Ordinal inscriptions, also known as Bitcoin NFTs, are the latest development in the Bitcoin ecosystem. With tools like Gamma.io users can inscribe metadata of any kind on satoshis without having to run a full Bitcoin node.
The Ordinal protocol that created the Bitcoin Ordinal stretches Bitcoin’s use case beyond a pure P2P cash system and towards a digital art marketplace. If you’re interested, we’ve previously discussed how you can create a Bitcoin Ordinal and the Ordinals-compatible wallets that you should have to store your Bitcoin NFTs.
In this article, we will:
- Focus on what Ordinals marketplaces are
- Explore the underlying PSBT protocol that powers them
- Give you a list of the top Ordinals marketplaces for trading your digital assets
What are Bitcoin Ordinals?
Bitcoin ordinals, born out of the Ordinals protocol, are satoshis (atomic Bitcoin units) inscribed with any kind of metadata (text, images, video games, songs) that become Ordinal NFTs and get directly stored on Bitcoin blockchain (Figure 1).
Ordinal inscriptions have numerous benefits, including, but not limited to:
- Immutability
- Simple sale process due to no NFT royalties
- However, note that some marketplaces, like Gamma’s, have implemented royalties for creators. This allows them to independently manage their collections and define the royalty percentage they wish to receive from secondary sales.
- Being stored on the most valuable crypto ecosystem, the Bitcoin blockchain
How to trade Ordinal inscriptions?
To start buying and selling Ordinals, you need to have any of the following Ordinals-compatible wallets:
- Xverse Wallet
- Hiro wallet
- Ordinals wallet
- Sparrow wallet
- Unisat wallet
Next, you should use one of the inscription services – from Gamma.io or Ordinals Bot – to create an Ordinal inscription. Then, after paying the inscription fee from your Bitcoin wallets, your inscription will be sent to your wallet address.
If you want to create a new inscription and hold it, you don’t necessarily need to interact with an Ordinals marketplace solution. However, no-code tools such as Gamma make it easier to inscribe your Ordinals, and if you want to sell your token or purchase a different Ordinal NFT, you should visit an Ordinals marketplace.
What is an Ordinals marketplace?
An Ordinals marketplace, like an NFT marketplace, is a platform that enables creators and collectors to browse, find, buy, and sell inscriptions. Ordinals marketplaces (i.e. Bitcoin NFT marketplaces) have their unique Ordinals collections and specific wallet compatibility.
As Bitcoin Ordinals steadily rise in price and popularity and receive new updates, like BRC-721E that turns Ethereum NFTs into Bitcoin Ordinals, an Ordinals marketplace becomes more important for enabling a larger audience to monetize and trade digital artifacts.
As of June 2023, the top1 Ordinals marketplaces according to trade and market volume are (Figure 2):
- Unitstat
- Magic Eden
- Ordinals wallet
How do Ordinals marketplaces work?
Most Ordinal marketplaces use a PSBT (Partially Signed Bitcoin Transaction) solution for trading Bitcoin NFTs.
The PSBT solution, introduced by the Bitcoin Improvement Proposal (BIP) 174, streamlines and simplifies multi-party transactions. A multi-party transaction is when the sale of non fungible tokens needs authorization by more than 1 signee before being broadcasted to the Bitcoin network.
The PSBT solution, specifically, works as follows:
1. Transaction creation
A member of the group creates a PSBT file. This contains all the details of the transaction, such as the inputs (which UTXOs are being spent), and outputs (where the UTXOs are going), but it lacks the necessary signatures.
2. Transaction signing
The creator of the transaction sends the PSBT to other members of the group for approval and signing.
3. Transaction finalization
Once the PSBT file has all required signatures, it is considered ‘final’ and is ready to be broadcast to the Bitcoin network. The final signer transforms the PSBT into a fully signed transaction which can be understood by the Bitcoin network.
4. Broadcast
The fully signed transaction is broadcast to the Bitcoin network, and the transaction is confirmed, completing the process directly on the Bitcoin blockchain.
How are Ordinals marketplaces different from traditional NFT marketplace solutions?
A traditional NFT marketplace sale and a PSBT-enabled transaction for trading Ordinals differ primarily in the way transactions are handled, signed, and confirmed.
In a traditional NFT sale, the process is often facilitated by smart contracts on a blockchain like Ethereum, involving a straightforward transfer between a buyer and a seller. The smart contract automatically processes the transaction, handling the exchange of assets with no further approval.
On the other hand, PSBTs are designed for more complex scenarios, typically on the Bitcoin network. These usually involve:
- Multiple parties
- Additional layers of security
- Situations where more than one party must sign off on a transaction before it can be confirmed, such as multi-signature wallets.
This process involves creating an unsigned transaction, getting it signed by all necessary parties, finalizing, and then broadcasting it to the network.
For more on Ordinal Inscriptions
To learn more about Ordinal Inscriptions, read:
- “Volume by Marketplace.” Dune. Retrieved on June 20, 2023.
