Bitcoin provides a new alternative to traditional payment methods by promoting decentralized peer-to-peer transactions. Although its core function is still the transfer and storage of value, with the emergence of cryptographic inscription technology, the Bitcoin network has begun to expand its uses.
Inscription technology allows users to store data such as images, audio, video, etc. directly on the blockchain. While this technology first appeared on the Bitcoin network in the form of ordinal inscriptions, it has expanded to other blockchain networks, which has caused curiosity and concern among community members. This guide details the concept of cryptographic inscriptions, their history of development, how they work, and the benefits and potential problems they bring to the decentralized ecosystem.
Reading Guide:
•Where to buy encrypted inscriptions?
•What is a cryptographic inscription?
• Bitcoin ordinal inscriptions: the early stages of cryptographic inscription technology
• How do cryptographic inscriptions work on Bitcoin?
• Advantages and disadvantages of encrypted inscriptions
• Cryptographic inscriptions: a novelty or a real innovation?
Where to buy encrypted inscriptions?
What is a cryptographic inscription?
For Bitcoin, inscriptions are metadata attached to the smallest unit of Bitcoin, sats. This inscription technology allows people to write arbitrary content on sats, thus creating native digital artworks that are unique to the Bitcoin platform.
The rise of Bitcoin ordinal inscription technology began with the Ordinals protocol created by Bitcoin developer Casey Rodarmor, which was officially launched in January 2023. The Ordinals protocol was made possible by the two upgrades of the Bitcoin network, Taproot and SegWit. This protocol uses ordinal theory to number, identify and track sats, allowing Bitcoin to support the creation and trading of tokens.
Once sats are inscribed, they can be transferred via Bitcoin transactions, sent directly to Bitcoin addresses, and stored in unspent transaction outputs (UTXOs). However, you need an address capable of receiving ordinal inscriptions, as normal Bitcoin addresses will not work here.
Bitcoin Ordinal Inscriptions: The Early Stages of Cryptographic Inscription Technology
Although Bitcoin ordinal inscriptions became popular in January 2023, the concept of non-fungible tokens on Bitcoin is not new. In the traditional Bitcoin framework, all Bitcoins are considered equal. However, in 2012, so-called colored coins emerged as a way to represent and manage real-world assets on the Bitcoin blockchain. This allowed Bitcoin's utility to expand beyond being a peer-to-peer currency. However, this additional "non-financial" data increased the demand for block space, which put some pressure on Bitcoin nodes.
Colored coins use the "metadata injection" technique to add metadata. However, this method is inefficient and has capacity limitations. To solve this problem, the Bitcoin community introduced the OP_RETURN function as part of Bitcoin Core 0.9.0 in 2014. This function enables users to "store" arbitrary data in Bitcoin transaction outputs and save this data in the Bitcoin block space.
The impact of Segwit
In 2017, the Bitcoin network implemented an update called Segregated Witness (SegWit). Prior to the SegWit update, the OP_RETURN function would store arbitrary data in Bitcoin's transaction blocks along with other necessary information about the transaction, such as the sender or receiver's address, transaction time, etc.
Segregated Witness (SegWit) separates signature information from transaction data, helping to optimize block space and reduce transaction costs.
The impact of Taproot
The Taproot upgrade implemented in 2021 goes a step further based on SegWit technology and introduces Schnorr signatures, which are more efficient, secure and smaller in size, which helps reduce the overall size of transactions. Thanks to these technological advances, Bitcoin transactions can now carry more metadata, which not only speeds up transaction processing, but also effectively reduces transaction costs.
In January 2023, Casey Rodarmor proposed the ordinal theory based on previous technical achievements. This theory further simplified the process of creating native assets on Bitcoin, making it easier to create native tokens on Bitcoin.
What is Ordinal Theory?
Ordinal theory describes the systematic ordering of Satoshi and the inscription of data onto Satoshi using the ordinal protocol. Ordinal numbers are a number system for Satoshi that allows for tracking and data transfer. These designated numbers, called ordinal numbers, are assigned to Satoshi based on the order in which they were mined.
Users can now trade Bitcoin non-fungible tokens (NFTs) directly on the blockchain. With the creation of ordinal inscriptions, users can now inscribe content such as videos, images, text, PDFs, and audio to a single satoshi.
Taproot Wizards
Shortly after the launch of Ordinal Theory, an Ordinal project called "Taproot Wizards" was launched in February 2023, launching a set of 2,121 collectible digital wizard cards. Subsequently, the Ordinal inscriptions attracted great attention from many well-known projects, including OnChainMonkey, DeGods, and Yuga Labs, the creator of the Bored Ape Yacht Club (BAYC) NFT series, and other well-known entities joined the Bitcoin network. At the same time, these inscriptions can be viewed and traded on various NFT markets.
The concept was then extended to Ethereum and chains compatible with the Ethereum Virtual Machine (EVM), such as BNB Chain, Polygon, and Avalanche, where users on these platforms were attracted by low transaction fees and began to embed data in transactions. Notably, Ethereum is the most popular blockchain for non-fungible tokens (NFTs), with some of the top NFT card series, such as CryptoPunks and BAYC.
