Bitcoin Ordinals – How They Work And Why They Are Important

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Cryptocurrencies not only provide quick and secure payment options, but they also introduce cutting-edge technologies that we probably would not have witnessed if virtual money did not exist.

One of the latest innovations in the decentralised world is Bitcoin ordinals, which extend the use case of the flagship cryptocurrency in a way that many consider similar to NFTs, with a twist. Let’s discuss what Bitcoin ordinals are and what their potential is.

Understanding The Ordinals Concept

Simply put, Bitcoin ordinals are the smallest units of BTC currency that carry inscription capabilities for conducting various crypto operations. Ordinals are also called Satoshi units (SATS), which proved to hold valuable features in transacting small fractions of Bitcoin. 

The inscription features of Satoshis were found to provide various utilities, including transferring different datasets, including images and texts.

One of the main challenges of Bitcoin Ordinals is the limited size, as they can store up to 4 megabytes, meaning they can only carry textual data. However, this technology is in its preliminary stages and can be explored further to add more features and utilities, allowing BOs to transfer various information and data.

Bitcoin Ordinals Vs Non-Fungible Tokens

The characteristics of Bitcoin ordinals are similar to NFTs, which are digital creations minted on the blockchain that carry and represent multimedia information. NFTs serve various purposes and have been in use for many years now, making them easier for the average user to understand and utilise.

However, a key difference between NFTs and BOs is that tokens must be minted on a given blockchain, and most of these processes happen outside the mainnet. The cross-chain minting of NFTs strips these tokens of many security and decentralised features that cryptocurrencies enjoy.

On the other hand, Bitcoin Ordinals do not require minting, and the inscription process happens within the coin cryptography structure. Therefore, they keep various benefits and advantages that NFTs sacrifice during the minting process.

The major advantage NFTs have over BTC ordinals is that ordinals are limited to 4 MB, while non-fungible tokens have extended capacity, allowing them to store and transfer textual data, videos, GIFs, etc.

Bitcoin Ordinals Liquidity

From a liquidity perspective, Bitcoin Ordinals are superior to NFTs since BOs enjoy the significant support and supply of Bitcoin, the largest and most important cryptocurrency in the world. Moreover, the Bitcoin blockchain has developed over the years and improved its security performance to cope with industrial challenges, making it the first choice for many crypto enthusiasts.

NFTs were initially introduced by the Ethereum network. However, most of NFTs founded today are minted off-chain and on different blockchain networks without being backed by a major cryptocurrency. Therefore, its security measures present a major concern for users.

Nevertheless, the long lifespan of NFTs has made them more familiar, and many platforms and decentralised tools have been founded to help create and promote NFTs, making them easier to create and manage. 

BOs are relatively new and entail sophisticated technicalities in their build, making understanding and operating them quite challenging for non-tech-savvy. However, over the years, with several technological advancements, they can reach their full potential and operate similarly to today’s NFTs.

Ethical Considerations

The unregulated nature of Bitcoin presents a major dilemma for BTC ordinals. Bitcoin has no restrictions, and BOs can potentially be used for various purposes and upload any type of data, which raises concerns regarding the safety and legality of the transmitted information.

Developers are concerned that the ultimate freedom that Bitcoin enjoys, and therefore Bitcoin ordinals, may lead to identity theft, data misappropriation and illegal transactions. This creates a dilemma for exploring BO capabilities, where further innovations call to extend BO utility with existing concerns about the security threats these developments may cause.

Conclusion

Bitcoin Ordinals are the smallest fraction of Bitcoin that can be used to carry and exchange information. These small units are called Satoshi Units, which are capable of carrying different types of data like text, videos and GIFs.

However, the major limitation of BOs is their size since they can only save 4 MBs, meaning that textual data is the only valid information that they can transfer. Similar Innovations, NFTs, serve similar purposes with extended use cases as they can exchange texts, images and videos of different sizes.

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