Up until recently, almost all non-fungible tokens (NFTs) lived on either Ethereum’s or Solana’s blockchain. Thanks to new developments on top of Bitcoin’s blockchain, a similar type of ownership has been enabled by Bitcoin. Bitcoin’s blockchain is the most decentralized and robust network, attracting investors that care about provenance to invest in Bitcoin Ordinals.
While Bitcoin Ordinals are different from NFTs, they operate in a similar way. Inscriptions, or data inscribed onto a fraction of a Bitcoin token, can identify on-chain data, such as images, that mimic how NFTs work on smart contract blockchains.
What Are Bitcoin Ordinals?
Bitcoin Ordinals are inscriptions of data on Bitcon’s blockchain, commonly referencing digital collectibles or art. While Bitcoin is primarily known as a cryptocurrency, the concept of NFTs allows for the tokenization of various digital or physical assets, creating scarcity, provenance and verifiable ownership on Bitcoin’s blockchain.
Bitcoin Ordinals is an innovative protocol that enables a new level of functionality to Bitcoin’s blockchain. Pioneered by Casey Rodarmor, this protocol enables the assignment of unique identifiers to individual satoshis (SATs), the smallest unit of Bitcoin.
By attaching extra data to these identified SATs, Bitcoin Ordinals allows for the creation of non-fungible assets directly on Bitcoin’s network. While Ordinals are sometimes referred to as NFTs, the tokens are technically still fungible pieces of a Bitcoin, and other protocols must identify the data attached to these SATs.
How Do Ordinals Compare With Ethereum NFTs?
Ethereum has held the position as the preferred platform for NFTs since the innovation of non-fungible tokens came out in 2018. However, a novel contender has emerged in the form of Bitcoin Ordinals. Unlike Ethereum NFTs, Bitcoin Ordinals operate fully on-chain, making it nearly impossible to alter the data attached to the tokens. Bitcoin’s robust network makes Ordinals an attractive investment to cryptocurrency investors that value provenance and proof-of-work consensus.
Let’s dive into a comprehensive comparison between Ordinals and Ethereum NFTs, examining their similarities, points of divergence, and the potential implications they carry for the future evolution of the NFT market.
1. NFTs vs. Bitcoin Inscriptions
Although similar, NFTs and Bitcoin Inscriptions are two distinct concepts within the blockchain space. NFTs refer to unique digital assets that are indivisible and cannot be exchanged on a one-to-one basis like cryptocurrencies. On the other hand, Bitcoin Inscriptions aren’t distinct tokens. Instead, they’re data attached to fractional pieces of a Bitcoin, making it possible to spend your Bitcoin Ordinal as Bitcoin if you are not careful.
NFTs have gained significant attention for their ability to represent ownership and provenance of various digital and physical assets, such as artwork, collectibles and real estate. They are typically built on blockchain platforms like Ethereum, using smart contracts to facilitate ownership transfers and enforce certain rules or conditions.
Bitcoin Inscriptions, however, work differently because of Bitcoin’s inability to support smart contracts. Ordinals allow users to include additional data within a Bitcoin transaction. Bitcoin Inscriptions can be used to attach messages, digital signatures, or references to external information, such as artwork or collectibles.
2. Marketplaces for Ordinals vs. NFT Marketplaces
While there are plenty of marketplaces to purchase NFTs, most of these marketplaces only support Ethereum, Polygon or Solana. The availability of marketplaces dedicated to Ordinals, or Bitcoin NFTs, is currently more limited.
Because of their nascency, the user experience on Ordinal marketplaces may not be as refined as those focused on NFTs. However, there are a few notable marketplaces where Ordinals can be traded. Some examples include:
- Rare Bits: Rare Bits is a marketplace that supports the trading of Ordinals. It allows users to buy, sell and discover unique Bitcoin-based NFTs directly on the Bitcoin blockchain.
- AtomicMarket: AtomicMarket is a decentralized marketplace that supports Ordinals and NFTs across multiple blockchains, including Bitcoin. It provides a user-friendly interface for buying and selling digital assets.
- Rarible (Bitcoin integration): Rarible, a popular Ethereum NFT marketplace, has announced plans to integrate Bitcoin support, allowing for the trading of Ordinals alongside Ethereum-based NFTs.
