Bitcoin Ordinals easy introduction
What are Bitcoin Ordinals?
Essentially, Ordinals is a system overlaid on Bitcoin which allows individual satoshis (and as you’re no doubt aware, satoshis are the smallest unit of bitcoin, akin to cents or pennies) to be identified according to their age. In the Ordinals numbering system, the first satoshi of the first block ever mined, has a value of 00000000000000000000.
As a simple analogy, pretend that an inept central banker has just printed a run of banknotes without any serial numbers. As there’s no numbering system to identify your individual bills, and as they’re identical in all other respects, there’s no way to track these bills as they circulate through the economy.
As a simple analogy, pretend that an inept central banker messed up his order to the Mint, and they’ve just printed off a run of crisp new banknotes without any serial numbers.
As there’s no numbering system to identify the individual bills, and as they’re identical in all other respects, there’s no way to track these bills as they circulate through the economy. Absent any markings or wear and tear, all the new bills look exactly alike.
This situation whereby units of currency are indistinguishable is known as “fungibility,” and it’s the default – and desirable – state of Bitcoin. While BTC being fungible is a desirable property in terms of monetary freedom, for obvious reasons it works against implementing the asset class known as Non-Fungible Tokens (or NFTs) in Bitcoin.
Let’s return briefly to our banknote analogy. In a heroic effort, the central banker manages to round up all his bungled bank notes, and scrawl serial numbers on them using invisible ink. As a result, anybody with a UV light can read the secret serial numbers on the bills, and so track them. Ordinals is much like this method of invisible ink and UV light numbering, only applied to digital satoshis instead of physical banknotes.
The nice thing about Ordinals is that it’s entirely optional. For those without interest in “Bitcoin NFTs,” it’s like Ordinals doesn’t even exist and, due to the rather theoretical way in which it works, it certainly won’t help anyone to track the movement of their coins. However, for those who are interested in “Bitcoin NFTs” – more properly known as Inscriptions – they can use the relevant software to superimpose a workable image of non-fungibility onto their satoshis. From there, it’s just a hop and a skip to to Bitcoin Non-Fungible Tokens!
Once a satoshi has been uniquely identified within the Ordinals system, it can be Inscribed, which is to say permanently associated with up to 4 megabytes of data, be it image, audio, text, or code. You can think of this Inscription creation process as like an autograph. Pretend some famous figure, let’s say Chuck Norris himself, autographs one of our bungling banker’s bills – and just for fun, Mr. Norris also uses an invisible ink pen. For those outside the UV light clique, Chuck’s buck would look like any other and so hold equivalent value. For anyone using UV however, that bill is suddenly worth a whole lot more for bearing the great man’s signature. If you were the bill’s owner and you were wise to the system (and now you are), you could frame it or perhaps sell it for a fortune.