What is a BRC-20: A Guide to Ordinal Theory & Bitcoin-native Digital Artifacts

Are you new to the world of Bitcoin and cryptocurrencies?

You may have heard about NFTs (Non-Fungible Tokens) in the Ethereum ecosystem, but did you know that Bitcoin has its own protocol for creating unique digital artifacts (aka BRC-20's)? It's called Ordinal Theory, and it's a fascinating concept that adds a new dimension to the Bitcoin network. In this article, we'll explain what Ordinal Theory is and how it works in simple terms for crypto and Bitcoin beginners.

What is Ordinal Theory?

Ordinal Theory is a protocol for assigning serial numbers to satoshis (the smallest unit of a bitcoin) and tracking their movement through transactions. These serial numbers are large numbers that uniquely identify each satoshi. The best part? It works within the Bitcoin network without needing a side chain or a separate token.

Why is Ordinal Theory important?

Ordinal Theory allows for the creation of unique digital artifacts called "sat inscriptions" or "digital artifacts." These inscriptions can be collected, traded, and even used for numismatic value. They enable artists and collectors to create and own digital assets within the Bitcoin ecosystem, similar to Ethereum NFTs but with some key differences.

How does Ordinal Theory work?

Ordinal numbers are assigned to satoshis as they are mined, starting with the first satoshi in the first block. An algorithm is used to track the movement of satoshis through transactions, transferring them in a first-in-first-out order.

Ordinal Theory vs. Ethereum NFTs

While both Ordinal Theory and Ethereum NFTs allow for the creation of unique digital assets, there are some notable differences between the two:

1. Immutability: Sat inscriptions are always immutable, meaning their content cannot be changed or deleted. Ethereum NFTs can be either immutable or mutable, depending on the contract.
2. On-chain content: Inscription content is always stored on the Bitcoin blockchain, making it more durable and scarce. Ethereum NFTs may store content on-chain or off-chain, affecting their durability and scarcity.
3. Simplicity: Ordinal Theory is more straightforward than Ethereum NFTs, which rely on a complex network and virtual machine.
4. Security: Inscriptions are more secure, allowing users to verify their assets with a Bitcoin full node they control. Ethereum NFTs often require blind-signing transactions and interacting with complex smart contracts, which can be hazardous for users.
5. Scarcity: Inscriptions require bitcoin to mint, transfer, and store, making them inherently more scarce and valuable. Ethereum NFTs can be minted in large quantities, potentially reducing their value.
6. Royalties: Ordinal Theory does not support on-chain royalties, avoiding confusion and controversy surrounding the topic in the Ethereum NFT ecosystem.
7. New markets: Inscriptions appeal to Bitcoin holders who may be hesitant to engage with the Ethereum ecosystem, unlocking new classes of collectors.
8. Data model: Inscriptions have a richer data model, supporting any content type used by web browsers without requiring changes to the underlying protocol.

In conclusion, Ordinal Theory offers an exciting new way for artists and collectors to engage with digital artifacts within the Bitcoin ecosystem. With key differences from Ethereum NFTs, it provides a unique, secure, and straightforward option for creating and owning digital assets on the world's most popular cryptocurrency network.

--Information Sourced from Ordinals.com