Bitcoin NFT, along with its bluechip collections like Pepe or CryptoPunks, has been gaining a lot of attention lately, with some lots selling for record-breaking prices of up to 9.5 BTC. However, unlike traditional NFTs, Bitcoin NFT is still in its infancy, with a developing infrastructure that may pose some challenges for newcomers. In this article, we aim to shed light on the key aspects of Bitcoin NFT, and provide guidance on how and where to interact with them safely.
What is Bitcoin NFT
The Bitcoin blockchain traditionally does not support non-interchangeable tokens and lacks infrastructure for decentralized data storage. Therefore, many were confused about how Bitcoin NFTs came to be. However, the implementation of unique tokens was made possible by combining three technical solutions for the Bitcoin network.
- Firstly, the OP_return function creates outputs in the network that cannot be spent, allowing third-party information such as inscriptions or impressions to be written onto the blockchain. However, the original function only allowed short messages up to 80 bytes.
- Secondly, Taproot, an update adopted in 2021 to increase privacy and bandwidth on the network, removed the message size restrictions in OP_return, making it possible to write relatively large data packets. In practice, it is now possible to add data up to 400Kb via OP_return.
- Lastly, the Ordinals protocol assigns a serial number to each satoshi, allowing you to track and assign a certain value to them.
Bitcoin NFTs are created by writing “inscriptions” via OP_return and attaching them via the Ordinals protocol to a specific, numbered, and tracked satoshi. With Taproot, it is possible to write large files up to 400 Kb in size. Ordinals protocol ensures that all data is written to the blockchain, unlike Ethereum, where the NFT image is stored in the cloud or on the smart contract owner’s servers. Additionally, the fee for writing witness data to the blockchain is lower than the standard transaction data, making it relatively cheap to mine such pseudo-NFTs.
However, it is important to note that unique satoshis retain their interchangeability property, meaning they can be sent or spent the same way as regular coins without the inscription, which can be risky for newcomers. To avoid accidentally spending Ordinals on a commission or during a regular transaction, special software is required.
Given the nature of Ordinals creation, the process of minting Bitcoin collections is currently limited. Two methods are commonly used: a full premint by the creator, who uploads the entire collection to the blockchain and then publishes it on the OTC or venues, or a pseudo-public WL mint, where approved users make a request to the creators and receive an already generated Ordinal.
However, in both cases, the procedural generation of the image and the creation of the inscription take place on the side of the collection author, making it too early to talk about trustless mechanisms.
NFT collections and where to find them
As of February, there were 76,400 generated Ordinals according to Yahoo, and this number is increasing rapidly based on data from Dune. With the market growing, new collections are appearing every day, and there are various ways to find them. You can start by using the native browser or exploring with tools like Gamma and Ordinals Wallet, which group new images by collection and link to the collections’ social networks. Another user-friendly explorer to check out is Ordinals Directory.
On OTC, which operates on social networks like Twitter, Discord, and Telegram, you can search for Bitcoin NFTs or Ordinals. It’s recommended to start with Discord Ordinals, which has a special branch for OTC trading, and then look for liquidity and offers for a specific collection on the project’s page or channel. However, it’s important to note that every offer on OTC is speculative and often there is no opportunity to compare the price with other pieces of the collection.
For a safer option, you can try marketplaces like Gamma, which is currently the only similar marketplace for Ordinals, or OpenSea, which has auctions with Ordinals and the EmblemVault collection. While there may be few offers and available collections, these marketplaces provide a more secure environment than OTC.
Overall, as the market for Bitcoin NFTs and Ordinals continues to grow, it’s important to do your research and carefully consider the risks before making any purchases.
Here are a few popular collections on bitcoin:
Ordinal Birds: a derivative on MoonBirds. The price range on OTC is 0.17–0.72 BTC, probably one of the future bluechips among Ordinals.
Bitcoin Punks: one of the largest collections on the Bitcoin network with a 10k supply. The developers write that they moved all the crypto punks from Ethereum to Bitcoin.
