After the introduction of blockchain technology with Bitcoin’s inception in 2008, various new concepts and use cases emerged for investors, developers, and tech enthusiasts. Two such concepts that gained traction were non-fungible tokens (NFTs), initially introduced around 2014, and, more recently, Ordinals, which emerged in 2023. While both represent digital ownership, they have key differences in their uses and underlying technology.
What are NFTs?
NFTs are digital assets that represent ownership of a unique item or piece of content on a blockchain. NFTs are “non-fungible” which means that each token is unique and cannot be exchanged on a one-to-one basis with another token.
NFTs are only built on smart contract platforms through the process of minting. Smart contracts are just a set of programmed rules stored on the blockchain to establish NFT ownership and define how it can be transferred or sold.
NFT minting on blockchain ensures that ownership and transactions are managed transparently and securely. Since the details of the NFT are recorded on the secure digital ledger called blockchain, a new block is added on every minting.
After the minting information is verified, the block is sealed to make the records tamper-proof. Imagine you’ve made a special digital sticker, and you want to ensure that everyone knows it’s unique and belongs to you. You decide to put it in a super-secure digital album where everyone can see it, but no one can claim it’s theirs without your permission. This is similar to what happens when you mint an NFT.
The NFT ecosystem includes marketplaces like OpenSea, Rarible, and Foundation. These platforms function as hubs where users can engage in buying, selling, and trading NFTs.
What are Ordinals?
In 2023, the popularity of NFTs led to a new kind of NFT called Ordinals, which are made on Bitcoin, the very first blockchain. Casey Rodarmor, a software developer, was the creator of Ordinals.
Unlike regular NFTs that use a special format or standard on their blockchain like a digital record book, Ordinals do something different. They write or “inscribe” information directly onto the smallest pieces of Bitcoin, called satoshis. Each satoshi can carry a little bit of data, such as an image or text. Hence, whatever is inscribed becomes a permanent part of that tiny Bitcoin piece, directly part of the chain itself.
As Ordinals embeds data directly into the Bitcoin blockchain using its original features (leverage the extra space created by Taproot and SegWit), the method sidesteps the need for complex smart contracts used in platforms like Ethereum. This ensures the data benefits from Bitcoin’s strong security and widespread use, but it also means what you can do is simpler because you’re not using advanced programming features.
Key Differences Between Ordinals And NFTs
Differences between Ordinals and NFTs are discussed in the table below:
Source: CCN
While both Ordinals and NFTs allow for unique digital items to be owned and traded, Ordinals embedding directly in the Bitcoin blockchain makes each satoshi uniquely identifiable.
Difference between Ordinals and NFTs
Based on Technology
The most apparent difference between Ordinals and NFTs is the blockchain on which they are hosted. NFTs are mostly associated with chains like Ethereum, Solana, or Avalanche, which support smart contracts and have several decentralized applications (dApps).
In contrast, Ordinals are inscribed directly on the Bitcoin blockchain, which is simpler and does not support smart contracts but benefits from Bitcoin’s network security and adoption. Essentially, Ordinals use a straightforward, highly secure system, while NFTs benefit from the greater flexibility and features of smart chains.
In terms of Functionality and Flexibility
Due to the absence of smart contracts, Ordinals are simpler but less flexible. They focus on permanence and security, embedding media directly into the blockchain. NFTs offer more functionality thanks to smart contracts, enabling more complex transactions and interactions. This includes programmable royalties, ownership history, and more, which can enhance user engagement and possibilities. For example: instead of buying an NFT outright, NFT rentals offer digital asset ownership temporarily on some platforms.
Market Dynamics
The market dynamics of NFTs and Ordinals also differ significantly. NFTs are traded on numerous marketplaces that provide user-friendly interfaces and additional services such as auctions, bundles, and more. While NFTs can be more expensive to interact with, especially on networks like Ethereum due to high transaction fees, they are also more diverse in their use and potential applications. On the other hand, trading Ordinals is currently more technically demanding, requiring a deeper understanding of Bitcoin transactions and often peer-to-peer exchanges. However, the Ordinals market is evolving, and simpler tools are being developed.
Conclusion
Ordinals and NFTs are concepts in digital ownership and asset tokenization. The NFT market is bigger when it comes to applications and community engagement. In contrast, Ordinals capitalize on the popularity and security of the Bitcoin network, offering a more secure on-chain approach to digital artifacts. Both appeal to different segments of the digital asset market but artists have a keen interest.
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