What Are Bitcoin Ordinals?

Bitcoin ordinals are a way to create digital assets on Bitcoin by attaching data to individual satoshis, the smallest unit of Bitcoin. Each satoshi gets a unique number called an ordinal based on when it was mined. These ordinals on Bitcoin allow data like images or text to be attached, which turns satoshis into digital collectibles similar to NFTs. Unlike regular Bitcoin transactions, ordinals store extra information that makes them one-of-a-kind.

Ordinals expand what you can do with Bitcoin. Instead of being only a currency, Bitcoin can also hold unique assets. Since they use Bitcoin’s existing network, ordinals benefit from Bitcoin’s security and decentralization. This makes them a new way to create NFTs using Bitcoin.

Bitcoin ordinals assign a number to each satoshi as they are mined. This number is called an ordinal. Once a satoshi has an ordinal, data such as images, text, or files can be attached to it, creating a unique asset. These ordinals are stored directly on the Bitcoin blockchain, so they get the same level of security as regular Bitcoin transactions.

Ordinals became possible because of upgrades to Bitcoin called Taproot and SegWit, which increased the amount of data stored in each Bitcoin block. Unlike blockchains that use smart contracts to create NFTs, Bitcoin ordinals use the main blockchain, which requires specific tools and platforms to manage them.

Bitcoin ordinals are valuable because they are unique digital assets on the Bitcoin blockchain. Each satoshi inscribed with data is one-of-a-kind, much like an NFT. The scarcity of ordinals and Bitcoin’s established security make them attractive to collectors looking for rare digital items.

Beyond their uniqueness, ordinals bring a new use case to Bitcoin. Supporters believe ordinals could increase demand for block space, which might help make Bitcoin more sustainable. This could be important for miners relying more on transaction fees as block rewards shrink.

Mining a Bitcoin ordinal is different from mining Bitcoin. Instead of validating transactions through proof-of-work, creating an ordinal means having to inscribe data onto a satoshi. To do this, you need to use a Bitcoin platform that supports ordinals, like Magic Eden.

To create an ordinal, choose the file or data you want to attach, upload it to the platform, and inscribe it onto a satoshi. Once inscribed, the satoshi becomes an ordinal on Bitcoin, which can then be stored or traded using a compatible wallet.

Learn more about crypto mining.

Buying Bitcoin ordinals requires using a specific platform that supports them. Popular platforms include Ordinals Wallet and OKX, where you can browse, purchase, and trade ordinals. You’ll need to set up a Bitcoin wallet compatible with ordinals and have enough Bitcoin to cover both the cost of the ordinal and any transaction fees.

Once your wallet is ready, you can explore different ordinal collections and choose the one you want to buy. After purchasing, the ordinal will be stored in your wallet, and you can trade or sell it whenever you like.

Creating BTC ordinals involves attaching data to a satoshi. You’ll need access to a Bitcoin platform like Magic Eden or Ordinals Wallet. After selecting the content you want to inscribe, such as an image or text, you upload it to the platform and follow the steps to attach it to a specific satoshi.

Once the process is done, that satoshi becomes a Bitcoin ordinal, which can be traded, held, or sold. Make sure to choose a platform that supports ordinals and offers tools for the inscription process.

Learn about NFT trading cards.

Bitcoin ordinals are sold through marketplaces that support them, like Ordinals Wallet or OKX. To sell, you first transfer the ordinal from your wallet to the marketplace and list it for sale. The price can vary depending on how rare the ordinal is and what buyers will pay.

After listing it, buyers can purchase your order using their Bitcoin wallet. Remember to account for transaction fees, which can go up or down depending on the network's activity.

While both ordinals and NFTs represent unique digital assets, they are created differently. Bitcoin ordinals are made by attaching data to a satoshi on the Bitcoin blockchain. Conversely, NFTs usually rely on smart contracts and are often created on blockchains like Ethereum. Ordinals don’t need smart contracts because they use Bitcoin’s existing infrastructure to store and trade digital assets.

Another key difference is storage. NFTs often store the actual asset’s metadata off-chain, while ordinals store everything directly on the Bitcoin blockchain. This gives ordinals more security and decentralization, though they are less flexible than NFTs on platforms like Ethereum.

Bitcoin ordinals have created a buzz in the cryptocurrency community. They’ve brought new interest in Bitcoin development, especially from users who previously focused on other blockchains. Ordinals could increase demand for block space, which might provide new revenue streams for miners as Bitcoin’s block rewards decrease.

However, not everyone supports ordinals. Some people worry that ordinals use too much space on the Bitcoin blockchain, which could drive up transaction fees and make the network slower. Others argue that ordinals don’t fit Bitcoin’s original purpose as a peer-to-peer currency.

Bitcoin ordinals are subject to taxes just like NFTs. If you sell or trade an ordinal and make a profit, you may owe capital gains tax. The exact amount depends on how long you held the ordinal and your local tax laws. Keeping good records of your transactions is important to ensure you pay the right amount of tax.

At TokenTax, our crypto tax professionals can help you figure out the tax implications of Bitcoin ordinals and make sure everything is reported properly.

Learn more in our NFT tax guide.

Get answers to frequently asked questions about, Bitcoin ordinals, wrapped Bitcoin ordinals, ordinals on Bitcoin, and what are Bitcoin ordinals?

What platform are Bitcoin ordinals on?

You can find Bitcoin ordinals on platforms like Ordinals Wallet and OKX, which allow you to trade and store these digital assets.

What is an ordinals wallet?

An ordinals wallet is a special kind of Bitcoin wallet that supports storing and trading ordinals. It’s designed to handle these unique assets safely.

What are runes in Bitcoin?

Runes are a new fungible token standard on the Bitcoin blockchain, created by Casey Rodarmor, the developer behind Ordinals. Unlike previous Bitcoin token standards like BRC-20, which can cause network congestion, Runes aim to be more efficient by reducing unnecessary data on the network.

Learn how to get a Bitcoin ordinals wallet.