A brief analysis of Bitcoin Ordinals protocol

basic knowledge

BTC is a UTXO model. Each UTXO is unique and inherently traceable.

1 BTC = 10^8 Satoshis (Satoshis), that is, the smallest unit is Satoshis, or satoshis for short;

origin

The biggest stories in crypto at the start of 2023 are happening on BitcoinIn January, the decentralized protocol Nostr was born from the Bitcoin community.In February, the NFT protocol Ordinals on Bitcoin was born.On March 8, Yuga Labs, the parent company of Boring Ape, began auctioning BTC NFTs on Ordinals. Of the 300 NFTs issued, 288 were auctioned for a total price of US$16.5 million.The Ordinals protocol ^{[2] released by} Casey Rodarmor ^[1] in January 2023 proposed an idea:Can we arrange these “sats” in a certain order.Assign them an ordinal number between 0 and 2,100,000,000,000,000, then connect them to other information: pictures, text, videos or even a string of code. Each Satoshi thus becomes unique and irreplaceable. This is equivalent to giving Bitcoin the native ability to create NFTs.Doesn’t it sound amazing? In fact, this protocol relies heavily on the upgrades of Segwit in 2017 and Taproot ^[3] in 2021 . The Taproot upgrade brings new levels of privacy, security, and scalability to the Bitcoin network. While it has always been possible to attach data to Bitcoin through technical means, you can basically only pump 4Mbs of data, and no more.Ordinals is an open source project developed on GitHub ^[4] . The project includes a BIP that describes the ordinal scheme ^{[5] , an index that communicates with Bitcoin Core nodes to track the location of all sats, a} wallet that allows ordinal-aware transactions ^[6] , and an index for interactive exploration of the blockchain. Block explorer ^[7] .It can be understood from two parts:

1. Use an Ordinals technical solution to number Bitcoin’s Satoshi (Satoshi, the smallest unit of Bitcoin). Bitcoin is originally a homogeneous token FT, but just like a big central bank issuing legal currency and numbering legal currency, Casey gives Bitcoin’s satoshis are also numbered;
2. Inscription: After each satoshi is marked with changes, it can be bound to any piece of code with a limited size, that is, to bind the artwork to the satoshi for issuance and circulation.

https://dune.com/icanhaz/ordinals-bitcoin-nft-inscriptions

Although Ordinal NFT is based on Ordinal theory, the current implementation of Ordinal NFT also relies on the technical updates of Segregated Witness (SegWit) and Taproot to the Bitcoin protocol in 2017 and 2021.It’s worth noting that these updates were not developed with the purpose of enabling these new types of NFTs. However, since both updates increased the amount of data stored in a block - meaning there is now space to store images, videos, and even games - the deployment of Ordinal NFTs was inadvertently made possible.

Segregated Witness (SegWit)

Segwit is an update in 2017 that resulted in a soft fork of BTC. The update effectively splits Bitcoin transactions into two parts by adding a “witness data” section that can support arbitrary data.

Witness data was originally created as a scheme in the following ways:

1. Bypassing tight block size limits
2. Allows optional, arbitrary data transfer
3. Preventing inadvertent transaction malleability In a technical sense, the implementation of SegWit means that transactions no longer need to contain attestation data (usually the sender’s digital signature). Instead, an extra space is created at the end of the block for the witness data as a separate structure. It supports arbitrary data transmission and makes the “block weight” smaller (because the witness data in segwit is stored in an independent data structure, so the transaction signature data is no longer included in the block weight), cleverly combining a large amount of data Stay within Bitcoin’s block size limits to avoid hard forks.

This is the first prerequisite for Ordinal NFTs, as it expands the limit on how much arbitrary data can be included in a transaction.

Taproot

Implemented in November 2021, Taproot is a multi-faceted upgrade designed to improve Bitcoin’s privacy , scalability , and security . With this upgrade, Taproot creates a simpler system for storing arbitrary witness data and relaxes restrictions on how much arbitrary data can be placed in Bitcoin transactions. The initial goal of this upgrade is to further enhance Bitcoin-based smart contracts, such as time-locked contracts often used in witness data.These changes are a key enabler for Ordinal NFTs, which store NFT data in Taproot scripts. The upgrade makes it easier to build and store arbitrary witness data, laying the foundation for the “ord” standard . And as data requirements are relaxed, it is assumed that a single transaction can fill an entire block with its transaction and witness data, reaching the 4MB block size limit, which greatly expands the types of media that can be placed on the chain .

