Bitcoin NFTs: A Complete Beginner’s Guide

Learn what Bitcoin NFTs are, how to inscribe them, and where you can buy them in this comprehensive guide.

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NFTs
,
Ordinals
,
Bitcoin
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Author(s)

Elizabeth Olson

Published

November 8, 2023

Bitcoin NFTs have made an impressive comeback in 2023, thanks to the emergence of Ordinal Theory enabling the creation of unique digital assets inscribed onto individual satoshis on the Bitcoin blockchain. 

Read on to learn what Bitcoin-native NFTs are, how they work, and where you can buy them. 

What Are Bitcoin NFTs?

Bitcoin NFTs, commonly referred to as Bitcoin Ordinals, are unique digital assets inscribed on individually numbered satoshis on the Bitcoin blockchain that can represent digital art, music, collectibles, and other types of assets. 

Unique digital assets on Bitcoin are made possible by Ordinals Theory, which prescribes numbers to each satoshi, and the Ordinals protocol, which enables the inscription of individual satoshis with data. Each satoshi can be tracked using indexers to identify Ordinal inscriptions. 

Developer Casey Rodarmor created the Ordinals protocol in February 2022 and launched it on the mainnet in January 2023. The release of this protocol caused a lot of excitement in the NFT community as it introduced a unique and innovative way of bringing native NFTs to Bitcoin in the form of Ordinal inscriptions.  

A Brief History of NFTs on Bitcoin

Bitcoin wasn’t designed to support the creation and issuance of non-fungible tokens or any other type of token. It was built to facilitate global peer-to-peer payments free of intermediaries. However, this hasn’t stopped developers from adding more utility and functionality to the most secure blockchain in the world.  

The Colored Coins project first attempted to create Bitcoin NFTs in 2012, before the term “NFT” even existed. Cryptographer Meni Rosenfeld, the brain behind the project, wrote in the Colored Coins paper that by tracking the origin of a specific bitcoin, it’s possible to “color” it, distinguishing it from the rest. 

In other words, a Colored Coin was created by adding metadata representing a real-world asset to a Bitcoin transaction. This opened up the Bitcoin blockchain to several applications beyond NFTs. For instance, Bitcoin-native securities could be issued by creating Colored Coins representing bonds or stocks. 

In the early days, the Colored Coins project generated great excitement within the Bitcoin community, inspiring developers to experiment with the concept. Developers building on top of Bitcoin then resulted in Layer-2 protocols like Counterparty and Mastercoin. 

In the following years (2015 and 2016), the next Bitcoin-secured NFTs were built on Counterparty. However, it was easier to issue NFTs and other tokens on Ethereum, a blockchain launched one year before the release of Counterparty NFTs. Since Ethereum was built to issue all types of assets, interest in Bitcoin NFTs waned as Ethereum projects like CryptoKitties and CryptoPunks ushered in a new era of non-fungible tokens. 

While it might have seemed like Bitcoin was out of the NFT game, two protocol changes made in 2017 and 2021 created the foundation for a new phase of Bitcoin NFTs.   

The Rise of Bitcoin NFTs

In 2023, Bitcoin NFTs are bigger and better than ever thanks to the Ordinals protocol. 

After launching in January, Bitcoin Ordinals quickly became popular as the NFT community rushed into Bitcoin-native NFTs. Suddenly, versions of popular Ethereum NFT projects, like Crypto Punks and Ether Rocks, were making their way to Bitcoin and bringing new users. 

Furthermore, Yuga Labs, the creator of the Ethereum-based NFT brand Bored Ape Yacht Club (BAYC), launched an NFT collection on Bitcoin called ‘Twelve Fold,’ which sold for $16.5 million at an auction held in March. 

Other notable Bitcoin Ordinals include Taproot Wizards, Ordinalz Maxi Biz (OMB), BTC DeGods, OnChainMonkey (OCM), and Bitcoin Punks.

The rise of Bitcoin Ordinals created a demand for Ordinals wallets, marketplaces, and minting platforms, a need quickly satisfied by builders at Xverse, Gamma, Magic Eden, and OrdinalsBot. As a result, the Bitcoin NFT ecosystem has grown significantly, recording millions of dollars in trading volumes. 

Furthermore, Ordinal-based token standards such as BRC-20 and ORC-20 emerged, taking the number of inscriptions beyond the one million mark in April 2023. The following month, the number of Ordinal inscriptions increased tenfold as BRC-20 tokens became more popular. These fungible Bitcoin-native tokens, mainly dominated by meme coins, briefly hit a total market capitalization of $1 billion in May 2023.

