The history of non-fungible tokens (NFTs) dates back to 2014, when New York artist Kevin McCoy created Quantum on the Namecoin blockchain, based on the same technology introduced with Bitcoin. He didn’t just create a piece of digital art but made a technological leap that paved the way for the ecosystem we know today. As time went by, numerous NFT collections emerged, mainly on the Ethereum blockchain. The ERC-721 standard was introduced to allow for the creation of unique, indivisible tokens. Unlike cryptocurrencies, NFTs contain a digital signature, so they can’t be replicated, and represent ownership of photos, videos, audio files, and so on.
Ethereum’s historical significance, security, and broader deployment make it the elementary choice for NFTs. In spite of everything, other blockchains have gained prominence, so Ethereum’s position could shift. The advent of Bitcoin Ordinals has added a new player to the NFT space, but the add-ons to the Bitcoin network still have a significant amount of work to do before reaching the heights of NFTs on Ethereum. Ordinals are an exciting development, marking a substantial evolution from Bitcoin’s original use case as a digital currency. They’re somewhat like NFTs, but there’s a massive difference between the two. If you’re curious to learn more, please continue reading.
Bitcoin Ordinals Can Be Either Fungible or Non-Fungible, Depending on How Holders Use Them
The 2021 Taproot upgrade increased the block size by 4MB, improving Bitcoin’s inherent ability for data inscription. Ordinals are digital assets created on the Bitcoin blockchain by attaching images, videos, and so forth to individual Satoshis. The process is referred to as inscription. Each Satoshi receives a serial number according to the order in which it was minted, starting at 0. The Ordinals protocol makes it possible to send and receive Satoshis that carry optional data in Ordinal progression. By inscribing an Ordinal number to each Satoshi on the Bitcoin network, the Satoshi becomes traceable, so the blockchain knows exactly who owns it.
What sets Bitcoin Ordinals apart from Ethereum NFTs is their dynamic nature. More precisely, they’re simultaneously fungible and non-fungible. An Ordinal can behave like an NFT if recognized and preserved by its owner. Still, it remains fungible to those who overlook and dismiss its unique value, so it can be exchanged for another Satoshi or used in transactions. Put simply, Bitcoin Ordinals act much like Ethereum NFTs but maintain their fungible nature. Each Ordinal is inscribed directly onto an individual Satoshi, which is a fungible unit of Bitcoin. The Ordinals Magic Eden marketplace is accessible to Anyone with a Bitcoin address.
Ethereum NFTs Are Minted on The Blockchain Via Smart Contracts That Assign Ownership
As far as Ethereum NFTs are concerned, it’s very important to know they reside in an off-chain location, which can be a website or a URL address. On-chain storage is preferable because users are able to verify the technical aspects of the NFT, but very few projects opt for this storage method. CryptoPunks and the Bored Ape Club store their files off-chain, living outside the blockchain. NFTs are created using smart contracts, essentially digital agreements that are executed automatically when predetermined terms and conditions are met. When an NFT is minted, the smart contract establishes the creator as the owner.
Bitcoin supports smart contracts via its native language Script, but the self-executing programs are limited in their functionality. Ethereum’s smart contracts enable the creation of unique digital assets that follow the ERC-721 token standard, which provides functionality to track and transfer NFTs. ERC-1155 allows for the creation and transfer of both fungible and non-fungible tokens within the same contract, meaning that multiple items can be sent in a single transaction to one or more recipients. The metadata associated with NFTs encompasses detailed information – the artwork’s title, the artist’s name, a brief, the unique identifier, the mint date, etc.
Bitcoin Ordinals Don’t Support Royalties Due to Them Being Numbered
While creators earn money from the sale of their NFTs, royalties are paid to the creator for each subsequent purchase. Royalties are often coded into smart contracts. Ordinals don’t support royalties because they’re minted directly onto the Bitcoin blockchain. A transaction can’t be reversed, which makes it difficult, if not impossible, to manage long-term royalties. Equally, Bitcoin’s scripting language is inappropriate for implementing complex contractual structures and agreements. Creators of Ordinals don’t receive royalties. Attention must be paid to the fact that on-chain royalties represent a good idea only in theory, not in practice, as payment can’t be enforced without complex and invasive restrictions.
The Ethereum NFT ecosystem is currently struggling with confusion with regard to royalties, as platforms and holders keep finding loopholes to avoid payments. Bitcoin Ordinals avoid this unpleasant situation by not making false claims of supporting royalties, therefore avoiding chaos. Recursive inscriptions now allow people to retrieve data from previous inscriptions on the Bitcoin network and use that data to create a new inscription. Practically, it removes the 4MB data cap. When creating NFT collections, it’s no longer necessary to upload the unique features as individual files because developers can call data from existing files. It opens up seemingly endless possibilities for interoperability on the network.
Ethereum NFTs Are Mutable, So They Can Be Changed Anytime
NFTs, like collectibles, depend on the immutability of the images to preserve rarity, which can influence the perceived value and appeal of a token and influence its potential for resale. The vast majority of Ethereum NFTs store their data in centralized servers, appearing to be fully on-chain. Nevertheless, that’s not the case. More than half of them are mutable, which means the metadata linking to the file can be altered at any point with potentially different information. NFTs, such as vaccination records, must be updated frequently as new doses are delivered. It’s just an example.
By contrast, Bitcoin Ordinals are stored in immutable, on-chain data, so they can’t be changed once minted and added to the blockchain. Through a logical ordering system, each Satoshi receives a unique identifier. The sequence, together with the ordinal positions, can be changed and reordered, but that’s it. Metadata specifies the characteristics of the Ordinal, drawing attention to its qualities or offering information about the rarity of specific traits, which explains why immutability is important. Bitcoin Ordinals are available on various centralized and decentralized platforms.
The Takeaway
We’ve signaled just some of the differences between Bitcoin Ordinals and Ethereum NFTs. It’s up to you to discover the rest.