The Rise of Ordinal Inscriptions

The debut of Ordinals, the latest type of Bitcoin NFT, launched at the end of January to a mixture of excitement, experimentation, and dismay. With the new invention of Ordinal Inscriptions, people can now directly inscribe text, images — and even videos — on the Bitcoin blockchain. In this post you will learn about the unique challenges of creating, securing, and transferring inscriptions and how BitGo will serve the users of this growing ecosystem.

What are Ordinals? What are Inscriptions?

Casey Rodarmor, a Bitcoin developer, released open-source software named ORD in December 2022. This software runs on top of a Bitcoin Core full node and enables users to encode computer files into hexadecimal data inside a Bitcoin transaction (known as an “inscription”). By “binding” this data to a specific satoshi, users can create an NFT (known as an “ordinal”). While these terms are used interchangeably in some cases, they refer to two distinct concepts.

Ordinal theory provides a system for tracking the movements of the smallest denominations of bitcoin known as satoshi’s on the Bitcoin network. While these numbers are not recorded in the blockchain, they can be used as a potential default view for tracking individual satoshis. Additionally, certain Ordinals, such as the first satoshi of the first block mined after a halving, are considered rare and can hold significant value. Overall, Ordinal theory provides a simple yet effective way to track and potentially assign value to individual satoshis despite not being officially recorded on the blockchain.

Inscriptions are a newly discovered (or invented) way of storing data in the bitcoin blockchain. Prior to this, storing data on Bitcoin’s blockchain was typically done using an OP_RETURN type output, which was unspendable, and nodes would only relay transactions limited to 1 OP_RETURN of up to 80-bytes per transaction. With inscriptions, it is possible to easily store nearly 400KB of data in a single transaction and, with the help of a miner, nearly 4MB of data can be stored.

Two changes that occurred over the last few years enabled inscriptions: First, the Segregated Witness soft fork introduced the concept of a block weight limit (to replace the block size limit) and weighted witness data (which authorizes spending an input) at 1 weight unit vs. transaction data (inputs consumed and outputs created) at 4 weight units. Second, the Taproot soft fork introduced a new type of Bitcoin script, Tapscript, which is not limited in size beyond the limits already imposed on transactions and blocks.

Tying Ordinals to Inscriptions is one more convention: If a transaction reveals an inscription, the first satoshi of the input whose Tapscript reveals the inscription is considered inscribed. Now ordinal theory allows the transfer of ownership of the inscription, and it becomes possible to buy, sell, trade, or collect inscribed satoshis.

Challenges for Users

Because ordinal satoshis are a new lens on Bitcoin transactions, inputs, and outputs, Bitcoin wallets cannot yet easily receive, send, or store them. If you were to receive a valuable inscribed satoshi to your standard Bitcoin wallet, it would have no indication that it contains an inscription, and you could easily make an accidental transfer of that satoshi with a later transaction or even send it to mining fees.

When transferring ordinal satoshis, one must be careful not to create unspendable “dust” outputs and to ensure that Ordinal theory’s lens is properly applied to the transaction so that the inscribed satoshi transfers to the intended recipient.

Creating new inscriptions is not yet a widely available service and most of the available services to create inscriptions require trust in the service provider (i.e., you pay and they inscribe, but they could accept payment and fail to deliver the inscription to your address).

BitGo’s Answer

Starting today, you can add inscription tracking to any Bitcoin hot wallet on BitGo. With tracking enabled, any transaction received into the wallet will be checked for inscriptions and frozen to prevent loss of valuable inscriptions. You will have a new “Unspents” view in your dashboard for the wallet where you can see your inscriptions and link out to the public ordinals explorer for more information. From that view, you’ll be able to unfreeze the inscription if you want to use that Bitcoin in a normal transaction without concerning yourself where the inscribed satoshi is sent.

In the coming days, you’ll be able to send the inscribed satoshi to an address of your choice safely, and have a new option on inscription-enabled wallets to mint an inscription when making a new transaction. This will let you inscribe your own content into the Bitcoin blockchain.

To learn more about BitGo’s offerings, including Ordinals, schedule time with our team.