Despite the Securities and Exchange Commission’s recent crackdown on crypto, Bitcoin is up, and up big: From Tuesday to Thursday, the price rose almost 14%, just above $25,000, according to CoinMarketCap.
Pinpointing exactly why the price of the first cryptocurrency in the world rises and falls is not an exact science, but reports of a new short squeeze-investors who will bet on the price of Bitcoin will reduce their holdings are sold-is one of the explanations for the sudden rally of Bitcoin.
It also pushed the value of Bitcoin as an ordinal, according to a report from blockchain data company Glassnode. But what are they, and how do they contribute to the recent price increase of Bitcoin?
Origin of Ordinals
Ordinals are essentially non-fungible tokens, a digital asset most famously used to prove that only one person owns, for example, a $69 million digital artwork sold in March 2021.
NFTs are most famously used in blockchains like Ethereum and Solana. The computational capabilities of this digital ledger go beyond Bitcoin, whose blockchain is primarily designed to record transactions between digital currency owners.
However, in December, Casey Rodarmor, a Bitcoin engineer, designed a way to allow NFTs to exist on the Bitcoin blockchain, as opposed to previous attempts to add NFTs to the Bitcoin ledger hosted “off-chain,” or not in the same database. which records daily transactions. Rodarmor called these “digital artifacts” ordinals.
Cumulative fees for minting Ordinals are approaching $1M and seem to be exponential.
🔗 https://t.co/kD6KnYFd8f pic.twitter.com/BjvotTwnpc
– Ben DiFrancesco (@BenDiFrancesco) February 16, 2023
How is the ordinal?
First, Rodarmor devised an algorithm to create a serial number for each satoshi, the name for the smallest part of a Bitcoin (there are 100 million satoshis per Bitcoin), based on when the first satoshi was created.
Then, he created a way to “inscribe” data in a satoshi, exploiting the new updates to the Bitcoin code in 2017 and 2021, which expanded the capacity for the blockchain to store data beyond transaction records.
“Imagine a penny piece that you have in your pocket, and I can put a piece of data,” Daniel Peter, cofounder and CEO of CapsuleNFT, a blockchain infrastructure company that recently announced its work with ordinal, told fortune. “Instead of being a penny, now I’ve attached a picture of Benjamin Franklin to the penny.”
Like NFTs in other blockchains, ordinals are “non-fungible.” In other words, there is a unique record in the Bitcoin ledger which says that a thin sliver of Bitcoin with, say, a picture of Benjamin Franklin on it belongs to one owner and one owner only.
However, unlike NFTs on blockchains like Ethereum and Solana, piggybacking data on top of satoshi does not link to where the actual file resides (often in a decentralized file storage system). Data is stored, or “written,” in its own ordinal.
It should be noted that Ethereum and Solana also allow users to store large data files in NFT; However, pushing this data “on chain,” or residing on the blockchain itself, is more computationally intensive and therefore expensive, Jon Wong, technical lead in the NFT team at the Solana Foundation, told fortune.
“It’s definitely an anti-scale model,” Austin Federa, head of strategy and communications at the Solana Foundation, said of the ordinal. He added: “It’s a version that, if you squint, is almost like fine art, about the ability to create value out of scarcity.” However, he notes, its use is limited.
Staying power?
Since the ordinal became hot in early February, the number of “mints,” or creations, of Bitcoin NFTs has skyrocketed, according to data from Dune Analytics. More than 100,000 have been printed so far, each Decryption.
As ordinal mints have increased, minters have been willing to pay miners, the computers that run and secure the Bitcoin blockchain, more and more in transaction fees. Increasing frenzy is one of the reasons behind Bitcoin’s recent price increase, said Wong from the Solana Foundation.
It remains to be seen whether the ordinal, which is only two months old, has retained its power. But, in the meantime, Bitcoiners are having fun at the rally.
#Bitcoin break through $25,000 🚀
The journey TO THE MOON has just begun🔥
— Keyur Rohit (@CryptoKingKeyur) February 16, 2023
Learn how to navigate and strengthen trust in your business with The Trust Factor, a weekly newsletter that examines what leaders need to succeed. Log in here.