Bitcoin Ordinals–What Are They and Why Does Everyone Care?
NFTs on the Bitcoin blockchain have the crypto industry buzzing, but are they a new paradigm or simply a fad?
Ordinals–Bitcoin-based NFT–could be a game changer.
Bitcoin maxis hate it, NFT traders don't believe in it (yet) but like every other trend, the market ultimately decides and over 100,000 have already been inscribed since its release this month.
This could be the most bullish moment in NFT history, and Ordinals bring both opportunities and threats.
Whichever side you’re on, it’s clear Ordinals are redefining the NFT landscape in 2023.
Why Ordinals Matter
NFTs can be difficult for the average person to understand. Often, you need the native currency of the chain it’s on in order to mint them, which can require several currency conversions (each with its own fee).
While Bitcoin purists and the NFT elite might dismiss Ordinals as just another meta-trend within the industry, the truth is that they have the potential to be so much more.
In fact, if we look at the current market share of Bitcoin, which is estimated to be around $465 billion, we can see that Ordinals have the potential to trump Ethereum by a significant margin, and other blockchains by even more.
NFTs are the most popular use case of smart contract technology that propelled Ethereum into the Web3 elite. OpenSea’s NFT marketplace, for example, is valued at $13.3 billion based on its funding rounds, and it landed those investments after reaching a record $2.7 billion in trading volumes in mid-2022.
But that was nearly a year ago, and the $946 million in NFT trading volume last month is the highest since June of last year. Although they may be ruffling feathers, Bitcoin Ordinals could be the Trojan Horse that carries the industry to new heights we haven’t seen since 2021. NFT historian, LeonidasNFT, is a prime example of known faces in the space who are bullish.
Image courtesy of Twitter
Of course, it isn’t all fun and games. Every time a new lane opens up and you get 100,000 of anything, there’s bound to be bad apples in the bunch. And it’s not surprising that high-profile NFT collections like Bored Ape Yacht Club and CryptoPunks were right-click saved as Bitcoin clones. Ordinal Punks, for instance, are already fetching six-figure sales.
Image courtesy of Ordinal Punks
Meanwhile, BAYC #1626 was just burned on Ethereum, thus permanently removing the token from circulation. It now only exists as a Bitcoin inscription (and obviously all the screenshotted copies online).
Image courtesy of OpenSea
Considering it was purchased for over $400,000 and was still worth over $150,000 at the time of burning, burning the BAYC token effectively removes you from the community, which is arguably more important than the art attached to the NFT.
Due to the fact that BAYC #1626 can no longer be verified, its owner could lose access to key community benefits.
Discord bots commonly used to verify membership typically connect to Ethereum, where the BAYC collection was minted. If the bots can’t find the token in your wallet, the benefits won’t transfer. BAYC #1626 can’t be mutated or scanned to enter exclusive events for token holders, because it no longer exists on the Ethereum chain being scanned.
That means burning BAYC NFT fundamentally changed its value for its owner, and possibly also burned the bridge for reentry into the club.
It's a bold move reminiscent of Shl0ms exploding a $250,000 Lamborghini Huracan to sell as NFTs. The pseudonymous Web3 artist earned an estimated $2 million from the sale, however, so he gained a nearly 10x return on the stunt.
Image courtesy of Shl0ms
On the other side of the proverbial coin, Bitcoin purists argue it doesn’t need NFTs to be successful, and it should remain a pure cryptocurrency. They worry that the network will become congested as an avalanche of mostly garbage NFTs will flood the network.
In the past, such debates led to project forks, such as Bitcoin Classic, Bitcoin Cash (which had its own Bitcoin SV fork), and Ethereum Classic, which infamously split after the DAO hack. While the communities continue to split, Bitcoin reigns supreme as the alpha crypto which all other tokens follow.
There are reasons to be both bullish and bearish about the addition of Ordinals to the mix.
The Bull Case for Ordinals
Bitcoin Ordinals NFTs courtesy of Hashrate Index
Bitcoin is the most recognizable cryptocurrency around the world, with surveys in the UK, Australia, and more showing the majority of people have heard of it. This means that by minting your NFTs on Bitcoin, you’re attaching it to the blockchain that will most likely remain in circulation forever.
Whether it’s financial institutions, merchants, or peer-to-peer, Bitcoin has proven staying power and is the easiest cryptocurrency to liquidate. It’s most widely accepted for payments and has the strongest trench in the crypto industry, as many coins can only be converted to fiat through $BTC.
Brands should always be searching for the next big thing because getting a head start on everything from Instagram to TikTok and Ethereum has all provided big returns for the early adopters willing to blaze the trail. Any time a new app or platform launches, it’s worth researching to determine how it can be used for your business.
Jumping on the Ordinals bandwagon right now could prove fruitful and would certainly open you up to media opportunities. It can also cause your NFTs to stick out among the crowd of new collections released every day.
The Bear Case for Ordinals
Image by MidJourney
A big downside to Bitcoin Ordinals is they must be minted in advance of selling them. This means the creator bears the up-front minting costs (which exponentially increase as you mint collections of 9,999) with no guarantee of selling them.
We’ve seen high-profile NFT launches flounder and fail to sell out plenty of times in the past. Most recently, Porsche was heavily mocked for its failed NFT drop last month, but it’s not alone. Major brands like Disney and Warner Bros have had their own flubs.
The problem with putting too much effort into new technology is that it may not pan out. As a new technology, we don’t know yet how well the Ordinals protocol will hold up as technological threats continue to evolve. Exploits are common in the crypto industry, and it only takes one major cyber attack to destroy your investment.
In generative AI, for example, a pending USCO ruling and two court cases could fundamentally change the legalities of using the images included in this blog commercially. And these legal actions could take years before a decision is reached (assuming they aren’t settled out of court). Imagine having to retroactively change all your marketing 2–3 years down the road.
Final Thoughts on Bitcoin Ordinals
Bitcoin Ordinals are taking the crypto world by storm right now by letting anybody who knows what they’re doing mint a jpeg NFT to the Bitcoin blockchain. But they’re not without criticisms.
Purists fear they could cause network congestion, and there’s no guarantee that the clones of projects like BAYC or CryptoPunks will foster the same communities.
Brands looking to jump on board can be confident that Bitcoin as a crypto will likely outlast any other blockchain project, including Ethereum. But that doesn’t translate into instant success for your Ordinals launch.
Ultimately, the market will decide the fate of Bitcoin Ordinals, and it could be years before we know for sure.
Big NFT hits like CryptoPunks and CryptoKitties were rare until the pandemic boom sparked by BAYC triggered a new chapter. All we can say for now is that Ordinals are selling, and Bitcoin is officially a major player in NFTs.
Lena Grundhoefer is the Founder of ZEITG3IST, a globally-recognized digital marketing and strategy agency. Through future-proof marketing solutions for the brands of tomorrow, we help Fortune 500 companies as well as brands just starting out break into web3.