Fundamental

We all know that each Bitcoin can be divided into 100,000,000 units, called satoshis (or sats), or “Satoshi” in Chinese.In other words, as an accounting unit, the smallest unit of Bitcoin is 0.00000001 (one hundred millionth) Bitcoin, which is called “1 Satoshi”.1 Bitcoin can be divided into 100 million satoshis, which means each satoshi is worth 0.00000001 Bitcoin.The Ordinals protocol proposes a design based on Satoshi, the smallest unit of Bitcoin, which allows embedding various information in Satoshi, such as pictures, texts, videos, etc. (inscription is called inscription), and connects the uploaded inscription to a specific Satoshi. This process It’s called inscribe.Ordinals are a numbering scheme for sats that allow individual sats to be tracked and transmitted. These numbers are called ordinal numbers ^[8] . Sats are numbered in the order in which they are mined and transferred from transaction inputs to transaction outputs on a first-in, first-out basis. Both the numbering scheme and the transfer scheme rely on order, the numbering scheme relies on the order of mining, and the transfer scheme relies on the order of transaction input and output, hence the name ordinals .Ordinal theory does not require a separate token, does not require any changes to Bitcoin, and can be used and effective immediately.Rodarmor proposed the theory of ordinals. Ordinals are numbered starting from 0 according to the order in which satoshis are mined. For example, the first satoshi in the first block has a serial number of 0, and the second satoshi has a serial number of 1. The serial number of the last Satoshi is 4999999999, so each Satoshi has an ID attribute.There are two core points in the entire Ordinals protocol:

1. The number of each satoshi is unique just like the ID number.
2. First in, first out . let us give an example

In the picture below, there are two Inputs on the left. Address 1 and Address 2 have a total of 5 satoshis. In this transaction, 4 satoshis were sent to an address starting with 3oPz, and 1 satoshi was left as a miner fee to pay the miners.

Assume that in the above transaction, we use the Ordinals protocol to assign an “identity” (serial number) to each satoshi. Then after the transaction is completed, the four numbered satoshis Ord A->D at address 1 and address 2 will go to address 3. There, the last satoshi was given to the miners.

The so-called “first in, first out” means that the number ordering of each satoshi is determined according to its index in the transaction output. For example, in the transaction output (Output) in the figure below, address 3 is ranked in front of the miner’s address, so the satoshi transferred from address 1 and address 2 will be inherited by address 3 first, and then the miner’s address.

Satoshi Numbering Rules

1. Each satoshi is numbered, starting with the first satoshi in the genesis block, and serial numbers are assigned to satoshis in the order in which they were mined. The first Satoshi in the first block has a sequence number of 0, the second Satoshi has a sequence number of 1, and the last Satoshi of the first block has a sequence number of 4,999,999,999. Because the initial Bitcoin mining reward was 50 BTC.
2. So you can attach arbitrary content to each satoshi, turning them into digital artifacts native to Bitcoin; (understood as nft)
3. There are several different representations of ordinal numbers:
   1. Integer notation: 2099994106992659Serial number, assigned according to the order in which satoshis are mined.
   2. Decimal notation: 3891094.16797The first number is the height of the block where satoshi was mined, the second is the offset of satoshi within the block.
   3. Degree notation: 3°111094′214″16797‴.
   4. Percentile symbol: 99.99971949060254%. Satoshi’s position in the Bitcoin supply, expressed as a percentage.

Total supply of Satoshi

• Normal level: any satoshi except the first satoshi in the block (total supply is 2100 trillion)
• Excellent: The first satoshi of each block (total supply is 6,929,999)
• Rare: 1st satoshi each difficulty adjustment period (total supply 3437)
• Epic: The first satoshi after each halving (total supply is 32)
• Legendary: First satoshi* each cycle (total supply is 5)
• Mythical level: the first satoshi in the genesis block (total supply is 1)

Query about rarity

https://ordinals.com/sat/2099994106992659

Myth level

https://ordinals.com/sat/0

Summarize

Whether it is for the NFT market or BTC, Ordinals has brought a unique influence.The Ethereum NFT market is headed for a clear bear market after the melee caused by the trading market Blur, but Ordinals brings a new narrative:First of all, compared with NFTs on Ethereum that are stored off-chain, Bitcoin NFTs are all stored on the chain. For the first time, artworks can be stored forever on a human public ledger. Humans have never given up the pursuit of “eternity”. There is no doubt that , BTC NFT will bring a new craze;Secondly, an important feature of Ordinals is to number Bitcoins, which breeds a culture similar to “QQ beautiful account” and brings a common narrative to the NFT community-communities are no longer “monkeys” and “monkeys”. Butterfly,” numbering would become an important and certainly new narrative.Ordinals will also bring new vitality to the Bitcoin ecosystem. In addition to block rewards, miners can also earn transaction fees under the Ordinals protocol. There is no doubt that miners will have greater motivation to start up in the future. At the same time, NFT transactions brought by BTC in the future may promote the further development of the Lightning Network.More importantly, if BTC NFT prospers further, it will also bring about the development of peripheral services - both wallets and exchanges are in the “to-be-built” stage. For developers, there is a huge demand for discovery and services. Chance.Of course, there is also great controversy in the Bitcoin community regarding Ordinals. Some BTC Maxi believe that non-financial data should not be written into blocks, causing BTC to deviate from the underlying narrative of “gold”. Some people are also worried about giving Bitcoin Numbering will turn Bitcoin from a homogeneous representative to a non-fungible token, losing privacy.In any case, just as NFT written into the public ledger of Bitcoin is irreversible, Bitcoin NFT must be an important trend in the history of encryption that is irreversible and even difficult to stop.

