From Stanford Blockchain Review

From the Editor: Ordinals and OnChainMonkey (OCM) has emerged as one of the most innovative and important Bitcoin Ordinals collections. In this essay, Danny Yang, the founder of OnChainMonkey, presents Ordinals’ impact on the Bitcoin NFT ecosystem, explores how OnChainMonkey leverages features of Ordinals’ programmability to reimagine the concept of a digital asset on Bitcoin, and discusses future directions in the Bitcoin NFT space.

Ordinals: Enabling Digital Artifacts On Bitcoin

Introduced in early 2023, the Ordinals protocol arrived at a pivotal moment for Bitcoin, which had been experiencing low transaction fees due to decreased demand. This was a critical development since Bitcoin's renowned security is funded by miner revenues from these fees and block rewards. With block rewards expected to halve by April 2024, thereby impacting miner income significantly, the need for a new growth driver was evident. Ordinals fulfilled this role effectively, stimulating a significant increase in transaction demand. Over $200 million in transaction fees has been spent so far for creating inscriptions, a type of transaction unique to Ordinals [1].

Source: https://dune.com/dgtl_assets/bitcoin-ordinals-analysis

Although NFTs have existed on Bitcoin for years before ERC-721 (such as Spells of Genesis and Rare Pepes trading cards) [2], the Bitcoin NFT market has been dwarfed by those on other blockchains like Ethereum and Solana. Now, however, because of Ordinals, the Bitcoin NFT market is rapidly catching up to the top NFT markets on all the other blockchains [3]. NFTs using Ordinals differentiate from almost all other NFTs because the Ordinals protocol treats Bitcoin as a medium for the NFT, as opposed to the usual certificate model for NFTs. Ordinals was launched at a time when the overall NFT market had matured enough to understand this new type of on-chain NFT that used the blockchain as a medium.

The Emergence of Bitcoin Ordinals Volume Relative To Other Chains, accessed Jan 27, 2024. Source: https://www.theblock.co/data/nft-non-fungible-tokens/nft-overview

The Ordinal Protocol can be boiled down to three concepts: the satoshi (sat), the inscription, and the mapping of ownership for the inscription [4].

Through this design, Ordinals NFTs on Bitcoin inherit BItcoin’s security properties, becoming a permanent record on the oldest, most decentralized, most secure, and highest value blockchain. Just like the founding principles of Bitcoin itself, the Ordinals protocol is permissionless, uncensorable, immutable, and complete. Permissionless means that we have the right to transfer the NFT to whoever we want without needing anyone else’s permission. Uncensorable means that no other party can censor our NFT. Immutable means that the NFT cannot be altered. And complete means that the NFT is complete on the medium it was created on, Bitcoin (i.e. on-chain). The NFT that satisfies all these properties is a Digital Artifact.

The Rise of OnChainMonkey (OCM)

Ordinals, however, is more than just a protocol. Just like Bitcoin, the community that formed around Ordinals is indispensable to the protocol’s rise. And this is the community that I’ve tried to cultivate, from beginning the Stanford Bitcoin Meetup in 2013, to establishing OnChainMonkey (OCM) as one of the most notable Bitcoin Ordinals project.

OCM, initially launched in 2021 as an art project on Ethereum, was an innovative blend of simplicity and complexity. I detailed its creation in "The Making of OnChain Monkey," also known as OCM Genesis [5]. The art of OCM stood out due to its unique design coupled with the intricacy of its on-chain transaction. Remarkably, all 10,000 distinctive monkeys were minted in a single Ethereum transaction. This singular transactional approach was a crucial aspect of OCM's artistic identity.

Then, in February 2023, the entire collection of 10,000 OCM Genesis images and their metadata were inscribed onto the Bitcoin blockchain as Inscription 20219. This inscription number is significant: being the 20,219th inscription on Bitcoin, it coincidentally mirrors the original creation date of the collection on Ethereum - September 2021 (year 2021, month 9). This marked the first occasion when such a large collection of images, specifically 10,000, was recorded and secured on Bitcoin.

OCM Genesis on Bitcoin. Source: https://magiceden.io/ordinals/marketplace/ocm-genesis

What stands out in this process, mirroring the original 2021 event, is the efficiency of the inscription method. Utilizing a single inscription for the entire collection meant that OCM leveraged the blockchain medium - a communal resource - with utmost efficiency. Impressively, the transaction that recorded all 10,000 OCM images consumed less than 20 kilobytes of Bitcoin block space, averaging less than 2 bytes per image. This approach ensured that the transaction did not overburden the Bitcoin network. As Bitcoin's usage expands, the efficient utilization of its block space, exemplified by OCM's creation method, will become increasingly important for all Bitcoin users.

