Bitcoin Ordinals Explained: Inscriptions on the Bitcoin Blockchain

Bitcoin Ordinals Explained: A Complete Guide to Inscriptions

Bitcoin Ordinals have taken the crypto world by storm, introducing a way to inscribe data — images, text, audio, and even applications — directly onto the Bitcoin blockchain. If you've heard about "Bitcoin NFTs" and wondered how that's possible on a network designed purely for financial transactions, this guide is for you.

What Are Bitcoin Ordinals?

Bitcoin Ordinals are a numbering system for satoshis — the smallest unit of Bitcoin (1 BTC = 100,000,000 satoshis). Created by developer Casey Rodarmor in January 2023, the Ordinals protocol assigns a unique sequential number to every single satoshi based on the order it was mined. This numbering system is called ordinal theory.

Because each satoshi can now be individually identified, it becomes possible to attach — or "inscribe" — arbitrary data onto a specific satoshi. This inscription is stored directly on the Bitcoin blockchain, making it permanent and immutable.

How Do Ordinal Inscriptions Work?

The technical foundation of Ordinals relies on two key Bitcoin upgrades:

• SegWit (2017): Segregated Witness separated transaction signature data from transaction data, creating a "witness" section with a higher data capacity.
• Taproot (2021): This upgrade relaxed the limits on how much data could be stored in the witness section of a transaction, effectively allowing up to 4MB of data per block.

When you create an inscription, the data is embedded in the witness portion of a Bitcoin transaction. The process involves two transactions: a commit transaction that prepares the inscription and a reveal transaction that actually writes the data on-chain.

The Inscription Process Step by Step

1. Choose your content: This can be an image (JPEG, PNG, SVG, WebP), text, HTML, audio, or video.
2. Serialize the data: The content is converted into a format that can be stored in the witness field of a Taproot transaction.
3. Commit transaction: A transaction is created that commits to the inscription content.
4. Reveal transaction: A second transaction reveals the inscription data on-chain, permanently attaching it to a specific satoshi.

Ordinals vs Traditional NFTs

If you're familiar with Ethereum NFTs, Bitcoin Ordinals represent a fundamentally different approach:

Feature	Bitcoin Ordinals	Ethereum NFTs
Data Storage	Fully on-chain	Usually off-chain (IPFS/Arweave)
Smart Contract	No smart contract needed	Requires ERC-721/1155 contract
Blockchain	Bitcoin mainnet	Ethereum mainnet or L2s
Immutability	Secured by Bitcoin's hashrate	Dependent on contract logic
Royalties	Not natively enforced	Programmable via contract
File Size Limit	~4MB per block	No practical on-chain limit (but expensive)

Types of Ordinal Inscriptions

Since the launch of Ordinals, the community has created several categories:

Image Inscriptions

The most popular type. Collections like Ordinal Punks, Bitcoin Frogs, and Taproot Wizards have become iconic. These are full image files stored permanently on Bitcoin.

Text Inscriptions

Plain text or JSON data inscribed on-chain. This led to the creation of BRC-20 tokens — a fungible token standard that uses JSON inscriptions to deploy, mint, and transfer tokens.

Recursive Inscriptions

A more advanced technique where inscriptions reference other inscriptions, allowing for modular, composable on-chain content. This enables complex applications to be built entirely on Bitcoin.

The Impact on Bitcoin

Ordinals have sparked significant debate within the Bitcoin community:

Arguments in Favor

• Increased miner revenue: Inscriptions generate additional transaction fees, improving miner economics as block rewards decrease over time.
• New use cases: Ordinals bring cultural and artistic value to Bitcoin, attracting new users and developers.
• Full decentralization: Unlike most NFT platforms, all data lives on-chain with no external dependencies.

Arguments Against

• Block space competition: Inscriptions consume block space that could be used for financial transactions, potentially increasing fees for regular users.
• Blockchain bloat: Large inscriptions increase the size of the blockchain, making it harder to run full nodes.
• Philosophical concerns: Some Bitcoin purists believe Bitcoin should only be used as money, not as a data storage layer.

How to View and Create Ordinal Inscriptions

To explore existing inscriptions, you can use block explorers like ordinals.com or ord.io. These platforms let you browse, search, and view inscriptions by number, type, or collection.

To create your own inscription, you'll need:

• A Taproot-compatible Bitcoin wallet (like Xverse, Unisat, or Hiro Wallet)
• Some Bitcoin to cover the inscription fee and transaction costs
• The file you want to inscribe (keeping in mind the ~4MB limit)

Several platforms like Gamma.io, OrdinalsBot, and Unisat offer user-friendly inscription services. Check our tools page for recommended options.

Ordinals and Sri Lanka

For the Sri Lankan crypto community, Ordinals represent an interesting opportunity. Artists and creators in Sri Lanka can inscribe their work permanently on the most secure blockchain in existence. Given that Bitcoin operates globally without gatekeepers, Sri Lankan artists can reach international collectors directly. Visit our learning center for more on how to get started with Bitcoin in Sri Lanka.

The Future of Ordinals

As the protocol matures, we're seeing innovations like recursive inscriptions, improved marketplace infrastructure, and new standards like Runes (covered in our next article). The Ordinals ecosystem is evolving rapidly, with developers building on-chain games, decentralized applications, and entire metaverse experiences — all inscribed directly on Bitcoin.

Disclaimer: This article is for educational purposes only and does not constitute financial advice. Bitcoin and cryptocurrency investments carry significant risk. Always do your own research before making any investment decisions. The Central Bank of Sri Lanka has not authorized cryptocurrency as legal tender.