Casey Rodarmor, a software engineer, conceptualized the idea of Bitcoin Ordinals, which became a reality due to the implementation of Bitcoin’s ‘Segregated Witness’ and ‘Taproot’ upgrades in 2017 and 2021, respectively.
Segregated Witness upgrade that was enacted in 2017 reorganized transactions by moving the signature data (witness) to the end of the transaction. This change resulted in an effective block size increase. Following that, in 2021, Taproot upgrade brought many improvements to the network, including the ability to create more complicated scripts in the witness section of a transaction. Taproot also removed the size limit for witness data, among other changes. The combination of SegWit and Taproot upgrades made it possible to store significant arbitrary data and made it cheaper than standard transaction data. This set the stage for Inscriptions.
Launched on the mainnet in January 2023, Ordinals allow users to inscribe various types of data, such as JPEG images, on satoshis, creating an Ordinal.
Inscriptions are pieces of arbitrary data and associated metadata in the network. The metadata tells Bitcoin nodes how to display such data, whether it’s an image or text. Inscriptions are similar to Ethereum’s calldata, which is used to store read-only data. Bitcoin’s Taproot upgrade and the Segregated Witness upgrade in 2017 allow for inscriptions as large as 4mb, making them ideal for storing large amounts of data.
The inscriptions are included in the witness data of a Bitcoin transaction, which stores the transaction signatures. Full archival Bitcoin nodes that run the ORD software can decode the inscriptions and view the content.
Ordinals are individual units of satoshis, which are the smallest denomination of Bitcoin. They are labeled and tracked using the concept of Ordinals Theory, which allows users to see when sats were mined and in what order. This methodology provides an interesting way to look at the history of Bitcoin’s supply and to apply rarity traits to individual sats based on various criteria.
The concept of tokenization on the Bitcoin network predated the creation of NFTs on Ethereum. Bitcoin’s first foray into NFT culture began in 2012 with the Colored Coins open-source project. This project introduced a new approach to Bitcoin by attaching real-world assets or services to a set of unspent transaction outputs (UTXOs).
As recent as 2021, the Stacks blockchain launched its own layer 1 blockchain to add NFT and DeFi capabilities to Bitcoin. The Stacks blockchain operates in parallel with Bitcoin’s blockchain, similar to a Bitcoin sidechain. However, the buying and selling of NFTs on Stacks can only be done using the native Stacks token (STX). As a result, some consider referring to Stacks as “Bitcoin NFTs” controversial, as the assets do not exist on the native Bitcoin blockchain and are not transacted using BTC.