums, or exclusive content directly to fans, providing a new revenue stream and a way to maintain control over their intellectual property.
Event ticketing — Ticketing for events can be issued as NFTs. This would help combat fraud and scalping as well as enable secondary markets where creators can earn a percentage of resales.

Bitcoin Ordinals vs NFTs: what’s the difference?

While Bitcoin Ordinals and traditional NFTs do have a lot in common in terms of utility, they possess several key differences.

Let’s examine them in greater detail.

Blockchain basis

Bitcoin Ordinals are inscribed directly onto the Bitcoin blockchain, utilizing the smallest unit of Bitcoin, the satoshi, as a carrier for data.

NFTs, on the other hand, are commonly associated with Ethereum and other smart contract-enabled blockchains. They utilize these platforms’ ability to execute complex contracts and applications, allowing for more interactive and dynamic digital assets.

Metadata and storage

A major portion of popular NFTs resides on the Ethereum blockchain and is based on the ERC-721 standard, which relies on metadata to describe the NFT’s properties. However, the digital asset itself is often stored off-chain, while the metadata includes a link to this external file.

Bitcoin Ordinals, in contrast, embed the entire data file within the witness signature field of Bitcoin transactions. This means that the digital piece of work is fully inscribed on the Bitcoin blockchain, without relying on external links or storage. The entirety of an Ordinal NFT’s data is thus immutable and permanently recorded on the blockchain, offering an additional layer of security and permanence.

Security and decentralization

Bitcoin Ordinals benefit from the unparalleled security and decentralization of the Bitcoin network, widely regarded as one of the most secure blockchains in existence. This high level of security is due to Bitcoin’s extensive Proof of Work consensus mechanism and its vast, distributed network of nodes.

While conventional NFTs also prioritize security, their level of security and decentralization depends on the underlying blockchain they are built on. For instance:

Ethereum — Known for its robust security measures and decentralized nature, Ethereum is a leading platform for developing, launching, and trading NFTs.
Binance Smart Chain (BSC) — Offers a high transaction throughput and lower fees. However, the blockchain faces criticism for its level of centralization, as a smaller number of validators run the network, potentially affecting its decentralization and security.
Solana — Boasts fast transactions and low costs, appealing for NFT projects and marketplaces. Yet, the Solana blockchain has faced several network performance issues and outages, raising concerns about its reliability and security under high demand.

Market and ecosystem

The Bitcoin Ordinals ecosystem is relatively new and is growing within the constraints of Bitcoin’s functionality, focusing on the novelty of embedding data directly onto the Bitcoin blockchain. This market is quite small and limited so far.

The NFT market is much more mature, with a vast ecosystem of platforms, marketplaces, and tools developed on Ethereum and other blockchains such as Binance Smart Chain, Flow, Tezos, and Solana. These diverse platforms facilitate the creation, sale, and exchange of NFTs across a wide array of communities and industries, expanding the reach and potential applications of digital collectibles and assets.

Bitcoin NFTs: the latest projects

Let’s take a look at several successful Bitcoin NFT projects that were recently launched and are gaining popularity these days.

Bitcoin Frogs

On March 8, 2023, the Bitcoin blockchain welcomed the introduction of Bitcoin Frogs, a unique collection of 10,000 digital frogs where each piece of art is designed with equally rare traits across various layers. These frogs were crafted through generative art and made available via minting on the Lightning Network. Transactions involving Bitcoin Frogs are primarily conducted on the MagicEden marketplace.

As of April 4, 2024, the Bitcoin Frogs NFT collection boasts a floor price of $5,156.88. The collection is now held by 4,702 distinct owners and has a total market capitalization of $51,6 million.

The collection reached its all-time high value on December 17, 2023, when a single Bitcoin Frog sold for 0.4779 BTC, equivalent to $31,000. On average, these NFTs have traded at around $3,500, marking them as a significant asset within the NFT and Bitcoin communities.

NodeMonkes

Launched on December 14, 2023, the NodeMonkes NFTs exhibit a wide range of unique digital traits and characteristics, organized into categories such as body color, earring type, eye traits, and headwear. The body colors include a variety of options from brown to alien green, highlighting diverse and imaginative designs. Headwear also greatly varies, adding another layer of personality to each NFT.

The collection has successfully minted 10,000 NFTs and is now showcasing a dazzling price floor of $33,068. It’s distinguished by a dynamic community of 4,589 unique owners and holds a market capitalization of $330.7 million, underlining its significant impact and the enthusiasm it generates within the NFT space.

Bitcoin Puppets

Bitcoin Puppets is a unique Bitcoin NFT collection that brings a fresh twist to digital art. These puppets offer a journey into a realm where creativity and whimsy take the lead.

With a price floor of $17,706.82 (as of April 4, 2024) and a 24-hour sales volume reaching 11.87 BTC, Bitcoin Puppets has quickly captured the attention of collectors and enthusiasts alike. Boasting 10,001 NFTs owned by 6,372 unique individuals, the collection has an astonishing market cap of $177 million.

NFT lovers can find this collection on the MagicEden marketplace as well.

Ordinal Maxi Biz (OMB)

Launched in March 2023, Ordinal Maxi Biz (OMB) is an intriguing project within the Bitcoin Ordinals ecosystem, born from the collaboration of ZK Shark, Tony Tafuro, and the artist Nullish. ZK Shark left a Wall Street career to dive into this venture.

OMB differentiates itself through its unique collections categorized by eye color themes: Blue eyes, Red eyes, and the most recent addition, Green eyes. The innovative project stands out for its bold thematic choices, blending finance and art in a way that challenges traditional perspectives and embraces a revolutionary spirit.

As of April 4, 2024, Ordinal Maxi Biz boasts a price floor of $24,645, marking its significant presence in the NFT marketplace with a total of 2,100 NFTs minted. These digital assets are distributed among 3,528 unique owners, underscoring the project’s widespread appeal and vibrant community engagement. The total market capitalization of OMB stands at an impressive $51,7 million.

What’s next for Bitcoin NFTs?

With Bitcoin NFTs providing a unique blend of security, scarcity, and interoperability, Bitcoin Ordinals are poised to redefine digital ownership and create new opportunities for creators and investors alike. The journey ahead is filled with possibilities for integration across various industries, such as gaming, real estate, fashion, music, sports memorabilia, education, and even healthcare.

As we explore this dynamic landscape, our team at PixelPlex is at the forefront, offering comprehensive NFT development services designed to help creators and brands unleash the full potential of Bitcoin NFTs and beyond.