You may have heard about Bitcoin NFTs and some collections based on this network, like Pepe or CryptoPunks, whose lots were sold for a record 9.5 BTC. However, this sector is still developing and for now it is far from what we’re used to call NFTs. Its ecosystem is new and a bit chaotic.
In this article, we will clarify the main issues of Bitcoin NFTs and see how and where we can interact with this new market.
What is Bitcoin NFT?
Technically, the Bitcoin blockchain (BTC) does not support non-fungible tokens. So how could Bitcoin NFT appear in the first place?
The implementation of unique tokens on Bitcoin blockchain became possible due to the combination of three technical network solutions:
- OP_return. This code helps to save third-party information on the blockchain. Initially, OP_return only allowed writing short messages weighing up to 80 bytes.
- Taproot. This Bitcoin update increased privacy and network bandwidth. It increased the message size limit in OP_return, now we can add information up to 400 KB.
- Ordinals. This protocol gives a serial number to each Satoshi, which helps to track them and assign a certain value.
Basically, Bitcoin NFTs are “messages” (“inscriptions”) made with OP_return and attached through the Ordinals protocol to a specific Satoshi. Thanks to the Taproot update, we can now upload not only texts but also different files. Ordinals let all attached data be saved on the blockchain. NFTs value does not depend on the BTC price prediction.
How to work with Ordinals?
A regular BTC wallet does not support Ordinals, so in order to interact with unique coins, we need:
- Ord Wallet with Taproot support and Satoshi Tracking. It is an additional software for the Bitcoin Core wallet, so you will need to install it first.
- Sparrow Wallet. It also supports unique satoshi tracking, but doesn't require a full node setup, so you can call it a simple wallet for Ordinals. Its functionality is limited compared to Ord, you cannot create your own “inscriptions”.
- Ordinals Wallet. This service is still developing. In theory, it should provide all the functionality for managing Ordinals in a convenient way.
You might also find interesting these two platforms, that might help you in your work with Bitcoin NFTs:
- Ordinals. You can track in real time the created "inscriptions" with all the on-chain data. Useful both for checking the Ordinal during an exchange and for monitoring fresh trends.
- Dune Analytics. Since there are no centralized analytical services for Ordinals yet, custom dashboards might come into rescue.
Where to find Bitcoin NFT?
In February, Yahoo reported about 76,400 Ordinals and that number is growing fast. The market is developing, which means that new collections appear every day. You can find them through different ways:
- By using convenient explorers like Ordinals Directory.
- On OTC (Over-the-Counter). OTС works in various social networks: Twitter, Discord, Telegram. You should start your search from the Ordinals discord, where there is a special branch for OTC trading. Then just type in "Bitcoin NFT" or "Ordinals" on various social networks.
- On marketplaces. Gamma at the moment is the only marketplace for Ordinals. The second place to look is OpenSea.
Advantages and disadvantages of Bitcoin NFTs
Ordinal is a new trend, it's about one month old. So for now it is unclear what effect it will have on the Bitcoin network. Such NFTs create advantages and difficulties for different market participants. Among the advantages are:
- Hype. The market is new and popular, so first investors might make great profits here if they are lucky.
- Activity. BTC is known as “digital gold” and most people use it for long-term investments. Ordinals created a new wave of interest and activity around Bitcoin.
- Secure decentralized data storage. Ordinals are stored on-chain, unlike other NFTs.
Among the main problems of Ordinals:
- Tricky to use. Tools for Ordinals are relatively difficult to install, and they use a console interface for management.
- Lack of ecosystem. There are no convenient solutions for trading. This attracts speculators.
Bitcoin NFT or Ordinals are tracked by Satoshi with an “inscription” – additional information in the form of text or an image. Satoshi remain fungible and can be spent like regular coins, so technically they are not NFTs. To interact with Ordinals, you need a special wallet and advanced technical knowledge. It can be difficult for beginners to work in this segment.
The ability to create NFTs on the Bitcoin network has created a new market, which is still growing and does not have a developed ecosystem. Despite this, prices for many Bitcoin collections are higher than for Ethereum ones, and OTC trading opens up wide opportunities for speculation in this market.
Did you enter the Bitcoin NFT market? Share your experience in the comments below!
If you want to learn more interesting facts about crypto then check out our blog! You might like our articles “NFTs From Politicians and Musicians” and “Crypto Trading as a Disease: True or False?”.