Bitcoin Ordinals Explained: How NFT-Like Inscriptions Work on Bitcoin

Bitcoin was never supposed to host NFTs. The network was designed as a peer-to-peer payment system — simple, purposeful, and deliberately minimal. Then, in late 2022, a developer called Casey Rodarmor changed that. He shipped a protocol called Ordinals, and suddenly Bitcoin was doing something its creator almost certainly never intended: storing digital art, memes, and token contracts directly on-chain. The Bitcoin community has been arguing about it ever since.

If you have heard the term “Bitcoin Ordinals” but are fuzzy on what it actually means, this article explains it plainly. No hype, no speculation — just the mechanics, the controversy, and what it means for anyone watching the crypto space.

What Are Bitcoin Ordinals?

Ordinals are a system for numbering individual satoshis — the smallest unit of bitcoin, one hundred millionth of a BTC. Casey Rodarmor’s protocol assigns a unique serial number to every satoshi ever mined, based on the order in which it was created. The first satoshi mined in block zero gets number zero. The next gets number one. And so on, all the way up to the eventual supply of 2.1 quadrillion satoshis.

That numbering alone is not particularly exciting. The interesting part is what you can do once satoshis have unique identities: you can attach data to them. Rodarmor called this an “inscription.” An inscription embeds arbitrary content — an image, a text file, a video clip, even a small piece of code — directly into a Bitcoin transaction. The satoshi carrying that inscription becomes unique. It has provenance. It can be tracked, traded, and transferred. That is a Bitcoin NFT.

The Ordinals protocol launched on mainnet in January 2023. Within weeks, thousands of inscriptions appeared. By mid-2023, over ten million had been created. By 2024, that number was well past fifty million. The protocol had touched a nerve.

The Technical Foundation: How Inscriptions Work

To understand inscriptions, you need to understand the Taproot upgrade. Bitcoin activated Taproot in November 2021 — one of the most significant protocol changes in years. Taproot improved privacy and efficiency for complex Bitcoin transactions, and it also changed how the network handles a specific part of transaction data called the “witness.”

The witness section of a Bitcoin transaction previously had strict size limits. After Taproot, those limits were effectively loosened for certain transaction types. Rodarmor exploited this change. By structuring data as a Taproot script, he found a way to embed large amounts of arbitrary content in the witness field of a transaction. That content gets stored on the Bitcoin blockchain — permanently, immutably, with no off-chain dependency whatsoever.

This is the key difference from most Ethereum NFTs. When you buy a typical Ethereum NFT, the token contract lives on-chain, but the actual image it points to is usually stored on IPFS, AWS, or some other external server. If that server goes offline, the “NFT” becomes a pointer to nothing. Bitcoin inscriptions carry the data itself on-chain. The image, the text, whatever it is — it lives inside the transaction, inside a block, replicated across thousands of nodes. It is not going anywhere.

Ordinal Theory: Tracking Satoshis Through the Network

The tracking system Rodarmor built is elegant. Satoshis are numbered sequentially in the order they are mined. When a transaction spends bitcoin, Ordinal theory defines which satoshis go where: inputs flow to outputs in order. If you send 0.001 BTC from an address holding inscribed satoshis, Ordinal theory tells you precisely which satoshi ended up in which output.

This matters because it gives inscriptions a kind of physical location within Bitcoin’s UTXO model. An inscribed satoshi sits in a specific unspent transaction output. The owner of that output controls the inscription. Transfer it and the inscription moves with it. This is analogous to how an Ethereum NFT is owned: the contract tracks which address holds which token ID. Ordinals use Bitcoin’s existing ownership model without modifying the protocol itself.

No consensus changes were required. Ordinals is a layer built on top of Bitcoin using rules that already exist. Nodes that do not understand Ordinals still process and validate the transactions. They simply do not track which satoshi is which.

What Has Actually Been Inscribed?

The first notable collection inscribed on Bitcoin was called Ordinal Punks — a riff on the famous CryptoPunks NFT series from Ethereum, with 100 low-resolution pixel art images embedded in the first thousand inscriptions. Then came Bitcoin Rocks, Taproot Wizards, and dozens of other collections. By spring 2023, the space had the full aesthetic vocabulary of the Ethereum NFT market: profile picture collections, generative art, one-of-ones from individual artists.

Inscription 0 — the very first ever created — is a pixel art skull. It sold for multiple BTC in early 2023. Inscription 3 is a pixel art skull too. Some of the early inscriptions now trade at significant premiums because of their low number, a concept collectors call “rarity by ordinal.” The lower the inscription number, the earlier it was created, and for a certain type of collector that matters enormously.

Beyond images, people have inscribed text, JSON files, small JavaScript applications, and even playable video games. The protocol is content-agnostic — if you can fit it in a Bitcoin transaction, you can inscribe it.

BRC-20: The Token Standard That Arrived Next

In March 2023, a pseudonymous developer called Domo published a standard for deploying fungible tokens on Bitcoin using Ordinals. The standard was called BRC-20, mirroring Ethereum’s ERC-20 naming convention. It works by inscribing JSON text files that define token names, supplies, and transfer rules.

BRC-20 tokens are not enforced by Bitcoin’s protocol. They rely on off-chain indexers to track state. When you “deploy” a BRC-20 token, you inscribe a JSON file saying “this token called ORDI has a max supply of 21 million.” When you “mint” some, you inscribe another file saying “I am minting 1,000 ORDI to this address.” Indexers read these inscriptions and build a state map of who holds what.

ORDI, the first BRC-20 token, reached a market capitalisation of over one billion dollars in late 2023. Hundreds of copycat tokens followed. Most are worthless. The BRC-20 mania generated enormous transaction volume on Bitcoin and contributed to significant fee spikes. It also demonstrated, in concrete terms, that people would pay real money to use arbitrary token systems on Bitcoin regardless of what the original design intended.