Thread by @JamesonMah

Did you fade Ordinals this whole time?

And now that they're about to cross 1M inscriptions (yes, actually) you're scrambling to get up to speed?

Don't worry, I gotchu.

Behold – the definitive Ordinals megathread 🧵

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This thread will cover:

1. What the heck are Ordinals and why now?
2. Market structure & trading
3. Who are the top dogs so far?
4. Competing Bitcoin NFTs (@Stacks, Stamps)
5. The future

There's a surprise waiting for readers who make it to the end – so let's jump in!

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Ordinals. Inscriptions. Bitcoin NFTs. Do these all mean the same thing?

No.

These are actually separate but related concepts, nested within each other.

Confused?

Let's break it down.

3/57

Let's start with Ordinals.

Ordinal Theory was developed by @rodarmor as an off-chain arbitrary method to track Satoshis.

Remember: each Bitcoin has 100M Satoshis.

There are ~1.9 quadrillion Satoshis in existence today and there will be ~2.1 quadrillion eventual supply.

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Satoshis (sats) are inherently fungible. They're just the smallest denomination of Bitcoin, like a penny is to the $.

But what if there was a method to distinguish one sat from another?

Suddenly – sats become NON-fungible.

This is what Ordinal Theory accomplishes.

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Ordinal Theory prescribes a serial number to every sat in existence based on the order it was mined.

If you subscribe to this ordering regime, you might value formerly fungible sats differently now.

For ex, older sats, or sats with unique serial #'s, may be worth more.

6/57

Ordinal Theory actually proposes a rarity system – it's quite interesting and I encourage you to check it out.

Uncommon Sats (~745K exist today) are trading OTC at .125BTC ($3,500!) per sat.

If you own BTC, you might unknowingly even have some in your wallet.

@null_ish

7/57

So we've established that satoshis can now be fungible.

In some sense, they're already NFTs – they're collectible, they're historical, and people might want to own certain sats.

But there's no metadata attached to them...yet.

And we all know JPEGs are what make NFTs fun.

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Enter Inscriptions – the term that describes an Ordinal inscribed (permanently imbued) with arbitrary metadata.

Inscriptions were technically feasible in the past, but there were two issues:

1) Data inscription was VERY costly
2) There was no way to track sats

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#2 has been solved by Ordinals.

What solved #1?

The SegWit (2017) and Taproot (2021) upgrades to the BTC network.

This can get a whole lot more technical, so I'll keep it high-level.

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SegWit separated essential block data (expensive) from witness data (cheap). Witness data receives a 75% discount on byte storage.

The Taproot upgrade inadvertently removed data limits in the witness section of a block.

Together...

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...one could now insert arbitrary metadata, at a much lower cost than normal transaction data, into the witness (signature) section of BTC transactions.

Thus giving rise to Inscriptions – aka Ordinals *inscribed* with metadata using this novel method.

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The astute reader probably stops here and asks:

"Ok hold up here man...who decided this Ordinal system is the one we should go with anyways!?"

And it's a great question.

Why are we using this numbering system instead of a different one?

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Anyone could have devised a protocol for tracking satoshis based on any number of factors.

The simple answer: Ordinal Theory has achieved social consensus. It came at the right time.

Why now?

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It's no coincidence that Ordinals have achieved escape velocity at the exact time the immutability of NFTs on other blockchains have come into question.

For example – projects on ETH are now contemplating contract migration to enforce royalties.

15/57

https://twitter.com/hypernova84/status/1486765296975331332

People are becoming acutely aware of the mutability of NFTs on smart contract chains.

Put simply – what you bought today, might be different from what you own tomorrow.

With Ordinals, what you buy will ALWAYS be precisely what you own.

16/57

This concept is referred to as a digital artifact.

Ordinals are digital artifacts. Inscriptions are digital artifacts.

But not all Bitcoin NFTs are digital artifacts. For example, NFTs created on a Bitcoin smart contract L2 are NOT digital artifacts (more on this later).

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The core innovation of Ordinals/Inscriptions is that you now have digital artifacts, for the first time ever, on the oldest and most secure blockchain in the world.

Owning an Ordinal is owning a piece of on-chain history and culture.

Forever.

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Now that all the conceptual groundwork is laid down, let's get into the practicals of the market.

I'll go through:

1) What is the current activity level in Ordinals?
2) Where do they trade?
3) Is there any material volume or is it all a fugazi?
4) Brief note on infra

19/57

Since Ordinals protocol was released on Jan 31st, there has been over 900K inscriptions and $4.5M (160BTC) in fees paid to miners.

Significant advances in infra have accelerated the pace of new inscriptions.

While any content can be inscribed, the majority are images.

20/57

In the early days, Inscriptions required running a full BTC node + Ord client. This involved a full download of the network (~450GB) and technical chops.