While these platforms provide avenues to buy and sell Ordinals, they don’t offer the same amount of features as Ethereum-based NFTs. Marketplaces on Ethereum may let you take out loans on NFTs, have phygital integrations or give you access to other parts of Ethereum, such as DAOs. For these reasons, Ethereum NFT marketplaces like OpenSea, LooksRare, Blur and X2Y2 have gained traction and offer a more mature and diverse user experience.
3. Ordinals vs. NFT Market Size
Considering current market conditions, it's impressive to see the performance and growth of Bitcoin-based Ordinals and the overall Bitcoin NFT market. With hundreds of millions of dollars in volume, Bitcoin-based Ordinals have demonstrated promising potential, showcasing the demand for unique digital assets on the Bitcoin blockchain.
The Bitcoin NFT market as a whole has seen significant traction, generating approximately $167 million in sales over the past month. This indicates a growing market for Bitcoin NFTs and highlights the growing interest and participation in this space.
Comparatively, Ethereum NFTs have also exhibited substantial success, with sales totaling $397 million during the same period. Ethereum has historically been the dominant blockchain for NFTs, and these sales figures underscore its continued prominence in the NFT market.
These impressive sales numbers across both Bitcoin Ordinals and Ethereum NFTs reflect the increasing popularity and adoption of NFTs as a means of ownership and investment in the digital realm. The NFT market continues to evolve rapidly, presenting new opportunities for creators, collectors and investors in the space.
4. Liquidity for Bitcoin Ordinals vs. Ethereum NFTs
Most Ordinal collections are less liquid than those on Ethereum. It’s hard to gauge the liquidity of non-fungible assets, so certain collections on Bitcoin may be more liquid than other collections on Ethereum.
The difference primarily comes from Ethereum’s larger user base, higher trading volumes, and diverse offerings available on platforms like OpenSea and Blur. While liquidity for Bitcoin Ordinals is growing, the market is still developing, resulting in relatively lower trading volumes compared to Ethereum NFTs. As the market for Bitcoin Ordinals continues to evolve and dedicated marketplaces gain traction, liquidity may improve over time.
Benefits of Investing In Bitcoin Ordinals
Investing in Bitcoin and Ordinals can offer compelling benefits, making them attractive options for those seeking exposure to the digital asset space. Whether you're considering Bitcoin as a cryptocurrency or exploring the potential of Ordinals as Bitcoin-based NFTs, there are distinct advantages that come with these investments.
Volatility: One of the notable benefits of investing in Bitcoin and Ordinals is the potential for significant gains resulting from market volatility. Bitcoin has a history of experiencing price fluctuations, which can present opportunities for traders to generate outsized returns. However, it's important to note that volatility also entails the risk of significant losses. As with any investment, it's crucial to approach volatility and realize these investments are high risk.
Fully on-chain: Unlike some NFTs that may rely on external platforms or centralized databases to store and manage data, Ordinals operate fully on-chain. This means that the data attached to an Ordinal, such as ownership information or additional details, is stored on the Bitcoin blockchain.
Bitcoin's blockchain: By leveraging the Bitcoin blockchain, Ordinals inherit the benefits of the longest-running and most secure blockchain network. The robust architecture of the Bitcoin network enhances the security and immutability of Ordinals, making them less susceptible to hacking or manipulation compared to other blockchain networks. Additionally, Bitcoin's widespread adoption and recognition contribute to the liquidity and market acceptance of Ordinals, bolstering their appeal as digital assets.
It's important to remember that while these benefits exist, investing in Bitcoin and Ordinals carries inherent risks. It's advisable to conduct thorough research, assess personal risk tolerance and seek professional advice before making any investment decisions.
Frequently Asked Questions
Are Ordinals NFTs?
Technically, Ordinals are not considered NFTs, as they are inscribed on a fraction of a Bitcoin called a satoshi. In practice, Ordinals work similarly to NFTs, holding distinct values separate from the price of Bitcoin.
Is every Ordinal one-of-a-kind?
Each Ordinal is identifiable as a one-of-a-kind asset, but anyone can make a copy of the image attached to an Ordinal. So, two Ordinals can look exactly the same, but they would be different.
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