Although BRC-20 focuses on fungible tokens, they are based on Ordinal Theory, the mechanism used to create Bitcoin Ordinal.

How Do Bitcoin NFTs Work?

Now, let’s take a look at how Bitcoin NFTs work.

Ordinal Theory

Bitcoin Ordinals are created by inscribing (attaching) content to satoshis (sats), the smallest bitcoin unit. A numbering scheme called Ordinal Theory allows protocol users to track individual sats and append them with various data types such as images, HTML files, and audio. Inscribed sats, called inscriptions or digital artifacts, can then be transferred from one person to another. Sats are inscribed using the Ord software.

Through Ordinal Theory, sats are numbered starting from zero in the order in which they are mined. Tracking each numbered satoshi throughout the existing Bitcoin supply becomes easier.  

SegWit and Taproot

Bitcoin Ordinals are made possible by two Bitcoin upgrades: SegWit and Taproot. Segregated Witness (SegWit) was implemented in 2017, changing the structure of a Bitcoin transaction to increase data storage efficiency. 

The update minimized the weight of transactions in a block by splitting a transaction into two parts. The first part holds the sender’s and receiver’s wallet addresses, while the witness section stores transaction signatures. 

On the other hand, the Taproot upgrade, released in 2021, expanded the Bitcoin block size to 4 MB, providing a decent amount of space to store an inscription’s metadata. 

To inscribe a sat, you must send a transaction to a Taproot address and include an image or another supported data type in the witness part of a transaction. The inscribed content is recorded on the Bitcoin blockchain when the transaction is mined. 

Since Bitcoin nodes aren’t required to store the data in the witness part of a transaction, an inscription’s metadata could be pruned (i.e., lost) if all the nodes fail to keep it. However, the chances of this happening are negligible since full nodes always maintain a complete blockchain record.

Recursive Ordinal Inscriptions And Other Improvements

Developers have enhanced the Ordinals protocol by enabling recursive Ordinal inscriptions, a mechanism that permits new Bitcoin Ordinals to borrow and reference the data of previous ones. This technique enhances storage efficiency while allowing users to store data files larger than 4 MB.

Furthermore, the Ordinals team addressed the issue of cursed inscriptions via a new software version released in June that recognizes these inscriptions and indexes them. Cursed inscriptions refer to digital artifacts not indexed and identified by the Ord software.

What’s the Different Between Ethereum NFTs and Bitcoin NFTs?

While Bitcoin Ordinals are often referred to as Bitcoin NFTs, the NFTs we know from Ethereum, which are based on the ERC-721 token standard, are different from the Ordinal inscriptions found in the Bitcoin ecosystem. 

Bitcoin Ordinals inscribe their metadata directly onto the Bitcoin blockchain, creating immutable and permanently recorded on-chain assets, ensuring their uniqueness and authenticity are verifiably maintained on the Bitcoin blockchain itself. 

In contrast, Ethereum-based NFTs don’t store the actual tokenized item or asset on the blockchain. Instead, Ethereum NFTs record a reference link on the Ethereum blockchain that points to the NFT's content, which is hosted on an off-chain cloud storage solution like the InterPlanetary File System (IPFS). While the ownership record of the NFT is on-chain, the actual content is stored off-chain. 

This distinction highlights the key benefit of Bitcoin Ordinals over NFTs on other layer-1 chains, as the data is actually stored on the most decentralized and secure blockchain in the world.

How to Inscribe on the Bitcoin Blockchain

Rather than setting up a full Bitcoin node and running the Ord software on this node, marketplaces and wallet providers, such as Xverse, have made the inscription process easy and fast. 

Below is the step-by-step guide on how to inscribe Ordinals on Bitcoin using the Xverse Bitcoin NFT wallet on Gamma.

  • Begin by downloading the Xverse wallet if you haven’t already. Xverse is available for iOS, Android, and Google Chrome. In this guide, we will use the Xverse Chrome extension wallet.
  • Set up your wallet.
  • Next, open the Gamma marketplace. Gamma is a platform where you can inscribe and trade Ordinal inscriptions.
  • Connect your Xverse wallet and fund it with BTC. You can purchase BTC using Xverse buy clicking the ‘Buy’ button in your Bitcoin wallet
  • Once connected, click the tab labeled “Create.”
  • Go to “Create single inscription for myself.”
  • Click “Continue.”
  • Select an inscription type.
  • Upload your image or type in your text, and then move to the next step.
  • Set your transaction fee and click “Continue.”
  • Paste the address that will receive the inscription. To copy it, open your Xverse wallet and go to the collectibles tab. Click the “Receive” button and copy the Ordinals wallet.
  • Send your payment to complete the transaction and wait for the inscription to hit your Xverse wallet. 