OCM's core values are encapsulated in the acronym !RISE - Respect, Integrity, Sustainability, and Enrichment. The significance of 'On-Chain' to OCM is due to the superior security offered by blockchain for digital assets. With the advent of Ordinals in early 2023, OCM's shift to this new protocol for on-chain assets on Bitcoin was a strategic move. Although initially met with skepticism, our team's unique experience in both Bitcoin since 2013 and recent years' development of NFTs and digital artifacts reinforced our confidence in this transition. We foresaw the necessity of higher Bitcoin fees in the future and dedicated efforts to grow both the OCM and Ordinals communities, and in doing so, moving the NFT community forward towards a more secure, decentralized, and transparent system aligned with the original principles of Bitcoin.

Highlighting Ordinals’ Capabilities Through OCM

One of our main focuses has been on elucidating the significance of Ordinals and demonstrating optimal usage of the Bitcoin medium. This includes illustrating a variety of Ordinals programmability features, including Recursive Inscriptions, Parent-Child Provenance, and Reinscription.

1. Generative and Recursive Inscriptions on Bitcoin

One of the great powers of Ordinals is the ability to inscribe code on Bitcoin. This functionality allows for programming directly on the Bitcoin blockchain. This very feature enabled us to efficiently create 10,000 images on-chain for OCM. By inscribing a piece of code capable of generating 10,000 SVG image files for the OCM collection, we accomplished this feat in a single inscription.

Another advantage of using code is its ability to invoke other code. OCM was at the forefront of employing a method called Recursive Inscriptions, where inscribed code calls upon other inscribed code. Inscription 20219 stands as one of the first instances of such recursive inscriptions. The code within 20219 can be utilized in other inscriptions to access each individual OCM image. This concept of Recursive Inscriptions and the broader application of code will become increasingly vital as Bitcoin continues to grow. Through Recursive Inscriptions, all previously inscribed code on Bitcoin becomes a resource for future developers. For instance, when we developed  OCM Dimensions, we were the first to inscribe JavaScript libraries such as compression, Three.js, and p5.js. These libraries are now increasingly employed by creators on Bitcoin to develop new and innovative applications. We also provide tutorials and tools for using these popular generative art libraries on Bitcoin.

As Bitcoin fees rise, the generative coding approach will be critical in keeping inscriptions from being cost prohibitive. We saw Bitcoin fees go up by a factor of more than a hundred times in 2023 because of the early growth of Ordinals and increased usage of Bitcoin’s block space. Today, inscribing a single image can cost over $10,000! The reason we inscribed OCM Genesis in the generative approach was to show how much could be done on Bitcoin using minimum bytes and fees. Remarkably, 10,000 images of OCM Genesis were inscribed for just a couple of dollars.

2. Parent-Child Provenance For Digital Artifacts

A key advantage of using NFTs is their ability to establish provenance, and Ordinals introduces a powerful feature known as Parent-Child Provenance [4]. This feature facilitates the tracing of the origin of "child" inscriptions by linking them back to a "parent" inscription. For instance, in creating an NFT collection on Bitcoin, one can establish a Parent inscription using Parent-Child Provenance, from which numerous Child inscriptions comprising the collection can be inscribed.

When Inscription 20219 was created, it served as the Parent inscription for the OCM Genesis collection. At that time, the concepts of both Parent-Child Provenance and Recursive Inscriptions were novel, leading to some misunderstanding about the rationale behind inscribing an entire collection's assets in a single inscription. However, OCM Genesis emerged as the trailblazing collection demonstrating the use of Parent-Child Provenance in distributing a 10k collection. Moreover, OCM optimized this distribution with Recursive Inscriptions, setting a precedent in efficiency.

Parent-Child Provenance allows for the tracking of ownership transition from the collective "Parent" (the original inscription of 10,000 OCMs) to the individual "Children" (each separate OCM owned by different individuals). Recursive Inscriptions, meanwhile, help to demonstrate that each child inscription is responsible for distributing one of the 10,000 individual elements of the OCM digital artifact contained in the Parent inscription [4].

This process allows for the creation of digital artifacts on Bitcoin. Consider Inscription 20219, a digital artifact containing 10,000 unique OCM (OnChainMonkeys). This collection fulfills all the criteria of a digital artifact: it's complete, ownable, uncensorable, permissionless, and immutable.

Initially, the entire 10k OCM collection was owned by a single entity. This is akin to a car manufacturer like Bugatti producing 10,000 cars and owning them all at first. Once Bugatti sells and delivers a car, complete with its title and keys, to a buyer, that buyer becomes the new owner of the car. Similarly, in the case of Inscription 20219, each of the 10,000 OCMs is set to be transferred to individual owners. This process is facilitated through the use of Parent-Child Provenance and Recursive Inscriptions.

3. Saving Fees with Batch Inscriptions

An efficient method for creating on-chain records is through Batch Inscriptions, which can be effectively paired with Parent-Child Provenance for distributing multiple NFTs in one go. This approach significantly reduces both the transaction fees and the time (or the number of Bitcoin blocks) required for inscription completion.

For instance, when we applied Batch Inscriptions to the OCM Genesis collection, the process of inscribing the entire 10k collection became 250 times faster compared to a scenario where Batch Inscriptions weren't used. This efficiency in batching not only streamlines the inscription process but also optimizes the overall resource utilization on the blockchain.

