How Inscriptions Work

While Ordinals provide a way to number and track individual satoshis, inscriptions are the mechanism for attaching data to them. An inscription permanently embeds content — an image, text, audio, video, HTML, or even a full application — directly onto a specific satoshi on the Bitcoin blockchain.

The Technical Foundation

Inscriptions became possible thanks to two Bitcoin upgrades:

• SegWit (2017): Segregated Witness separated transaction signatures from transaction data and introduced the "witness" section of a transaction, which has a higher data limit (up to 4 MB per block for witness data vs. 1 MB for non-witness data).
• Taproot (2021): Taproot introduced Schnorr signatures and relaxed the limits on witness data scripts, making it practical to embed larger amounts of arbitrary data in a single transaction.

Inscriptions exploit these upgrades by embedding data in the witness portion of a Taproot transaction. The data is stored in a script that is part of a "spend" transaction, using OP_FALSE OP_IF ... OP_ENDIF envelopes that encapsulate the inscription content.

What Can Be Inscribed?

Virtually any type of digital content can be inscribed onto a satoshi:

• Images: JPEG, PNG, SVG, GIF, and WebP — the most common inscription type.
• Text: Plain text, JSON, and even full documents.
• Audio: MP3 and WAV files.
• Video: MP4 files (though size limits make this challenging).
• HTML/JavaScript: Interactive web applications that run entirely from the blockchain.
• BRC-20 tokens: A token standard built on top of inscriptions (we'll discuss this in the ecosystem lesson).

The Inscription Process

Creating an inscription involves a two-step transaction process:

1. Commit transaction: A transaction is created that commits to the inscription data (essentially a hash of what will be inscribed).
2. Reveal transaction: A second transaction "reveals" the full inscription data, embedding it permanently in the Bitcoin blockchain.

This two-step process is necessary because of how Taproot scripts work — the script (containing the inscription data) is only revealed when the output is spent.

Cost Considerations

The cost of creating an inscription depends on two factors: the size of the data and the current fee rate (satoshis per virtual byte). A small text inscription might cost a few dollars, while a large image during a period of high fees could cost hundreds or even thousands of dollars. For Sri Lankan creators interested in inscribing digital art, timing inscriptions during low-fee periods can significantly reduce costs — typically weekends and late-night hours (UTC) see lower fees.