Bitcoin Ordinals vs. Ethereum NFTs: A comparative overview

Nonfungible tokens (NFTs) first came into existence in 2014, with the minting of the first NFT named Quantum on the Namecoin blockchain. Ethereum brought broader recognition of the technology by facilitating the creation, hosting, programming and trading of NFTs in November 2017.
Although the first NFT concept was minted on Bitcoin, they have lagged behind in the digital art space. In January 2023, former Bitcoin Core contributor Casey Rodarmor launched Bitcoin NFTs called Bitcoin Ordinals.
This article provides an overview of Bitcoin and Ethereum NFTs and explores the similarities and differences between digital collectibles on the Bitcoin and Ethereum blockchains.

What are Ordinals on the Bitcoin blockchain?

Bitcoin Ordinals are the equivalents of NFTs. They are digital assets inscribed on a satoshi, the smallest denomination of a Bitcoin 
BTC
$65,153
. One satoshi has the value 1/100,000,000 of a single Bitcoin.The Segregated Witness (SegWit) update in 2017 caused a soft fork of Bitcoin, transforming Bitcoin’s transaction structure into witness and transaction parts. This removed witness data from the main block, reducing the size of transactions and effectively increasing the block’s capacity without changing its limit. SegWit also remedied transaction malleability concerns. 
The 2021 Taproot update improved Bitcoin security and transaction privacy, increased block size to four megabytes, and brought wider attention to Bitcoin’s inherent capability for data inscription. These were the building blocks for the Bitcoin Ordinals protocol.
The Bitcoin Ordinals protocol leveraged the inherent ability of a satoshi to be uniquely identified and inscribed with data to facilitate the creation of digital art on Bitcoin without creating a smart contract. 
In January 2023, the launch of the Ordinals protocol enabled the minting of NFTs directly onto the Bitcoin blockchain. These Bitcoin Ordinals inscriptions are similar to NFTs on Bitcoin, which are digital artifacts like images, text or videos.

How Ordinals inscriptions work

Ordinals are Bitcoin native and are not minted on a separate blockchain layer. They rely on a logical yet arbitrary ordering system in Bitcoin known as the Ordinals system. Ordinals NFTs work on the Bitcoin protocol without needing further layers, are backward compatible, and although they will not change the core Bitcoin protocol, they will introduce new use cases.
In the Ordinals theory, each NFT follows a system of numbering. This assigns a unique number to each satoshi on the Bitcoin blockchain without changing the fungibility of the satoshis themselves. Instead, the inscribed data is nonfungible. The theory is implemented through the Ordinals protocol, which stipulates that each Ordinals inscription is assigned a number according to the order in which they were minted. When transferring the satoshi, the theory requires following the first-in, first-out system and preserving the order.

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Once a satoshi acquires a unique ID, owners can inscribe each satoshi with unique and arbitrary content, creating an Ordinals NFT. These artifacts can be held in Bitcoin wallets and transferred as any normal Bitcoin transaction. Bitcoin Ordinals retain the same immutability, decentralization and security as Bitcoin itself.

What are Ethereum NFTs?

NFTs are a type of unique digital assets that are different from each other. They are polar opposites of fungible tokens like Ether (ETH) or USD Coin (USDC), which are digital assets that are identical or indistinguishable.
Since all NFTs are unique, they facilitate the representation of art and collectibles as digital tokens. NFTs can also be used to establish ownership of assets in real life, such as real estate ownership. Anyone can verify ownership of digital assets on the Ethereum blockchain.

Blockchain technology for NFTs

NFTs are created using smart contracts. These are one type of digital items created on Ethereum’s blockchain using a specific type of smart contract designed for nonfungible assets. Smart contracts follow Ethereum NFT standards like ERC-721 (specifically designed for NFTs) and ERC-1155 (allowing for both NFTs and fungible tokens within the same contract), which determine the functionality of a contract.

Ethereum NFT standards

A token standard designates the features, functionalities and use cases in the smart contract used to create an NFT. The Ethereum Request for Comments (ERC) encompasses a wide range of proposals, including core protocol specifications, client application programming interfaces or APIs, and contract standards. 
ERCs are Ethereum Improvement Proposals (EIPs) that apply to the application layer, defining standards for tokens and other smart contract interfaces. ERCs are a type of EIP that has been accepted and formalized by the community.
Therefore, ERC standards are a set of rules and guidelines for creating tokens on the Ethereum blockchain with specific properties and behaviors. Different ERC standards cater to different types of tokens, such as fungible, nonfungible or multitoken standards. 

Similarities and differences between Bitcoin Ordinals and Ethereum NFTs

Bitcoin Ordinals and Ethereum NFTs are similar, although some differences exist. Crypto art on Bitcoin and Ethereum are both used to create, represent and trade unique digital assets. The assets are immutable and undergo decentralized verification.
As for the NFT minting process comparison, owners can create and track NFTs using smart contracts on the Ethereum blockchain. For instance, in some NFTs, the assets that are the smart contract’s subject matter are often elsewhere. Some of the NFT artwork is often stored in InterPlanetary File System storage or on different layers of the Ethereum blockchain.
On the other hand, Ordinals are stored on individual satoshis on the Bitcoin blockchain. They receive the same validation as other transactions. The smart contract capabilities for NFTs allow off-chain storage of the metadata. This allows owners of NFTs to change or enhance the appearance of some NFTs. Users cannot change Ordinals, which are stored in immutable, on-chain data.
Ordinals store all the data and content on the satoshi, increasing its transaction size. NFTs store all the heavy data off-chain, referencing the digital art stored in the smart contract. Creators of Ordinals do not receive royalties like NFT creators. However, the concept of royalties for NFT creators is enforced mainly by marketplace conventions and smart contract functionalities on Ethereum and other NFT-supporting blockchains rather than an inherent feature of NFTs themselves. 
The scalability of NFTs in Bitcoin and Ethereum is also vastly different. NFTs had a headstart over Ordinals and developed a broader ecosystem. Ethereum NFTs benefit from established standards, interoperability across platforms and support of the marketplaces.

The future of Bitcoin Ordinals and Ethereum NFTs 

Artificial intelligence (AI) is increasingly being utilized and will likely see greater use in digital artwork creation, with artists using AI to create music, art, in-game items and videos. Another trend is interoperability, with users requesting blockchain network interoperability. Already, there is a new BRC-721E standard allowing traders to bridge Ethereum-based NFTs to the Bitcoin network. There are continuous developments to have true cross-chain Ordinals and NFTs. 
Integrating digital art with real-world assets (RWAs) presents an opportunity to make physical assets, which are traditionally illiquid, more liquid. Transforming RWAs into NFTs or Ordinals allows for fractional ownership and overseas trading, widening the market base and making it easier to sell the underlying asset.