ordinals

A simple explanation of Ordinals, Inscriptions, Rare Sats, BRC-20s, and Runes.

This can help someone who’s just entering this ecosystem.

It’s simple, but it’s a long thread. 🧵

First and foremost, a Bandit. Building. Writing and reading. Commodities enthusiast. 100% correct opinions.

More than one year ago, Casey Rodarmor, a dev, created something called the Ordinals Theory. This is essentially a numbering scheme where individual satoshis are numbered in the order they were mined.

The concept is simple: as you number each sat, you give it an identity, allowing for individual tracking and transfer.

Ordering the sats and giving them an identity allowed us to assign value based on certain characteristics each had (numismatic value).

We could know which sat was the first ever mined, which sats are the first sats mined in each block, which sats were used in the famous Pizza transaction, which ones were mined by Satoshi, which ones were mined by Hal Finney, and you get the point.

But it didn’t stop there. Having created this sophisticated tracking system for each sat, Ordinals Theory introduced the concept of inscribing sats—linking content inextricably to a specific sat.

A new numbering scheme for inscriptions began, starting from 0 and numbering each inscription in the order they were inscribed. That’s why you hear that an inscription is early.

With over 60 million inscriptions so far, the earlier ones—sub1k, sub10k, and sub100k—are highly valued. They remind us of the beginning. Naturally, we began by inscribing random JPEGs and information.

After the first era of inscriptions featuring random content, the first PFP collections appeared. With no dedicated marketplace, we relied on trusted individuals like ZK and ChartFu to manage spreadsheets for trading.

However, this didn’t last long as marketplaces made their entrance, and we never looked back (except we did for Natcats lol).

And with this, the era of PFP collections began dominating the scene. You must be well aware of this, and if you’re reading this the day I’m posting, it means you still are quite early because Ordinals PFPs are on their way to absolute dominance.

Back to the explanation. The first collections were inscribed in the most rough (and yet beautiful way), inscribing the image directly onto the sat.

As the network kept being used more and more (Ordinals), fees began to skyrocket, and inscribing a 10K collection in this ‘rough’ way became financially unaffordable for many. That wasn’t a problem, because as an ecosystem, we’ve gone beyond merely inscribing images, innovating to code within the Inscriptions.

Concepts like recursive inscriptions and parent-child started to be used for every PFP collection. Now we have high-resolution JPEGs born from this innovation (check the art by OCM or Hashlings, for example).

But we didn’t stop with images. Domo, another dev, brought more excitement by using Ordinals Theory to create a standard (BRC-20) for launching fungible tokens. The name BRC-20 is just a useful play on Ethereum’s ERC-20 token standard.

The most basic explanation is that BRC-20 brought fungibility to Ordinals inscriptions. Instead of running a smart contract, the BRC-20 leverages JSON data inscribed in an Ordinal. This script can be used to create, mint, and transfer tokens. All on the base layer, and all through Inscriptions.

BRC-20 brought the craziness of fungible tokens to Bitcoin. The launch of so many tokens practically congested the Bitcoin network. Some have been so successful that they’ve reached and maintained over 1B market caps.

Since then, some competing fungible token standards within the Ordinals ecosystem have been released (none of them gaining the traction that BRC-20s achieved).

Like JPEGs, BRC-20s evolved to enable easier trading. The UX isn’t perfect but has improved, despite the standard’s inherent limitations. You can trade them on various platforms, and some popular BRC-20s are even listed on CEXs. It’s quite incredible what our degeneracy can achieve.

Given that the UX and the standard itself could be better, the creator of Ordinals Theory stepped up by creating a new protocol (independent of Ordinals) for launching fungible tokens, that will further enhance the fungible token experience.

This protocol, called Runes, is set to launch at block 840,000, but there are already some projects like RSICS, Runestone, $PUPS and $ZBIT, preparing to launch their runes.

Why Runes? BRC-20s, as fun as they are, created some issues, such as UTXO proliferation, which you’d recognize if you’ve been following them.

In the words of Rodarmor: ‘I’m not sure creating a new fungible token protocol for Bitcoin is a good idea. Fungible tokens are 99.9% scams and memes. However, they don’t appear to be going away any time soon, similar to how casinos aren’t disappearing. (…)

(…) Creating a good fungible token protocol for Bitcoin might bring significant transaction fee revenue, developer mindshare, and users to Bitcoin.’

This is significant. If you want to draw a parallel with the introduction of the ERC-20 standard on Ethereum, before its wide adoption, there were other less standardized methods.

Early tokens on Ethereum were created using custom implementations, leading to compatibility issues due to the lack of a consistent interface. The ERC-20 standard became dominant because of its simplicity and ease of integration, setting a common standard for Ethereum-based tokens.

This sounds familiar, right?

The Runes protocol that Rodarmor is developing aims to be the standard for fungible tokens on Bitcoin, gradually replacing BRC-20. And, as part of the way it’s being created, it’s unlocking significant possibilities to further decentralized finance on Bitcoin.

That means, it’s not only just a better protocol for launching and trading fungible tokens on Bitcoin, it’s going to be a protocol that can be leveraged to interoperate with other layers of the network and definitely with Ordinals, thus amplifying Bitcoin’s capabilities to bring home decentralized finance.

As you see, Ordinals changed the way we believed Bitcoin could be used and unlocked a myriad of opportunities. Bitcoin has become the number 1 chain for ‘NFTs’, has launched several fungible tokens with market caps over 1B. Runes is unlocking a new era.

runesprotocol

Hopefully, this gives you a better grasp of this ecosystem. And if you’re already part of the ecosystem, it reminds you of our journey.

Follow /ordinals and /runesprotocol

We even got sassy and started giving value to certain sats, not because of their historical value, but because of certain characteristics (e.g., palindromes).