Bitcoin Ordinals - The New “Blue Chip” NFTs
A new NFT standard with a unique value proposition.
Last cycle proved that there is serious demand for “profile picture” NFTs of all sorts. Projects began experimenting with ways to offer unique value to holders, including exclusive communities, events, and even rights to allocations for new projects or airdrops. Ethereum was the first and main chain that NFTs were traded and collected on, however, other chains such as Solana and Polygon began to see an increase in NFT activity. The main reason for a lot of activity being on Ethereum was not only because it was the first chain to have NFTs in a big way, but also because it was (and continues to be) seen as the most secure chain for NFTs. That is, until Bitcoin NFTs came along.
What are Ordinals?
Enter Bitcoin “NFTs” aka Ordinals. A single bitcoin can be broken down into 100 million “satoshis”, or in other words, 0.00000001 BTC = 1 satoshi. The ordinals protocol assigns data to different satoshis based on rarity (the first satoshi mined after a bitcoin halving is much less common than one in the middle of a random block). Bitcoin NFTs, called Ordinals, are stored directly on the Bitcoin blockchain in these inscriptions of metadata in a satoshi. In this way, these NFTs may actually have a fair argument for being the most secure, as Bitcoin is by far the most secure and decentralized blockchain, and the NFTs are actually stored directly on-chain, differently from other chains.
The Ordinals Protocol, which introduced the concept of inscribing data on Bitcoin, was launched in January 2023. However, it wasn’t until late 2023 when people really began to experiment with inscriptions and Bitcoin NFTs took off. The below chart shows how the activity on the Bitcoin blockchain increased meaningfully in late 2023 as inscriptions took off. Fees accounted for the largest percentage of the total block reward since late 2017.
The Changing Landscape of the NFT Market
As the price of Bitcoin continued to creep higher throughout 2023 and the anticipation for ETF approvals built, Ordinals really began to take off. Market participants saw how Ethereum NFTs outperformed ETH in many instances last cycle due to the high demand and low supply of the collections. Furthermore, the wealth effect from prices going up has benefitted no community more than early Bitcoin holders. Therefore, there is speculation that Bitcoin whales will purchase Ordinals, similar to how Ethereum whales did with Ethereum NFTs such as CryptoPunks and Bored Ape Yacht Club. The increase in experimentation with Bitcoin inscriptions and speculation around Bitcoin Ordinals led to an increase in the percentage of NFT trading activity on Bitcoin (in green below).
Popular Ordinals Collections
NodeMonkes
Ordinals went from being basically unheard of to being some of the most popular NFTs, both in terms of volume and high floor prices. Some of the top collections only recently launched in late 2023, coincidentally just a couple weeks before the Bitcoin ETF began trading. The most popular “blue chip” Ordinals NFT is NodeMonkes, which has appreciated considerably in Bitcoin value while BTC has also gone up substantially.
NodeMonkes were inscribed on Bitcoin in February 2023, however, they didn’t officially launch until December 2023 when the Ordinals ecosystem was more built out. They were the first 10,000 count profile picture (PFP) collection to launch, hence their high floor price. NodeMonkes launched with a Dutch auction, and the ultimate price at launch was 0.03 BTC, or just over $1000 at the time. The following week, in early January 2024, Gordon Goner, a co-founder of popular NFT collection Bored Ape Yacht Club, showed his support for NodeMonkes and Ordinals by purchasing a rare duck NodeMonke. This sparked interest in and generated volume for NodeMonkes and Ordinals generally, as Ordinals were still new and unknown to many. The floor price of NodeMonkes is up over 15x in BTC terms since launch at the time of writing.
Bitcoin Puppets
Another popular project is Bitcoin Puppets, launching at a similar time to NodeMonkes. Bitcoin Puppets feature art created using Microsoft Paint and the community embraces the grassroots nature of crypto. The whitepaper on their website mentions no roadmap, promises, or guarantees, and really embraces typical meme qualities over fundamentals. There is a strong emphasis on community and it has translated into Bitcoin Puppets being the 2nd largest PFP collection on Bitcoin by market cap behind only NodeMonkes.
There are other popular projects such as Quantum Cats and Bitcoin Frogs, along with many others popping up all the time. Details of the other projects is a topic for a different discussion. However, I wanted to highlight how quickly Bitcoin Ordinals came onto the scene and how swiftly they became some of the highest volume and most valuable NFT collections. If BTC goes on a huge run backed by massive ETF inflows, top Ordinals collections could become extremely valuable, much like the top Ethereum collections did (see CryptoPunks floor price below) during ETH’s historic run to ~$4500 in 2021.
Could the top Bitcoin Ordinals collections reach floor prices of $400k or higher like Punks and BAYC did? Only time will tell.
A Note on Bitcoin Activity and Sustainability
There is a long-standing debate on how Bitcoin will be sustainable once block rewards become much less meaningful after a few more halvings. Miners must be incentivized to continue to operate and to sustain the network, and when BTC issuance inevitably drops, fees may become a very important driver of miner revenue and profitability. Yes, this would make the Bitcoin blockchain expensive to use for every day transactions and normal users. However, a flourishing “Layer 2” ecosystem on Bitcoin could remedy that, and new projects are tackling that as we speak. Ordinals may prove to be a win-win for Bitcoin, increasing fees for miners over the medium to long-term, as well as providing critical infrastructure for people to store data such as NFTs in the most immutable, censorship-resistant chain in existence.
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