What Are Bitcoin Inscriptions & How Do They Work?

What Are Bitcoin Inscriptions?

Bitcoin inscriptions are images, videos, audio, and text files that store data on the Bitcoin Blockchain. Actually, bitcoin inscriptions can be pretty much anything with the capacity to store a wide variety of data on the Blockchain.

According to reliable data from industry players such as Dune Analytics and Galaxy Digital, text files make up the majority of Bitcoin inscriptions – accounting for about 95% of all inscriptions.

A report by Galaxy Digital indicates there were close to 18 million Bitcoin ordinal inscriptions by mid-2023.

To fully understand what Bitcoin inscriptions are in the Bitcoin Blockchain, we need to differentiate between ordinals and inscriptions.

Ordinals are a numbering system for Sats (Satoshis), which makes it possible to track and transfer various Satoshis.

Satoshis are numbered depending on how they are mined – on a first-in-first-out basis. With this system of numbering, each satoshi can be identified, allowing for the deployment of inscriptions in the Blockchain.

On the other hand, inscriptions inscribe sats with arbitrary content, creating digital artifacts that can be held in Bitcoin wallets.

It becomes possible to carry out different Bitcoin transactions with the digital artifacts held in the Bitcoin wallets.

How Do Bitcoin Inscriptions Work?

Ordinal inscriptions are a new way of keeping records in the Bitcoin network. The inscriptions use the principle of ordinary theory, which provides an uncomplicated way of assigning value to individual sats and tracking them.

Put differently, bitcoin inscriptions are a newly invented way of keeping data in the Bitcoin Blockchain.

They provide a reference number that can be used to transfer individual Satoshis, even when the sats are not officially recorded on the Blockchain.

To achieve this, the Bitcoin inscription attaches a file or document that the recipient can use as an invoice number or point of reference for a particular transaction.

Inscriptions have gained popularity because of their versatility. Ordinals add to the usefulness of bitcoins sats by generating or inscribing digital artifacts to the Satoshis.

Bitcoin inscriptions have been so well received that about 1.2 million image-based inscriptions were created within the first 200 days of the first inscription being rolled out.

How Do Bitcoin Inscriptions Affect the Bitcoin Network?

Bitcoin remains the world's most popular cryptocurrency. It was rolled out in 2009 and is meant to operate on the Blockchain protocol.

Bitcoin crypto has been well received because it is a decentralized, peer-to-peer way of carrying out secure financial transactions.

With the emergence of bitcoin NFTs or ordinal inscriptions, the use of bitcoin in the permission-less Blockchain has experienced a massive uptake.

This is because the many blocks in Bitcoin’s block space can now house far more than financial data. It’s now possible to store digital artifacts, books, and video games.

This means that the Bitcoin block space has become more accepted by players outside the traditional Bitcoin mandate of financial transactions.

Actually, many industry experts predict that it's only a matter of time before the financial users of Bitcoin are relegated to second place by the other players.

The good thing about bitcoin ordinals or ordinal inscriptions is they allow any kind of metadata to be created on individual sats, which can then be stored in the bitcoin Blockchain.

Bitcoin inscriptions use UI-friendly tools. This, coupled with the fact that the inscriptions rely on low code, makes it easy for users to employ them to create and trade in Bitcoin NFTs.

With well over 4 million inscriptions in the form of images, videos, application forms, and text being created every 5 or so months, it's obvious that the popularity of ordinals is not about to wane any time soon.

Ordinal inscriptions continue to rope in more users to the Bitcoin network. Indeed, ordinals had taken up to 50% of each bitcoin block size barely 4 weeks after introduction.

So, what is the Bitcoin block, and how is it measured? Each Bitcoin block has a finite space for data storage. This block can be regarded as a ledger holding data about financial dealings.

The bitcoin block size limit is capped after a number of transactions are reached – and that block cannot accommodate any more transactions.

Historically, the block limit was capped at about 1.4MB. However, the introduction of Bitcoin inscriptions has seen the size of each block rise to as high as 2.5MB.

Conclusion

Bitcoin inscriptions give industry players a new way to generate and trade in unique digital assets. The good news is that these traders leverage the decentralization and safety that come with operating within the Bitcoin Blockchain.

Overall, the power of ordinals and inscriptions has made individual Satoshis to be far more than a unit of account.

They have become an expression of creativity and value.