The Ordinals protocol introduces a unique system for numbering satoshis, assigning each satoshi a serial number, and tracking them across transactions. In essence, ordinals enable the individualization of satoshis by appending additional data, a process known as 'inscription.'
A satoshi, named after Bitcoin's pseudonymous creator Satoshi Nakamoto, represents the smallest unit of bitcoin (BTC), divisible into 100,000,000 satoshis, with each satoshi valued at 0.00000001 BTC.
Satoshis receive numerical designations based on the order in which they are mined and transferred. The numbering scheme relies on the mining order, while the transfer scheme depends on the order of transaction inputs and outputs, hence the term 'ordinals.' The first satoshi in the initial block holds the ordinal number 0, followed by the second with ordinal number 1, and so forth. According to ordinal theory, these numbers serve as stable identifiers for the attached data.
While traditional NFTs share similarities with ordinals, there are key distinctions. NFTs are typically created using smart contracts on platforms like Ethereum, Solana, and BNB Chain, with the assets they represent often hosted elsewhere.
In contrast, ordinals are directly inscribed onto individual satoshis, integrated into blocks on the Bitcoin blockchain. Ordinals exist entirely on the blockchain, avoiding the need for a sidechain or separate token. In this way, ordinal inscriptions inherit the simplicity, immutability, security, and durability inherent in Bitcoin itself.
