What is Bitcoin NFT? How Bitcoin Ordinals Works.

What is bitcoin etf?

What is Bitcoin NFT?

Bitcoin NFTs are NFTs minted from the Ordinals protocol. To create Bitcoin NFTs, the community uses the term “inscribing” because each NFT created is the process of engraving images on the smallest part of Bitcoin called a satoshi.

Background of Bitcoin NFT

Attempts to revive Bitcoin

In the Crypto market, Bitcoin is the asset and blockchain with the largest market capitalization. However, this is contrary to the application Bitcoin can bring to users because of their non-deployable Smart Contracts .

Currently, most DApps related to DeFi or NFT are developed in ecosystems other than Bitcoin such as Ethereum, Solana, Polygon. NFTs play an important role in many applications such as GameFi, Identity,… In addition, they also have the task of encoding many items from real life into the DeFi market.

Faced with the situation of being left behind by many blockchains, many developers have started the process of reviving Bitcoin, including Bitcoin core developers, but they have not been successful until…

The Heaviest Bitcoin NFT is Born

On February 2, 2023, Udi Wertheimer created the Bitcoin NFT with the largest block size and transaction in the history of the Bitcoin network at nearly 4 MB.

4 MB is about the size of a 4-5 minute mp3 song. However, for the Bitcoin network, this is a huge number. Based on data from Blockchain.com, the average block size has increased from 1.2 MB to nearly 2.4 MB.

The birth of this NFT has caused a stir in the community and they have begun to learn about related components such as what is Bitcoin NFT, how are they minted?

NFT successfully minted on Bitcoin
NFT successfully minted on Bitcoin.

Bitcoin Ordinals Generation Mechanism

Ordinals is a protocol created by Casey Rodarmor – a former Bitcoin developer. While NFTs on Ethereum have their own token standards, ERC-721 or ERC-1155, Bitcoin NFTs do not have those standards.

Since each NFT is engraved on a satoshi (1 BTC = 100,000,000 Satoshi), 1 Bitcoin can create up to 100,000,000 Bitcoin NFTs. These NFTs are trackable, transferable, and operate natively on Bitcoin without the need for Layer 2 solutions .

What’s more, these photos are stored entirely on the Bitcoin network, not on other servers like most NFTs on the market. Ordinals also takes advantage of Bitcoin’s SegWit and Taproot, which are technologies that help the network get verified faster.

ordinals protocol interface
Ordinals Protocol Interface

How to Create and Buy Bitcoin NFTs

How to mint Bitcoin NFT

To mint NFTs on the Bitcoin network, you need to know about technology and code. Therefore, normal users currently cannot mint Bitcoin NFTs as easily as on Opensea.

The Coin98 Insights team will update new methods when the market has products that support NFT minting launched. Technically, to be able to mint NFT, users need knowledge of:

How to rent a virtual server (from Amazon Web Services) to run a full Bitcoin node.

Understand the UXTO ledger mechanism (this is the model Bitcoin and Cardano use, while Ethereum uses the Account model).

Calculate the fee to pay for the size of the NFT file using the tool here .

To understand more about minting, you can read the thread of member named dotta here .

How to Buy and Sell Bitcoin NFTs

Because there is no exchange support, users can only buy P2P from other holders through exchanges on Discord. This trading activity will usually have a third party as an intermediary to support the two parties.

However, this is still quite risky because no one can guarantee that the intermediary is reputable. If you accept the risk, users just need to create a Bitcoin wallet, transfer BTC and buy NFT from the seller.

Note: Users do not need to run a full node to buy Bitcoin NFTs. However, to create, sell, send or trade, you need to run a Bitcoin full node as instructed above.

NFT Collectibles on Bitcoin

Ordinal Punks

Ordinal Punks is an NFT collection created with inspiration from CryptoPunks on Ethereum – considered one of the first and most prominent NFT Collectibles on the market. Moving to the new blockchain, Ordinal Punks continues to be one of the most sought-after collections.

Their base price has increased from 2.2 BTC ($50,000) to 9.5 BTC ($215,000) at its peak. Currently, each NFT is priced at an average of 4.2 BTC ($95,000) with a total supply of 10,000 NFTs already owned.