4. Rare and Exotic Satoshis, A Unique Feature of Ordinals

Ordinal theory meticulously tracks each satoshi (sat) in Bitcoin, including those from historic blocks like Block 9, mined by Satoshi Nakamoto himself. Particularly notable are the first-ever Bitcoin transaction sats, known as 450x sats, mined in Block 9 and sent by Satoshi to Hal Finney. These 450x sats, starting with the digits 450, are highly sought after by sat hunters for their historical value and collectibility, making them ideal for inscribing art on Bitcoin.

In the Ordinals framework, sats are categorized into different tiers like common, uncommon, rare, epic, legendary, and mythic, according to the Rodarmor Rarity Scale devised by Casey Rodarmor, the creator of Ordinals [6].

The OCM Genesis collection utilized these historically significant Block 9 - 450x sats. The entire collection of 10,000 children was inscribed on sequential Block 9 sats, where the last five digits of the sat number correspond to the Genesis number. For instance, OCM Genesis #1 is on sat 45017800001 and OCM Genesis #10,000 is on sat 45017810000. This precise matching of sat numbers is not only a testament to the skill required to utilize the Bitcoin medium but also clarifies the provenance and link between the sat and the OCM Genesis art.

Combining matching sat numbers with generative art opens up new possibilities. In the case of OCM Genesis, the art is generated by the inscribed code on Bitcoin, using the specific sat number, further integrating the Bitcoin medium into the art form.

5. Reinscription, the Unexplored Frontier for Programming Bitcoin

Reinscription, a feature of Ordinals, allows the same satoshi (sat) to be reinscribed multiple times [4]. The cost for each reinscription is comparable to that of any standard inscription. Importantly, all reinscriptions occur on the same sat, ensuring they are interlinked and transferred collectively. Only the sat's owner has the authority to inscribe or reinscribe it. Reinscriptions are particularly useful in recording state changes, especially with the advent of the Ordinals sat endpoint feature, enabling the development of on-chain programs and applications on Bitcoin [7].

OCM Genesis utilized this feature to reinscribe multiple 10k collections onto the same sats. These reinscribed collections are effectively "soul-bound," meaning they are permanently connected to the original collection. This connectivity not only facilitates ease of navigation between collections but also enhances the value of the original collection by incorporating additional reinscribed collections. OCM Genesis pioneered this approach with a reinscribed 10k collection. Each sat in OCM Genesis houses four distinct collections, reflecting the innovative use of reinscription in digital art and asset management on the Bitcoin blockchain.

Exploring the Future of Digital Assets on Bitcoin

Bitcoin's role in securing digital assets beyond its native token is still in its infancy. The infrastructure is under development, but the potential is immense. The success of asset markets on other blockchains like Ethereum and Solana suggests a similar growth trajectory for Bitcoin, propelled by innovations like Ordinals. Works like OCM Genesis showcase the possibilities for future assets within the Bitcoin ecosystem, indicating a promising future for digital assets on this platform. 

One of the most interesting parts of the Ordinals protocol is to reimagine the popular 10k Collection as an Art Form on Bitcoin. The 10k collection has become a significant art form in the world of NFTs, with many collections adopting this format. On Ethereum, creating a collection of 10 or 10,000 is almost equally straightforward. However, on Bitcoin, creating a 10,000-piece collection is exponentially more expensive and complex than a smaller collection. This complexity stems from the need for each NFT to be a distinct, on-chain digital artifact, making each creation cost-intensive and immutable. Any error in a single NFT could necessitate scrapping the entire collection. Techniques like Parent-Child Provenance and sequential sat numbering further complicate the process, increasing the risk of mistakes with larger collections. Therefore, successfully creating a 10k collection on Bitcoin, like OCM Genesis, is a remarkable achievement, highlighting the potential of Bitcoin as a medium for digital art.

Another avenue that we’re excited about is the possibility of encoding certificates of ownership on BItcoin – a process that is very different from that of Ethereum. Ethereum's model involves owning a tradable certificate for a digital item, usually stored off-chain. In contrast, on Bitcoin, the digital item is on-chain, making it directly ownable and tradable. OCM Genesis explores these concepts by transferring ownership from Ethereum to Bitcoin. This involves a teleburn process, where the Ethereum asset is bound to the corresponding Bitcoin Inscription. The Ethereum asset becomes "soul-bound" to the Bitcoin inscription, transferring ownership to whoever holds the Bitcoin Inscription. Additionally, a Certificate of Ownership is inscribed on the same sats, serving as proof of ownership for the teleburned Ethereum asset. This concept is part of the unique artistry of OCM Genesis and represents a step towards securing Real World Assets (RWA) on Bitcoin, potentially encompassing titles, deeds, and securities.

As we enter 2024 and the second year of the Ordinals protocol, there is still much to explore. We at OCM remain incredibly excited about the future of the space, and remain committed to the road ahead, leading the way to reconceptualize the idea of digital assets on Bitcoin and truly exploring Ordinals as a canvas for digital innovation.