Another Bitcoin Punks: here supply is only at 100 pieces and they cost much more than the previous collection. Flor price from holders starts at 72 ETH. The project’s Twitter, however, states that they are in no way affiliated with LavraLabs, the creators of Ethereum punks.
Bitcoin Rocks: one of the first collections on Bitcoin. A derivative for the famous Ether Rocks. Virtually a blue-chip among ordinals.
InscribedPepes, Bitcoin Toadz and BitcoinShrooms are also worth checking out.
Estimating at least the approximate spread of prices due to the lack of aggregators and trading venues is almost impossible. This makes it difficult to trade, but opens up opportunities for speculation, because the value and price of your Ordinal is set subjectively and can vary from site to site or even from user to user.
Note that the Ordinals community values the time criterion of NFT appearance, so Ordinals from the first 1000 are considered real OGs. It is likely that in the future this criterion will add value and value to existing collections.
Advantages and disadvantages of Bitcoin NFT
As a new trend, Ordinals have been around for only a month, and it is challenging to determine the implications of this technology for the Bitcoin network. Traceable satoshis with inscriptions create advantages and difficulties for different market participants. Among the benefits are:
Hype and the emergence of a new market: pioneers in any industry can make the most profits, and the flow of Ordinals from the first thousand is now higher than most NFT collections on Ethereum. Enterprising cryptans can make money from speculation and derivative collections.
The resurgence of interest in Bitcoin: BTC has long been perceived as “digital gold” and mostly used for accumulation and long-term investments. Ordinaries have been able to bring activity back to the network and attract the attention of crypto enthusiasts who previously had no interest in buying BTC.
Secure decentralized storage: Bitcoin is one of the few networks considered truly decentralized, and Ordinals are entirely stored on-chain, unlike Ethereum (and most other) NFTs whose images are recorded on third-party cloud storage.
However, there are some main problems with Ordinals:
A high technical entry threshold: Setting up basic tools to work with Ordinals is relatively difficult, and using a console interface to manage them could be a challenge for beginners. Also, there is a risk of accidentally spending satoshis with an inscription. For an experienced cryptan, this is just a quirk of the work, but for a novice, it could pose real difficulties.
Lack of infrastructure and convenient solutions for storage, transfer, and trade: Currently, everything works “by word of honor,” so the risk of running into a scam is much higher compared to traditional NFT. Trading through OTC gives more freedom to speculators, which increases the likelihood of an unprofitable deal.
Potential overloading of the blockchain: Inscriptions take up tens of times more space in a block than regular transactions, and Taproot allows recording this data relatively cheaply. If Ordinals become a mass phenomenon, Bitcoin may face overload, and its consequences could include hours or even days of queuing in the mempool and a fee of several tens/hundreds of dollars.
However, so far, the Bitcoin Core development team has not given any official comments on the current situation. Ordinals may cause a new conflict between developers seeking to preserve the original Bitcoin concept and miners who earn income from commissions. Nonetheless, Ordinals could become an organic addition to the network and “make Bitcoin great again.”
Bitcoin NFTs, or Ordinals, are additional information in the form of text or image that can be attached to bitcoins, making them a unique and new type of digital asset. However, it is important to note that satoshis, or the individual units of bitcoin, remain interchangeable and can be spent like regular coins, which means they are not technically NFTs. To interact with Ordinals, a special wallet and some technical knowledge are required, making it a relatively niche market that may be challenging for newcomers to navigate.
Despite the lack of a developed infrastructure, the ability to record images on the Bitcoin network has opened up a new market for “gipeds” that is still in its infancy. Although prices for many Bitcoin collections are higher than their Ethereum counterparts, the market is heavily influenced by OTC-trading, which may offer speculative opportunities for enterprising investors. This presents a second chance for crypto enthusiasts who missed the NFT fever on Ethereum to capitalize on this emerging trend.
It is still too early to predict how long this trend will continue or its long-term implications for Bitcoin. However, if you are interested in investing in Ordinals, now is a good time to start. Keep in mind that, as with any emerging market, it’s essential to approach it with caution and do your due diligence to minimize potential risks.