Ordinals Punk NFT Collection on Bitcoin
Ordinals Punk NFT Collection on Bitcoin

On The Edge of Oblivion

This is a collection created and traded on Ethereum. However, with the popularity of Bitcoin NF, the developer of this collection has allowed users to buy NFTs on Ethereum and then convert them to Bitcoin by burning and minting on the other chain. This collection is currently priced at 0.2 ETH with a total supply of 555 NFTs.

Other NFT Collections

etherrock bitcoin nft
EthereumRock Collection Ported to Bitcoin

The Bitcoin NFT trend has also led to cash flows to other NFT projects like the Bitcoin Ether Rocks collection. Some users have paid more than $2 for each Ether Rocks, and the number of buyers has also increased following the current trend.

How Many NFT Collectibles Are There on Bitcoin?

Anyone can create an NFT collection on Bitcoin, so most Bitcoin NFTs are launched as a trend and have no intrinsic value. You should research carefully before deciding to buy or sell.

New NFT projects will be announced on Ordinals Discord  .

Bitcoin NFT’s Impact on the Market

The Impact of Bitcoin NFTs on the Bitcoin Network

The birth of Bitcoin NFTs has not only attracted attention from the Bitcoin community, but also created a trend of NFTs on other Bitcoin forks like Bitcoin SV (BSV). This has both advantages and disadvantages:

Benefit:

  • Bitcoin and BTC networks get more attention, driving value to BTC.
  • Miners earn more transaction fees because there are more transactions.
  • Proving Bitcoin can be used for more than payments.

Limit:

  • Users transacting on the Bitcoin network have to pay higher transaction fees as more people compete to validate transactions.
  • Rising transaction fees are also a major concern for the Bitcoin community, but data from Blockchain.com shows that this number has not increased significantly and is not even different from 2022.
average transaction fees on the bitcoin network
Average transaction fees on the Bitcoin network

According to Coin98 Insights, the reason why Bitcoin gas fee does not increase is because:

  • High technical and technological barriers for the average user.
  • Bitcoin NFT prices are being FOMOed at too high prices.
  • There is no application ecosystem like NFTs on other DeFi ecosystems.

Binance NFT Marketplace Supports Binance NFT

On May 8, 2023, Binance NFT Marketplace announced that it will support Bitcoin NFT. Binance is looking for relevant NFT projects focused on Bitcoin Ordinals to support their development and community expansion. To participate in this program, projects need to register with Binance from May 9, 2023 to May 15, 2023.

For Binance investors and users, Binance’s integration of Bitcoin NFT will allow you to buy and sell these NFTs directly without going through the complicated technical steps required by the traditional trading method mentioned below.

binance nft marketplace supports bitcoin nft
Binance NFT Marketplace supports Bitcoin NFTs.

Could Bitcoin Become a Space for NFTs Like Ethereum?

For NFTs to develop long-term and sustainably, they need an ecosystem to develop. This is where there are users, developers, and projects to apply the released NFTs, similar to NFTs on the Ethereum ecosystem.

Back to Bitcoin, why is Bitcoin not yet called an ecosystem? The biggest reason is because Bitcoin does not have the right infrastructure to develop dApps. There have been many projects on the market that want to develop on the basis of Bitcoin but have not had great success.

Here are some typical projects:

  • Lightning Network: This is considered Layer 2 of Bitcoin to help the Bitcoin network faster, however, the application level only stops at the payment level.
  • Stacks : Smart Contracts development project helps many projects develop on Bitcoin but has not achieved success.
  • ChainX : Combining both payment solutions and building an ecosystem on Bitcoin but also not successful.

In addition, Bitcoin has many times Hard forked to create networks with larger block sizes, for example Bitcoin Cash with 8 MB block size (compared to 1 MB of Bitcoin) but failed. Through this, we can see that building Bitcoin into an ecosystem is not simple. There have been many teams wanting to make Bitcoin a rival to Ethereum but this seems unfeasible.

The success of Ethereum and other chains comes not only from the right infrastructure but also from the network effect, the efforts of the blockchain foundation in developing and directing to create a symbiotic ecosystem.

Summary

Bitcoin NFT is a trend that the community is interested in. However, they cannot develop long-term due to barriers in infrastructure, approach and practical application like NFT in other ecosystems.