Blockchain Ordinals and Inscription

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16 Jan 2024

Apart from airdrops and people making free cash, another topic that created a buzz in the space last week was ordinals and inscriptions.
Some support Ordinals, some are against them, some are just in between, and others don’t really understand what they are.
This writeup is all you need to understand what ordinals mean and to see things from the perspectives of the groups that are for or against them.
To understand ordinals, you first need to understand what satoshi is.
Satoshi is the smallest unit of Bitcoin.
1 Satoshi = 0.00000001 BTC

What exactly are ordinals?

Ordinals is a protocol on the bitcoin blockchain that allows the attachment of data to satoshis. These data could be images, texts, videos, or even software.
Dune
The process of attaching these data to the blockchain is called inscription.
These satoshis are now numbered from 1 to 2.1 quadrillion (when BTC reaches its maximum supply)
Now, while they are all satoshis, the numbering and the events around the bitcoin blockchain give each of them unique properties.

How is it possible?

Previously, it was not possible to distinguish between satoshis, but in recent years, with the aim of improving the bitcoin blockchain's scalability, privacy, and functionality, upgrades have been made.
The upgrades are necessary to ensure that the network can continue to function effectively. The recent upgrades, Segwit (in 2017), which increased the block size, and Taproot (in 2021), which reduced the amount of block space required, made ordinals possible.

Supporters—How do Ordinals help?

Utility: Bitcoin, the digital currency as we know it, can only be used to transfer token value from one wallet to another, but Ordinals and inscriptions are giving it another use case beyond just transactions.
Adoption: Giving bitcoin an additional utility brings in more adoption. Unlike Ethereum and others, the bitcoin blockchain is completely decentralised, and some will try inscribing important dates or files.
Miners: Ordinals and inscriptions not only cause the volume to soar, they also increase the fees. Which means miners get more reward.

Some of the big names supporting ordinals and inscriptions include Binance, OKX, and Justin Sun.

Against—The Effects of Ordinals

What are the issues with Ordinals? And why are some against it?

Fees: Those against it argued that while ordinals bring adoption, they raise transaction fees, making normal bitcoin transactions expensive, which is against what bitcoin is built for. “Bitcoin is not an art gallery.”
Illegal imagery: The bitcoin blockchain is supposed to be the center for blockchain decentralisation, inscribing maybe only memorable files and images would have been great, but we are beginning to see illegal images being inscribed into it. This is bad since the space still faces scrutiny from regulators.

Most bitcoin Maxi and devout Satoshi followers are against ordinals and inscriptions, saying it’s not what Satoshi wanted.
Some, like Luke, even called it a bug that would be fixed soon.

Are Ordinals and inscriptions really good or bad?

Those against Ordinals do raise some valid points, but to me, the benefits outweigh them.
Some are even suggesting forks to limit the block size.
Let’s face it, Ordinals is getting bigger, and I don’t see the whole ‘Ordinals sphere” just going into thin air because some bitcoin maxis don’t want it.
Dune
From the screenshot above, the dashboard shows about 47 million inscriptions and about $150 million in fees (based on the current price of BTC).

Popular Ordinals Projects

If you are someone like me, you would be wondering, since it’s new, how you can position yourself to make money from it in case it blows up.
So here are some projects you could look into:

Ordi — The biggest Ordinals token in terms of market cap.
Trac
TurtSat
Ordinex

Conclusion

The debate is out there, which is a good one, and I think it’s possible to find a common ground that satisfies both parties.
You and I don’t have to pick sides. We can just stay in between.
That’s it!
Feel free to leave comments and suggestions.
Follow me on Twitter: Cryptonalyses

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Written by Cryptonalyses

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I’m a blockchain analyst and researcher. I write about projects and break down complex blockchain terms and processes for anyone to read and understand.