Today, there are tons of no-code inscription services. To name a few:

- @ordinalsbot
- @trygamma
- @ordswap

21/57

https://twitter.com/aradtski/status/1623505494303186946

This has driven a sizable valuation premium for early-inscriptions, which are seen as historical and rare in context of the movement.

This is despite the fact that most early Ordinals are copy-cat IP or even spam (try to count how many pics of BTC clipart there are).

22/57

Some of these early Ordinals (first 1K inscribed) have sold for upwards of hundreds of thousands of dollars.

As the market develops further, I expect more of an emphasis on original IP, rare Sats, and novel inscription methods over simply early inscriptions.

23/57

Initially, the majority of Ordinal trading volume was conducted OTC in Discord servers using trusted 3rd-parties to escrow.

It's hard to ascertain total OTC volume, but I estimate it to be somewhere in the $5M range based on the activity in top early collections.

24/57

The current marketplace structure has opened up more liquidity but is still fragmented.

There are three main marketplace types today:

1. Open-source/trustless @openordex @MagicEden @Gamma
2. Trusted OTC @DeGodsNFT
3. Vaulted and traded on another chain @OrdinalsMarket_

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In total, I estimate there has been minimum $25M+ volume in Ordinals since inception:

$18.2M trackable on-chain + ~$3M DeGods OTC + $5M other OTC

MagicEden has about 50% market share by volume but a lot of this is driven by DeGods (higher $ price).

26/57

One of the main issues with on-chain Ordinals marketplaces is that trades take 10 mins to settle due to Bitcoin's throughput.

Keep an eye out for new marketplaces that innovate around this UX crux...instant trade finality works wonders for liquidity in a nascent market.

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A brief note on infra – it's improving rapidly.

Whatever UI/UX faults you experience in Ordinals (like accidentally sending a UTXO that has you Ordinal in it, ouch!) is being worked on.

A few builders to keep an eye out for on the infra side:

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1) @hirowallet @xverseApp – best self-custodial wallets IMO
2) @LuxorTechTeam @ordinalsbot leading IaaS (inscription as a Service) providers
3) @trygamma – #1 @Stacks marketplace, now building on Ordinals
4) @ord_io – a sick discovery platform by @LeonidasNFT

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Now the fun stuff.

Who are the blue-chips?

In my view, there are three:

1) @DeGodsNFT
2) @yugalabs TwelveFold
3) @TaprootWizards

I view historical Ordinals like @OrdinalPunks @ordrocks @Ordinal_Loops as valuable artifacts but different from larger blue-chip projects.

30/57

1) @DeGodsNFT. Need I say more?

They're a top Web3 brand with @frankdegods @kevindegods at the helm.

Revived 535 burned DeGods onto Ordinals for 0.33 BTC ($9K) and launched an OTC desk to support liq.

At ~1BTC now, it's the top-tier entry into DeGods.

Don't fade Frank.

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2) @yugalabs TwelveFold.

Despite a rocky start (see my prev thread), interest in TwelveFold remains high with Yuga continuing to dominate the overall NFT attention economy.

Currently $65K FP.

Many think there's more secrets to unFold (terrible pun) soon with this one.

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https://twitter.com/JamesonMah/status/1636089225077739520

3) @TaprootWizards by @udiWertheimer @ercwl @0xfar.

These haven't been sold yet. But everyone knows the wizards and the infamous viral wizard shower (see mine).

They went down in history for inscribing the largest ever 4MB Ordinal – taking up an entire block.

(cont.)

33/57

https://twitter.com/JamesonMah/status/1638671298128908289

These guys are making Bitcoin fun again by supplanting the laser-eyed maxi purists with a MS Paint meme from 2013.

And it's working.

@TaprootWizards is a master class in BTC culture wars, viral marketing, and memeification.

Follow their Quests to stay in the loop.

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https://twitter.com/udiWertheimer/status/1621176136142045191

For trading information on OTC historical ordinals, I highly recommend you follow @d0r10n for his daily market updates.

This guy is putting in serious elbow grease to keep us on top of the market.

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https://twitter.com/d0r10n/status/1643515332747993089

A few other projects I'm excited about:

- @Bugatti x @AspreyStudio x @OnChainMonkey egg drop
- @PGodjira doing a "deadJira" drop
- @ExtraordinalBTC reminds me of @NeoTokyoCode riddles early-on

+ a couple others I can't talk about yet 👀

36/57

Now this is great and all, but there's an elephant in the room.

Didn't NFTs on Bitcoin already exist before Ordinals?

They did. And they still do.

There are a variety of Bitcoin rollups, including @Stacks @CounterpartyXCP and several others.

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Every Bitcoin rollups' architecture is different, but for practical purposes, they all accomplish a similar end-goal as it relates to NFTs:

NFTs can be originated on a higher layer that uses Bitcoin to settle transactions and thus benefit from Bitcoin's security.

