Bitcoin inscription is the process of embedding arbitrary data or content onto a Satoshi, the smallest denomination of Bitcoin.
What Are Bitcoin Ordinal Inscriptions?
Generally, the term “inscription” refers to something written, curved, or engraved onto something else. But what is an inscription in crypto? In this context, it is the process of attaching metadata to a cryptocurrency. For instance, inscriptions in Ethereum and Bitcoin are known as Ethscriptions and Bitcoin Inscriptions, respectively.
Also known as Ordinal Inscriptions, Bitcoin Inscriptions are a new way of writing additional data or digital artifacts on the Bitcoin blockchain. The information engraved includes images, videos, texts, audio, and more. This extra data is attached to individual satoshis (sats), the smallest unit of Bitcoin representing 0.00000001 BTC.
How Do Ordinal Inscriptions Work?
Since Bitcoin was designed to handle basic functionalities like writing simple smart contracts and transferring value, how are inscriptions possible on the network?
Initially, Bitcoin was limited by the amount of data that users could attach to it. The taproot upgrade paved the path for Ordinal inscriptions by removing the transaction data storage limit, allowing blocks to contain more data. This opened possibilities such as Bitcoin Ordinals – the pieces of Bitcoin in which extra information is inscribed.
Ordinal inscriptions are based on Ordinals theory, where individual satoshis are identified or numbered based on the order in which they are mined. Instead of imprinting data on separate tokens or relying on sidechains, Ordinal inscription adds a data layer to specific units of Bitcoin on-chain. The inscription protocol uses a mechanism called an “envelope”, a Bitcoin script designed not to execute, to store the data. The arbitrary data is then attached to Bitcoin transactions’ witness through the SegWit and Taproot upgrades. Typically, this approach allows up to 4MB of data to be included in each transaction.
By inscribing and storing metadata directly on the Bitcoin blockchain, they inherit the network’s benefits, such as immutability, security, scarcity, and tamper-proofness. In addition, it allows users to create Bitcoin-native non-fungible tokens (NFTs) and BRC-20 tokens – the standard for fungible tokens on the Bitcoin network.