Expand knowledge

Dust Limit

About the reason why each engraving costs 546 statsIn Bitcoin, the minimum transaction output is usually 546 satoshis. This value is based on the “dust limit” concept in the Bitcoin protocol. Dust limit refers to the lowest valid value of transaction output in the Bitcoin network. Transaction output lower than this value may be considered invalid or not worthy of processing by miners. The purpose of the dust limit is to prevent users from creating a large number of small transactions in the network, thereby congesting the network and wasting storage space.According to the Bitcoin protocol, a standard transaction output contains a P2PKH (Pay-to-Public-Key-Hash) or P2WPKH (Pay-to-Witness-Public-Key-Hash) output script. For these types of transaction outputs, the lowest valid value is 546 satoshis. If the value of a transaction output is less than this value, then the cost of creating the transaction (i.e. the mining fee) may be higher than the value of the transaction itself. Therefore, few miners are willing to process such transactions.Please note that the value of 546 satoshis may change as the Bitcoin network changes. The actual dust limit depends on the size of the transaction and current network rates. In summary, Bitcoin’s 546 satoshis rule is to prevent invalid transactions and congestion in the network.

two-phase commit

All Taproot costs must come from existing Taproot outputs. This is why inscribing information into the blockchain requires a two-stage commit/reveal process.First, in a “commit” transaction, create a commit to the Taproot output of the script that contains the engraved content. This step is the one that prepares and commits to writing specific information.Second, in a “reveal” transaction, the output created by the commitment transaction is consumed, thereby revealing the inscribed content on-chain. This step is the one that actually performs the write, as it consumes the Taproot output created by the commit phase and makes the pre-commit information public.This process is required because Taproot transactions do not directly support the writing of arbitrary data, but instead require that all spending come from existing Taproot outputs. Through the commitment/reveal method, we can burn any information to the blockchain, but it requires two stages: first, prepare the output and information in advance in the commitment stage, and then actually write the information in the reveal stage.

Transaction analysis

Engraved with a hello world
https://mempool.space/tx/46714ae173f0c183e974fab2f582701c9d0e0e896a93e3e970d8710f870d28c9

OP_FALSE

OP_IF

OP_PUSH “ord”

OP_1

OP_PUSH “text/plain;charset=utf-8”

OP_0

OP_PUSH “Hello, world”

OP_ENDIF

original content

20117f692257b2331233b5705ce9c682be8719ff1b2b64cbca290bd6faeb54423eac060beea7098801750063036f7264010118746578742f706c61696e3b636861727365743d7574662d38000b68656c6c6f20776f726c6468

parse content

20117f692257b2331233b5705ce9c682be8719ff1b2b64cbca290bd6faeb54423eac060beea70988017500

63 OP_IF

03

6f7264 ord

010118

746578742f706c61696e3b636861727365743d7574662d38 text/plain;charset=utf-8

000b

68656c6c6f20776f726c64 Hello, world

68 OP_ENDIF

parsing toolshttps://codebeautify.org/hex-string-converter

Engraved with a nice message to meet you
https://mempool.space/tx/4fafab4a267876f371b2b08437a9948c22c2911f2462d65dde384b1f689c0499

https://ordinals.com/inscription/4fafab4a267876f371b2b08437a9948c22c2911f2462d65dde384b1f689c0499i0

https://static.unisat.io/inscription/content/4fafab4a267876f371b2b08437a9948c22c2911f2462d65dde384b1f689c0499i0I

carved an inscription myself

https://mempool.space/tx/3fd4b39890aae0a740db7a157eb8c32e901270c52a2cee0c2d25bd0e40f4d22f

The number of brc20 stat transferred to me is 500000000

https://ordinals.com/inscription/fed2913e99beb498896eb910e1ea4260807441c322a9324573b4dcbd514904c4i0brc20

mint doge quantity 4200

https://ordinals.com/inscription/b9135e259ec380571b5fe087d5df67c686337a8bedec9d335793db8b5abe6d24i0brc20

transfer doge quantity 2200

https://ordinals.com/inscription/c02b017443290a4f50511878824c340129bb766cb66ea14916930b3a3d498d94i0

Disclaimer：

1. This article is reprinted from [Rebase社区]. All copyrights belong to the original author [Melvini17]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.