When Casey Rodarmor launched the Ordinals protocol in January 2023, he ignited a firestorm of controversy in the Bitcoin community. By enabling individual satoshis to be inscribed with data – images, text, audio, video – Ordinals brought NFT-like functionality to Bitcoin for the first time. The BRC-20 token standard, built on top of Ordinals, went further by enabling fungible tokens on Bitcoin. Together, these innovations have fundamentally expanded what Bitcoin can do.
How Ordinals Work
The Ordinals protocol assigns a unique number to every satoshi based on the order in which it was mined. This numbering system allows individual satoshis to be tracked as they move through the blockchain. Once satoshis have unique identities, they can be inscribed with arbitrary data embedded in a Bitcoin transactions witness field.
The key innovation is that Ordinals use the existing Bitcoin protocol without requiring any changes to the consensus rules. They work within the existing block size limits and use the witness discount introduced by SegWit to make inscriptions economically feasible.
The BRC-20 Token Standard
Building on Ordinals, an anonymous developer named Domo created the BRC-20 token standard in March 2023. BRC-20 tokens are fungible tokens that are created and managed through Ordinal inscriptions. The first BRC-20 token, ordi, was created as an experiment and quickly gained a market capitalization of hundreds of millions of dollars.
At the peak of the BRC-20 boom in May 2023, thousands of tokens had been created, and Bitcoin transaction fees surged as users competed for block space to mint and trade tokens. While the initial frenzy has subsided, the infrastructure and community remain strong.
The Impact on Bitcoin
Ordinals and BRC-20 tokens have had several significant effects on the Bitcoin ecosystem. First, they dramatically increased transaction fees during peak activity, with some blocks generating over 1 BTC in fees for miners. This has been a boon for miner revenue, especially after the 2024 halving reduced block rewards.
Second, they expanded Bitcoins use cases beyond financial transactions. Digital art, collectibles, domain names, and even software can now be inscribed on the Bitcoin blockchain. This has attracted a new community of artists, creators, and developers to Bitcoin.
Third, they sparked a cultural debate within the Bitcoin community. Supporters argue that inscriptions are a legitimate use of block space that brings new users and revenue. Critics argue that they bloat the blockchain with non-financial data and increase fees for regular users.
Bitcoin is big enough for everyone. If you are paying fees, you are using the network. Thats what its for.
Casey Rodarmor, creator of Ordinals
Major Ordinals Collections
Several Ordinals collections have achieved significant cultural and financial prominence. Bitcoin Punks was the first major collection, a tribute to CryptoPunks inscribed on Bitcoin. NodeMonkes became one of the most valuable Ordinals projects with 10,000 generative art pieces. Taproot Wizards celebrated the Taproot upgrade with the largest Bitcoin transaction ever recorded.
The Technical Evolution: Runes
Since their launch, Ordinals and BRC-20 have evolved significantly. The most important development is Runes, created by Casey Rodarmor as a more efficient alternative to BRC-20. Runes use a UTXO-based model that is more aligned with Bitcoins architecture and produces less blockchain bloat.
Other innovations include recursive inscriptions that allow inscriptions to reference other inscriptions (enabling complex on-chain programs), Ordinals marketplaces like Magic Eden and OKX that provide liquidity, and Ordinals wallets like Xverse and Unisat that make it easier to hold and trade inscriptions.
The Future of Bitcoin Tokens
The Ordinals and BRC-20 phenomenon has opened the door to a new era of Bitcoin-based digital assets. Runes, in particular, has emerged as a more sustainable and Bitcoin-native approach to tokens. Looking ahead, we can expect continued innovation in Bitcoin-based tokens, digital artifacts, and on-chain applications.
The key challenge will be balancing these new use cases with Bitcoins core mission as a decentralized payment system and store of value. Whether you view Ordinals as a feature or a bug, they have permanently expanded the Bitcoin ecosystem.
Learn more about Bitcoins evolving capabilities at bitcoin.org.
The Ordinals Marketplace Ecosystem
A thriving marketplace ecosystem has emerged around Ordinals. Magic Eden, the largest NFT marketplace, added Bitcoin Ordinals support in early 2023, bringing its massive user base to the Bitcoin NFT space. OKX, one of the worlds largest crypto exchanges, launched an Ordinals marketplace with integrated wallet functionality. Gamma.io and other Bitcoin-native platforms have also built robust trading experiences.
These marketplaces provide the infrastructure needed for Ordinals to thrive: discovery, trading, bidding, and portfolio management. They have made it easy for newcomers to buy, sell, and trade Ordinals without needing deep technical knowledge.
Criticisms and Challenges
Despite their popularity, Ordinals face legitimate criticisms. The most significant is blockchain bloat – inscriptions take up block space that could be used for financial transactions. Critics argue that this increases fees for regular Bitcoin users and makes it more expensive to run full nodes.
There are also concerns about the permanence of inscriptions. Unlike traditional NFTs that often store metadata on IPFS or other external systems, Ordinals are stored directly on the Bitcoin blockchain. This means they are truly permanent – but it also means they permanently consume block space.
Some Bitcoin purists argue that Ordinals violate the intended use of Bitcoin as a financial system. The blocksize wars of 2015-2017 were fought over exactly this question: what should Bitcoin be used for? Ordinals have reignited this debate.
Learn more about Bitcoins evolving capabilities at bitcoin.org.
The Cultural Impact of Ordinals
Beyond the technical and financial aspects, Ordinals have had a profound cultural impact on the Bitcoin community. For the first time, Bitcoin is being used for something other than financial transactions. Artists, musicians, writers, and creators of all kinds are using Ordinals to publish their work on the most secure and decentralized blockchain in the world.
This cultural shift has brought new people to Bitcoin. Many artists who had never used Bitcoin before have created Ordinals, attracted by the idea of permanent, censorship-resistant digital art. This has expanded the Bitcoin community beyond its traditional base of libertarians, cypherpunks, and financial professionals.
The Environmental Debate
Ordinals have also reignited the debate about Bitcoin’s energy consumption. Critics argue that using block space for digital art is wasteful, especially when that space could be used for financial transactions. Supporters counter that Bitcoin mining would happen regardless of what the block space is used for, and that the fees paid by Ordinals users help fund the network’s security.
The environmental debate is likely to continue as long as Ordinals exist. But it is worth noting that the fees paid by Ordinals users have been a significant source of revenue for miners, especially after the 2024 halving reduced block rewards.
Ordinals and the Future of Bitcoin
Ordinals represent a fundamental expansion of what Bitcoin can do. They have shown that Bitcoin is not just a financial system – it is a platform for permanent, censorship-resistant data storage. This opens up possibilities that go far beyond digital art, including software distribution, identity verification, and legal documentation.
Whether you view Ordinals as a feature or a bug, they have permanently changed the Bitcoin ecosystem. The genie is out of the bottle, and there is no going back.
Learn more about Bitcoins evolving capabilities at bitcoin.org.