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Many of these NFTs differ quite a lot from Ordinals however.

They are more akin to Ethereum or other smart contract NFTs despite leveraging BTC for security.

@Stacks for instance supports smart contracts and thus Stacks NFTs are not true digital artifacts.

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This isn't inherently a bad thing. Smart contract NFTs have a different value proposition.

It is very hard with today's infra, for example, to provide token-gated utility to Ordinals without smart contracts.

What does the market say?

40/57

Let's take a look at @trygamma, the leading @Stacks NFT marketplace.

Volume, weekly users, and transactions have cratered since Ordinals were created.

It seems the Bitcoin NFT community prefers L1 Ordinals for now.

41/57

As it relates to the broader @Stacks ecosystem, $STX is up significantly since Ordinals as there is a thesis that a rising tide lifts all boats.

Users profiting on Ordinals might recycle capital into Stack's DeFi ecosystem, for example.

There is one complication...

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As of now, Ordinals cannot be bridged between different network layers.

There are several builders working on this functionality, so we'll see where it goes.

One thing is clear – there is a substantial amount of capital on Bitcoin's L1 interested in Ordinals.

43/57

A quick aside on Stamps.

You may have seen something called "Bitcoin Stamps" floating across your timeline recently.

Remember how I mentioned that Ordinal inscription data is stored in the witness section of a block?

Nodes can prune (no longer store) witness data.

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https://twitter.com/TO/status/1643241697776680961

Bitcoin Stamps created by @mikeinspace is a new method of inscribing into the essential node data. Your NFTs now live on the trunk of Bitcoin, not its branches.

So in some sense, these stamps are more permanent than Ordinals (it's up for debate if this actually matters).

45/57

https://twitter.com/trustmachinesco/status/1643353972885913602

It's a narrative driven game so I expect we'll see more and more stamps activity in the days to come.

"The most permanent type of NFT."

We at @HelloMetaversal stamped our own 72x72 retro pixel Pepe by @PatrickLawler for fun...as well as many StamPunks.

46/57

https://twitter.com/JamesonMah/status/1643732212133789696

To close out, where will the future of Ordinals go and how large of a market could this grow to be?

@glxyresearch sees between $1.5 – 4.5bn TAM within the next 2 years.

This is based on market cap comparisons to various Ethereum NFT verticals.

47/57

I think this is overall reasonable but adoption will hinge on several factors:

1. Rapid buildout of infra for seamless UI/UX and onboarding
2. Continued innovation on the creative project side
3. Establishing dominance over the Bitcoin culture war

#3 is interesting...

48/57

SegWit/Taproot were never intended to house cryptopunks in witness data.

Bitcoin maxis are furious at Ordinals – a movement they view as defiling sacred block space.

Yet here we are.

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In some ways, Ordinals may have saved Bitcoin.

Because it is far more expensive to pay miners to inscribe data compared to an ordinary BTC transaction, inscribers set a floor for block space and thus network fees.

It's unlikely maximalists will see it that way.

50/57

Could Bitcoin devs implement a fork of the network?

Yes. It's possible.

However, it wouldn't stop inscriptions altogether – it would just make them more costly if the exploits for cheaper on-chain data storage go away.

Ordinals are here to stay in some form or another.

51/57

To recap this behemoth thread:

1. Ordinals/Inscriptions/BTC NFTs are all not the same
2. Ordinals = numbering system. Inscriptions = permanent data storage within Ordinal satoshis
3. Together – these are BTC-native digital artifacts

(cont.)

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4. While it's easy to inscribe now, it wasn't always the case
5. Infra around marketplaces, IaaS, wallets, and explorers is moving fast
6. Majority of trading is taking place on trustless exchanges now but lengthy settlement is still an issue

(cont.)

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7. Ordinals have achieved real volume in a short lifespan
8. A handful of projects have cemented blue-chip status already but more quality launches are coming
9. The market so far has a preference for L1 Ordinals over L2 BTC NFTs. BTC Stamps may have legs as an alternative

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10. Above all else, Ordinals are bringing fun back to Bitcoin.

They're culture, history, and digital artifacts all wrapped into one and on the oldest blockchain in the world.

It's worth getting fired up over.

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Congrats if you made it to the end of this absolutely massive thread!

I invite you to mint my very own custom Metaveralist Badge: a free mint on Polygon.

@HelloMetaversal and myself will be giving out perks in the future for badge holders.

Link: mint.highlight.xyz/63fd0406d21c0b…

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If you enjoyed this deep dive into Ordinals, follow me @JamesonMah for more research at the intersection of NFTs, culture, gaming, and finance.

Would really appreciate a like/retweet on the first tweet below if you can:

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https://twitter.com/JamesonMah/status/1644010184791183362