Secure Your Digital Legacy: Bitcoin, NFTs & Vault12 Guide

What are Bitcoin Ordinals?

The Ordinal protocol emerged as one of several new “features” of Bitcoin following the Taproot upgrade implemented in November 2021.

In 2022, the Bitcoin Improvement Proposal introduced the ability to inscribe arbitrary digital assets onto the Bitcoin blockchain. It’s important to understand that a satoshi is the smallest unit of Bitcoin, named after its anonymous creator, Satoshi Nakamoto. Through the Ordinals protocol, each satoshi can be sequentially ordered and “inscribed” with up to 4 MB of information, which may include images, audio, code, or any form of data.

Ordinals have quickly gained traction, with over 60 million inscriptions recorded on the Bitcoin blockchain so far. There have been moments where users have overwhelmed the network with new content.

What are Bitcoin Artefacts / Artifacts?

Bitcoin artifacts refer to digital artifacts created on the Bitcoin blockchain, and they may also be called Bitcoin NFTs.

The Ordinals documentation FAQ suggests using the term “digital artifact:”

An inscription is effectively an NFT, but the term “digital artifact” is preferred as it is simpler, more suggestive, and familiar.” — Ordinals FAQ

Digital artifacts can encompass various forms, often including memes, images, screenshots, audio clips, and code snippets.

While Bitcoin artifacts may seem restricted due to the 4MB data limit per satoshi, a new functionality introduced in June 2023, known as Recursive Inscriptions, allows for larger and more complex data structures by facilitating series of calls to previously inscribed data on the blockchain. This means that Recursive Inscriptions theoretically enable the storage and interaction with entire movies or video games on-chain!

What is BRC-20?

Early in 2023, just after the Ordinals protocol propelled Bitcoin NFTs into the spotlight, the BRC-20 experimental token standard formally brought Ordinal-inscribed token applications to the Bitcoin base layer.

BRC-20 tokens can be minted and transferred similarly to Ethereum’s ERC-20 NFTs. While BRC-20 shares similarities with Ethereum’s NFTs, it lacks the powerful and flexible smart contract capabilities of Ethereum. For instance, although inscriptions do not support token royalties, BRC-20 endeavors to address this shortcoming by introducing a royalty feature, boosting its popularity.

What are the differences between Ethereum and Bitcoin NFTs?

Bitcoin Ordinals, as conceptualized by developer Casey Rodarmor, stand apart from traditional Ethereum-based NFTs in several critical aspects, despite both being digital artworks. Rodarmor refers to Bitcoin NFTs as “authentic digital artifacts” due to their complete integration on-chain and the robust characteristics they inherit from the Bitcoin network.

1. Immutability: Bitcoin inscriptions are intrinsically immutable, unlike Ethereum NFTs, which can occasionally be modified or deleted by the contract owner. Achieving immutability for certain NFTs on Ethereum may require auditing, a complex process that necessitates an understanding of the Ethereum Virtual Machine (EVM) and Solidity.
2. On-chain Content: Bitcoin inscriptions consistently feature on-chain content, which enhances their durability and resilience against loss. Creating inscriptions incurs fees correlated with the content size. In contrast, Ethereum NFTs may rely on off-chain content stored on platforms like IPFS, which are susceptible to loss.
3. Security: With the superior security of the Bitcoin blockchain, inscriptions offer enhanced security. Additionally, they can be transferred via Partially Signed Bitcoin Transactions (PSBT) without requiring third-party intermediaries like exchanges or marketplaces, unlike some Ethereum NFT transactions.
4. Smart Contracts: While Bitcoin’s BRC-20 tokens have limited scripting capabilities compared to Ethereum’s comprehensive ERC-20 Smart Contracts, utilizing intricate smart contracts on Ethereum may present difficulties for those unfamiliar with digital art trading’s technical aspects.

How can you put NFTs on Bitcoin?