Data from Dune Analytics shows a significant increase in the number of inscriptions on the Bitcoin blockchain.
![](https://public.bnbstatic.com/image/pgc/202404/a6d2915d128b27ffc41aeb09461c6e6b.png)
As inscription technology has gained increasing attention, community members have expressed concerns about a number of issues, including high transaction fees and its potential impact on the long-term scalability of the Bitcoin network. Bitcoin developer Luke Dashjr called inscription technology a "bug" that needs to be fixed, and believes that by embedding data on the blockchain, inscriptions may pose a security risk to the system.
Despite sharp criticism from critics regarding issues with the inscription technology, later in 2023 Rodarmor criticized complaints from Bitcoin maximalists and their attempts to “censor” inscriptions.
“It’s contradictory to simultaneously believe that Bitcoin is the unstoppable internet currency and think that a bunch of [editors] posting JPEGs on-chain is anything but a problem.” —Casey Rodarmor: Rodarmor.com
“It’s inconsistent to believe that Bitcoin is an unstoppable Internet currency and to think that some people posting JPEGs on the blockchain is a problem.” – Casey Rodarmor | Source: Rodarmor.com
After the successful market entry of Inscription technology, Domo, a developer based on the Ordinals protocol, launched the BRC-20 token standard, making it possible to issue homogeneous tokens on the Bitcoin network.
ORDI became the first BRC-20 token launched on the Bitcoin network. Since its launch, the concept has been gradually adopted by the market, leading to the emergence of BRC-20 trading platforms that allow users to buy and sell tokens.
How do cryptographic inscriptions work on Bitcoin?
Cryptographic inscriptions allow users to embed data into satoshis. They are created by packaging arbitrary data (such as images or documents) and storing them in Bitcoin's "witness data". The size of such inscription data is limited to 520 bytes, and creating larger inscriptions requires linking them.
The inscribed satoshis are transmitted to the Bitcoin network in two consecutive transaction steps: first a commit transaction, followed by a reveal transaction. In the commit transaction, a Taproot output is created that commits to a script containing the inscription. Next, the reveal transaction discloses the complete script, allowing the inscribed satoshi output to be created.
After the transmission is completed, these transactions will enter the Bitcoin network's transaction pool (mempool), where they will wait for confirmation by miners. Once the transaction is verified by the miners and packaged into the block, the inscription will be permanently recorded on the Bitcoin blockchain. Users can use tools such as Ordinals Explorer to track and view these inscriptions.
Unlike regular Bitcoin transactions or Ethereum’s non-fungible tokens (NFTs), creating, minting, and tracking inscriptions requires running a specific “ord” client on a fully synced full node.
The "ord" client, combined with Bitcoin Core, enables users to inscribe individual satoshis in the UTXO set and track them. Without this client, regular Bitcoin wallets cannot distinguish between inscriptions and regular satoshis.
Advantages and disadvantages of encrypted inscriptions
Here are some of the pros and cons of cryptographic inscription technology observed on the Bitcoin network, which is the first use case of this technology.
•Advantage:
1. Immutability: Once data is recorded on the Bitcoin blockchain, it becomes extremely secure and immutable and cannot be tampered with or deleted.
2. Flexibility: Cryptographic Inscription supports multiple types of data storage, enabling users to store a variety of information on the blockchain, including digital artwork, personal information, important documents and pictures, etc.
3. Decentralization: This technology leverages the decentralized nature of Bitcoin, with no central authority controlling data, enhancing transparency and censorship resistance.
4. Expanding Bitcoin functions: Bitcoin was originally designed mainly for peer-to-peer transactions, but the emergence of encrypted inscriptions has expanded its scope of application.
5. Increase miner income: Transactions containing inscriptions increase transaction fees, bringing additional income to miners while also enhancing the security of the Bitcoin network.
• Disadvantages:
1. Impact on fungibility: Assigning non-fungible characteristics to Bitcoin’s satoshi may pose challenges to Bitcoin’s fungibility because each satoshi is endowed with unique properties.
2. Blockchain expansion: As more data is embedded in the blockchain, the block size may increase, which requires more storage and processing resources, may affect the transaction verification speed, and put more pressure on network nodes.
3. Data pruning risk: Some Bitcoin nodes may choose to delete inscription data in blocks, which may affect the integrity of transactions that rely on this data.
These advantages and disadvantages reflect the current application status of cryptographic inscription technology in the Bitcoin network and its potential impact on the future development of blockchain technology.
Cryptographic Inscriptions: A Novelty or a Real Innovation?
Cryptographic inscriptions are an important development in the digital asset space. They allow digital artworks to be embedded and transferred directly within the blockchain, creating new opportunities for asset creation and trading. Cryptographic inscriptions are an important development in the digital asset space. They allow digital artworks to be embedded and transferred directly within the blockchain, creating new possibilities for asset creation and trading.
Despite challenges such as fungibility and blockchain scalability, cryptographic inscription technology still brings more security, efficiency and functionality improvements, and has been more widely used in the field of cryptographic inscription. #加密铭文 #OrdinalsInscription