Bitcoin Network NFTs

Bitcoin Network NFTs

The Ordinals protocol enables NFT creation on Bitcoin. It supports various formats, including images, PDFs, videos, and audio. This expands Bitcoin's capabilities and boosts its leadership in the cryptocurrency world.

When discussing Non-Fungible Tokens (NFTs), most individuals focus on Ethereum, Solana, or Layer-2 networks. However, it's important to note that NFTs can also be utilized with the Bitcoin network. This is a unique approach, as it's different from a typical use case for Bitcoin. The reason for this underappreciation is Taproot. Taproot is a recent upgrade to the Bitcoin network that has resulted in a side effect, enabling NFTs to be utilized with Bitcoin. However, the process is more complex and less straightforward than using NFTs on Ethereum or other blockchain networks.

The concept of OP_RETURN on the Bitcoin network has been discussed and debated among those familiar with the network. It was first introduced by projects such as Omni, Counterparty, and Veriblock, and it caused quite a stir in the community. OP_RETURN is a transaction output that is provably unspendable and used to “burn” Bitcoin. This means it sends Bitcoin to a completely unspendable address, effectively taking it out of circulation. Despite this primary use case, OP_RETURN can also be leveraged to store arbitrary data on the blockchain. This opens up the possibility of building decentralized applications on the Bitcoin network, although this use case has yet to gain significant traction.

This lack of adoption is primarily due to concerns over the potential inflation of Bitcoin transaction fees due to the arbitrary data stored on the blockchain. Since the data stored in OP_RETURN is forever on the blockchain, adding too much data could cause the blockchain to become bloated, increasing transaction fees for everyone using the network. This was a significant concern for many individuals in the community, leading to the underutilization of OP_RETURN.

However, this current condition may soon change, as Taproot, a recent upgrade to the Bitcoin network, has unwittingly opened up the possibility of limitless Bitcoin data storage without using OP_RETURN. This design quirk led to creation of a new NFT protocol on the Bitcoin network, Ordinals. This significant development could disrupt the traditional way NFTs are created and managed. With Ordinals, creating and managing NFTs becomes more efficient and cost-effective, eliminating the need to use OP_RETURN and the associated costs.


Ordinals is a new NFT protocol built on the Bitcoin network and leverages the design quirks of the recent Taproot upgrade. It works by repurposing individual satoshis as NFTs. Despite being fungible by nature, the Ordinal Theory convention allows participants to ascribe non-fungible features to these satoshis, making it possible to create NFTs more efficiently and cost-effectively.

The concept of Ordinals is similar to an accounting standard in personal finance. For example, in accounting, you can have multiple units of the same stock, but when it comes to selling, you have to determine which unit to sell and calculate the gains made on the sale. Ordinals use a First-In-First-Out (FIFO) system to track individual satoshis, similar to how an accounting firm would use an accounting standard like Last-In-First-Out (LIFO) to determine which unit of stock to sell. This system provides a consistent way for participants to opt into the convention and differentiate the different units of satoshis. Still, the fungibility of these satoshis is intact for everyone.

Ordinals leverage the recent Taproot upgrade to the Bitcoin network to store NFT data in the Taproot script-path spend scripts. This upgrade relaxed the limits on witness (signature) data sizes in a Bitcoin transaction, providing an opportunity for Ordinals to repurpose old opcodes (OP_FALSE, OP_IF, OP_PUSH) into so-called “envelopes” to store arbitrary data for NFTs.

The Taproot upgrade was not designed explicitly for NFTs but to allow for future bitcoin contract functionality by relaxing the limits on witness data sizes. However, the increased capacity for storing arbitrary data in a Bitcoin transaction has been utilized by Ordinals to create a new and innovative NFT protocol on the Bitcoin network.

Ordinals developer, Casey Rodarmor, recognized the potential of the Taproot upgrade. He created a new NFT protocol and has taken advantage of this by repurposing the old opcodes into envelopes for storing NFT data. This has enabled him to build a new NFT protocol that maximizes the increased capacity for storing arbitrary data in a Bitcoin transaction.

Overall, Ordinals provides a new and innovative way of creating and managing NFTs on the Bitcoin network. By repurposing individual satoshis as NFTs and using the FIFO system to track them, it offers a cost-effective and efficient solution for creating NFTs that are flexible and customizable for participants. It's a concept that might be hard to grasp at first, but it can potentially revolutionize the way NFTs are created and managed on the Bitcoin network.

The Debate

Introducing the Ordinals NFT protocol has sparked debate within the Bitcoin community, with different groups holding varying opinions on its potential impact. Those who support the protocol argue that it expands the use cases for Bitcoin, offering a new way to store and trade unique digital assets on the blockchain. Proponents of this view argue that this innovation can drive greater adoption of Bitcoin and bring it closer to its intended purpose as a decentralized digital asset.

On the other hand, some are skeptical of the protocol, claiming that it deviates from Satoshi Nakamoto's original vision. These individuals believe that introducing NFTs and storing large amounts of data on the blockchain could lead to increased network congestion, higher fees, and, ultimately, a deviation from the principles of Bitcoin's design.

On the positive side, having proper on-chain NFTs will make the technology behind NFTs more reliable and secure. NFTs only have a pointer to the digital asset stored on a separate server. This can raise concerns about the security and accessibility of digital assets in the long term. Keeping NFTs directly on the blockchain will be accessible and secure forever.

On the other hand, storing NFT data on the blockchain could have negative consequences. Every full node on the network will have to download and keep every on-chain NFT, increasing the size of the blockchain and putting strain on the network. This could result in increased transaction fees and the possibility of filling up the blocks.

The storage of NFT data as “witness data” is much cheaper than traditional transaction data, which could reduce the impact of witness data on the transaction fee market. However, this could also result in NFT “witness” data making up more volume than transaction “witness” data, which may not be ideal for some.

These differing views reflect the broader debate within the cryptocurrency community about Bitcoin's proper use and purpose. Some see it as a store of value, while others view it as a tool for payments and financial transactions. Regardless of one's perspective, it is clear that the introduction of the Ordinals NFT protocol has the potential to significantly impact the future of Bitcoin and the broader cryptocurrency ecosystem.

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Disclaimer: Nothing on this site should be construed as a financial investment recommendation. It’s important to understand that investing is a high-risk activity. Investments expose money to potential loss.



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