How to Buy Bitcoin NFTs

You can buy Bitcoin NFTs on any marketplace that supports Ordinals. This guide will use Magic Eden and Xverse wallet.

Here’s how to go about it:

  • Ensure that your Xverse wallet has enough bitcoin.
  • Next, visit the Magic Eden website.
  • At the top, select the blockchain by clicking the Bitcoin logo.
  • Connect your Xverse wallet.
  • Search for your target NFT collection or explore the marketplace to find something you like. You can explore by scrolling down to view the new or trending collections.
  • Once you find your preferred Ordinal inscription, click “ Buy Now” and complete the transaction using your Xverse Bitcoin NFT wallet

Where Can You Buy Bitcoin NFTs?

Initially, Bitcoin Ordinals were trading on the Discord servers dedicated to Ordinals or specific projects. However, several marketplaces have since begun supporting Ordinal inscriptions, allowing people to easily buy and sell Ordinals.

Examples of Bitcoin NFT marketplaces are Magic Eden, Gamma, and the OKX NFT marketplace. You can use your Xverse wallet on all of these platforms to buy Ordinals.

Popular Bitcoin NFT Collections

Bitcoin art has become increasingly popular with the introduction of the Ordinal Theory. Below are some of the most popular Bitcoin Ordinals collections today. 

‍DeGods

DeGods is a digital collection of 535 generative Bitcoin art NFTs of gods produced with modern and ancient aspects. Dust Labs, the creator, rolled out the NFT collection on Bitcoin in March 2023 through a public mint where anyone could mint a DeGod using the Xverse wallet. Today, you can buy DeGods on Magic Eden with Xverse. 

Source: Magic Eden

Ordinal Maxi Biz (OMB)

Ordinal Maxi Biz (OMB) is an Ordinals collection of 2,100 algorithmically produced art released in March 2023. The collection consists of roughly sketched heads drawn by the artist Tony Tafuro. The digital artist Nullish and Substack contributor ZK-Shark founded the NFT project.

You can trade this collection on Magic Eden using Xverse.

Source: Magic Eden

OCM Dimensions

OnChainMonkeys (OCM) Dimensions is an Ordinals collection of code-generated 3D art inscribed in February 2023. Metagood created the collection of 300 inscriptions using the first sats mined in 2009. OCM Dimensions was the first collection based on the recursive Ordinals mechanism. 

The collection is available for purchase on Gamma using Xverse.

Source: Gamma

Taproot Wizards

Taproot Wizards is a collection of 2,106 Bitcoin Ordinals featuring different hand-drawn wizards. Udi Wertheimer and Eric Wall created it to make Bitcoin magical again and revealed the collection in February 2023.

Collectors can acquire a Taproot Wizard by joining the project’s Wizard school.

Source: Taproot Wizards

NFTs on Bitcoin Layers

In addition to Bitcoin Ordinals, you can find Bitcoin NFTs on Bitcoin layers, such as Stacks. Xverse also provides a Stacks wallet, enabling you to securely store, receive, and send Stacks NFTs. 

Other Bitcoin layers, such as Taproot Assets and Mintlayer, will also allow users to mint and issue non-fungible tokens once they go live on the mainnet, giving the Bitcoin NFT ecosystem more protocols to build on. 

FAQs

Does Bitcoin Have NFTs? 

Yes. Bitcoin has NFTs directly inscribed on the blockchain thanks to the Ordinals protocol. Ordinals permit users to append virtual items like images and audio files to an individual satoshi, creating a Bitcoin-native, non-fungible token called a digital artifact.  

Bitcoin-native NFTs are also enabled by Bitcoin STAMPS, a protocol that generates NFTs that are more immutable than Ordinal inscriptions. Besides Bitcoin-native NFTs, users can also find Bitcoin NFTs on Bitcoin layers like Stacks, which run on top of the Bitcoin blockchain. 

Can I Buy NFTs With Bitcoin

Yes. You can buy NFTs with bitcoin on marketplaces that support Ordinal inscriptions using the Xverse wallet. Simply connect your Xverse to Magic Eden, Gamma, Ordinals Market, or the OKX NFT Marketplace to purchase a digital artifact of your choice. 

You can then securely store the Bitcoin NFT using Xverse for as long as you want. Moreover, you can send and receive Ordinal inscriptions anytime using the Xverse Bitcoin wallet.

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