The emergence of Bitcoin-based NFTs through the Ordinals protocol has sparked renewed interest in the world’s oldest blockchain. Far from being just a store of value, Bitcoin now supports unique digital assets—non-fungible tokens—directly on-chain, thanks to innovative use of existing infrastructure. This article explores the technical foundations that make Ordinals possible, including Bitcoin scripting, SegWit, Taproot, and how data is encoded and stored.
By understanding these core components, we uncover how a seemingly simple numbering system for satoshis evolved into a full-fledged NFT ecosystem—all without altering Bitcoin’s consensus rules.
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The Role of Bitcoin Script in Enabling Ordinals
At the heart of the Ordinals protocol lies Bitcoin Script, a stack-based programming language embedded within the Bitcoin network. Designed primarily for transaction validation, Bitcoin Script uses a limited set of opcodes to define spending conditions—such as proving ownership via digital signatures.
While not Turing-complete, this scripting system enables programmable payments like P2PK (Pay-to-Public-Key) and more complex multi-signature setups. Importantly, it allows for the inclusion of arbitrary data under certain conditions.
Ordinals leverage Taproot script-path spend scripts to inscribe data directly onto individual satoshis. With Taproot (introduced via BIP 340–342), users can embed rich content—text, images, or even HTML—into transactions without bloating the main transaction data. This is made possible because:
- Taproot scripts have minimal restrictions on data size and format.
- Witness data (which includes the inscription) benefits from a 75% discount in block space cost under SegWit, making storage more economical.
Thus, Bitcoin Script isn't just for payments—it's become a vehicle for permanent, decentralized data storage.
How Bitcoin Scaling Paved the Way for Ordinals
Despite its reputation for slow throughput, Bitcoin’s approach to scaling has indirectly enabled innovations like Ordinals. Originally limited to 1MB blocks, Bitcoin faced growing congestion as usage increased. Instead of increasing block size—a contentious change requiring hard forks—the community adopted Segregated Witness (SegWit) in 2017.
SegWit improved efficiency by separating ("segregating") signature data (witnesses) from the main transaction data. This had two key effects:
- More transactions fit into each block.
- Signature data no longer counted fully against the 1MB limit, effectively increasing capacity.
This optimization laid the groundwork for storing non-transactional data—like NFT inscriptions—within witness fields at lower cost.
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Understanding SegWit: Separating Signature Data
Every Bitcoin transaction contains two critical parts:
- Base transaction data: Details sender, receiver, and amount.
- Witness data: Digital signatures proving ownership of inputs.
Before SegWit, both were bundled together, meaning large signature data consumed valuable block space. This drove up fees and limited scalability.
SegWit moved witness data outside the base transaction, storing it separately in a "witness" structure. As a result:
- Transaction malleability was resolved.
- Block capacity increased by up to 2MB in effective size.
- Users paid less per byte for transactions with large scripts or multiple signatures.
For Ordinals, this meant that inscribed data—wrapped inside witness scripts—could be stored affordably and permanently on-chain.
Taproot: Unlocking Advanced Scripting Capabilities
Launched in November 2021, Taproot represented the most significant upgrade to Bitcoin since SegWit. It combined three BIPs:
- BIP 340 (Schnorr Signatures): More efficient and secure than ECDSA.
- BIP 341 (Taproot): Enhances privacy and flexibility for complex scripts.
- BIP 342 (Tapscript): Extends script functionality with new opcodes and rules.
Taproot enables script-path spends, where a user can unlock funds using either a simple key signature or a complex script. For Ordinals, this means inscriptions are embedded within these script paths—specifically using script-path spends under P2TR (Pay-to-Taproot) addresses.
Because Taproot makes complex scripts look identical to simple ones on-chain, it enhances privacy while enabling richer applications like NFTs—all without compromising security or decentralization.
Lightning Network: Indirect Support for Efficient Minting
Although Lightning Network does not directly support Ordinals inscriptions (since they require on-chain transactions), it plays an indirect role in lowering costs and speeding up interactions.
Users can:
- Fund their wallets quickly via Lightning.
- Batch or optimize on-chain transactions before minting inscriptions.
- Reduce overall fees by minimizing frequent high-cost broadcasts.
As adoption grows, hybrid models combining off-chain payments with on-chain inscription may emerge—offering faster user experiences while preserving permanence.
How Inscriptions Are Encoded in Transactions
Ordinals use a two-phase process to inscribe data: commit-reveal.
Phase 1: Commit Transaction
A Taproot output is created that commits to a script containing the inscription data. This doesn’t yet reveal the content but reserves space for it.
Phase 2: Reveal Transaction
The previously committed output is spent, revealing the actual inscription within the witness field. This is when the data becomes visible and indexed by explorers like ordinals.com.
The data itself is encoded using a special structure called an envelope, which wraps arbitrary information in a non-executable script segment:
OP_FALSE
OP_IF
OP_PUSH "ord"
OP_1
OP_PUSH "text/plain;charset=utf-8"
OP_0
OP_PUSH "Hello, world!"
OP_ENDIFThis pattern uses OP_FALSE OP_IF ... OP_ENDIF to ensure the script does nothing when executed—making it safe to include without affecting transaction logic. Inside, metadata identifies the protocol ("ord"), content type, and payload.
Any type of data can be inscribed—plain text, JSON, HTML pages, images (as base64), or even small games. As long as it fits within block size limits (~4MB with SegWit), it can be stored permanently.
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Frequently Asked Questions (FAQ)
Q: What is an Ordinal inscription?
A: An Ordinal inscription is a piece of data—like text, image, or code—etched directly onto a single satoshi using Bitcoin’s Taproot scripting capabilities. It turns fungible coins into unique digital artifacts.
Q: Do I need special software to create an inscription?
A: Yes. You’ll need a wallet that supports P2TR addresses and tools like ord CLI or compatible web services to craft and broadcast inscription transactions.
Q: Are all inscriptions visible on blockchain explorers?
A: Only if they follow the standard Ordinals encoding format. Custom or encrypted payloads won’t be recognized or rendered by public explorers.
Q: Can inscriptions be updated or deleted?
A: No. Once written to the blockchain, inscriptions are immutable and permanent—just like any other transaction record.
Q: How much does it cost to mint an inscription?
A: Costs depend on network congestion and inscription size. During peak times, fees can range from $10 to over $50 due to competition for block space.
Q: Is Ordinals compatible with existing Bitcoin wallets?
A: Partially. Only wallets supporting Taproot addresses (bech32m format) can send or receive inscribed satoshis safely. Some popular wallets still lack full support.
Conclusion
The Ordinals protocol demonstrates how innovation can emerge from constraints. By creatively combining Bitcoin Script, SegWit, and Taproot, developers have unlocked NFT functionality on Bitcoin—without forks or new tokens.
These technical advancements show that Bitcoin remains fertile ground for experimentation. From simple text messages to full-on on-chain art galleries, the possibilities are expanding rapidly.
In upcoming discussions, we’ll explore tools, marketplaces, and future enhancements shaping the next phase of Bitcoin-native digital collectibles.
Until then, remember: every satoshi has a story—and now, thanks to Ordinals, it can carry one forever.