There are web platforms like Ordinalbots that simplify the process of placing NFTs onto the Bitcoin blockchain. Here’s a brief overview of the steps involved:

1. Obtain a Taproot-compatible wallet (like Ordinals Wallet, Xverse, OKX, Hiro, or Unisat). Also, ensure you have some Bitcoin for token minting and transaction fees.
2. Create Your Digital Asset: This could include any digital creation such as an illustration, piece of music, or digital artwork. Ensure that the digital asset is original and owned by you.
3. Mint the BRC-20 NFT: ‘Minting’ refers to the process of converting your digital asset into a BRC-20 token or NFT. Various platforms supporting Bitcoin allow for this process, typically incurring a small fee in Bitcoin.
4. Store or Sell Your NFT: After minting, you can keep your NFT in your digital wallet or sell it on a marketplace like Magic Eden that accommodates Bitcoin NFTs.
5. Transfer Ownership: If you sell your NFT, ownership is transitioned to the buyer, with the transaction recorded on the Bitcoin blockchain to ensure NFT authenticity and ownership.

This summary oversimplifies the process; actual steps may be more complex depending on the platform used and the unique requirements of your digital asset. Always conduct your due diligence or seek professional advice if uncertainties arise.

What is the controversy with Bitcoin NFTs?

The introduction of the Ordinals protocol has sparked significant debate within the Bitcoin community, raising fundamental questions. Should Bitcoin be limited to a monetary role, or should it expand to include additional applications? Is the Ordinals protocol trespassing on the Bitcoin network’s purpose?

The Bitcoin blockchain has long been characterized by a limited block size that primarily facilitates payment transactions, prompting the development of additional layers to enhance the network’s programmability and scalability.

1. Diverging Use Cases for Bitcoin

The recent upsurge of Ordinals has attracted attention and scrutiny in the Bitcoin community. Concerns are emerging about whether it detracts from Bitcoin’s fundamental use as a medium of exchange and whether Ordinals represent an effective use of block space. Ordinal inscriptions, which may include images, audio, or even games, occupy space that could otherwise be utilized for financial transactions, potentially leading to slower on-chain confirmation times and higher transaction fees.

Some dedicated members of the Bitcoin community oppose the idea of NFTs on the Bitcoin blockchain, adhering to a conservative stance that prioritizes stability and network reliability. These individuals tend to refrain from frequently updating code and are generally resistant to proposals aimed at enhancing the network’s speed or features in comparison to competing cryptocurrencies.

2. Challenges to Bitcoin’s Fungibility

Ordinals also challenge the fundamental fungibility of Bitcoin. By inscribing data onto a satoshi, it assumes a unique identity, akin to collectible numismatic coins that are valued for their rarity.

Ordinal satoshis carry distinct identities that can be tracked, traded, and enriched with valuable information like text or images. This uniqueness effectively converts a satoshi into a non-fungible token (NFT), while traditional views hold that all satoshis must be regarded as equal to preserve a crucial characteristic of money.

3. The permissionless nature of Bitcoin’s blockchain means individuals cannot be prevented from storing illegal or harmful data permanently on the blockchain — this raises additional concerns.

How do you use an Ordinals wallet to back up and protect Bitcoin NFTs?

The Ordinals wallet is user-friendly, as are other Taproot-capable wallets:

• Set up an account, safeguard your seed backup, and deposit funds into the wallet.
• Be mindful of the types of Bitcoin public addresses you use; utilize a Taproot-enabled address (which typically begins with bc1p prefix).
• Employ that address to receive the Bitcoin NFT from the selected marketplace or trading platform.

How do you ensure inheritance of Bitcoin NFTs?

As Bitcoin Ordinals gain prominence in the Web3 ecosystem, it’s essential to approach the inheritance of Bitcoin NFTs akin to how you would any other Web3 digital asset. Inheritance of Web3 assets differs significantly from traditional methods, which generally involve contacting a financial institution to access assets after a person’s death or incapacitation. In contrast, with Web3 assets, the primary responsibility lies with the owner to secure and manage these assets. If the details about your assets are not properly documented and shared with beneficiaries, those assets may be irretrievable. Even with accurate records, various pitfalls can complicate the process for heirs during succession.