The Bitcoin blockchain now hosts tokens. This allows for new assets like NFTs to be created and stored on Bitcoin. Doing so opens up new applications for Bitcoin and changes the way the blockchain can be used.
So far there are four main types of tokens on Bitcoin. Here’s how they work and why they’re gaining in popularity.
The easiest way to buy Bitcoin tokens like BRC-20s is through centralized exchanges like Gate.io and BitGet which have been early adopters of BRC-20 tokens. These exchanges may also add support for ORC-20 and SRC-20 tokens in the future.
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Otherwise, if you’re comfortable using a non-custodial wallet, you can use the UniSat, Xverse or Hiro wallet to purchase BRC-20 tokens.
UniSat is also a marketplace. It’s a decentralized exchange (DEX) that allows you to trade your BTC for BRC-20 tokens. Keep in mind though that it is on the Bitcoin blockchain, and using it is quite different from using a DEX on Ethereum.
To purchase Bitcoin this way you will need to first create a BRC-20 wallet by following the steps below.
UniSat is an open-source Google Chrome browser extension wallet that integrates with the UniSat exchange. You can use it to trade BRC-20 tokens on UniSat. You can download the wallet for free from the Google Chrome store or GitHub.
Once you’ve downloaded it, follow these steps to set the wallet up:
Using an NFT marketplace like Magic Eden is the easiest way to purchase inscriptions. It only requires you to create and connect and fund a compatible wallet like UniSat, Xverse and Hiro.
To set up a UniSat wallet to buy Ordinals Inscriptions, follow the instructions above which will allow you to create a compatible wallet.
Alternatively, there are Discord communities which trade Inscriptions, but these can be difficult to access, require a trusted third-party for escrow, and have increased risks of scams.
At face value, NFTs and Ordinals appear to be the same. Seemingly, they’re just images stored on a blockchain. But there are key technical differences regarding how they are created and stored.
NFTs are minted in smart contracts on blockchains like Ethereum or Solana. The code for NFTs remains stored in the smart contract on-chain, while the image — or whatever data comprises the NFT — is stored off-chain on networks like the Interplanetary File System (IPFS). The IPFS can best be described as the blockchain’s decentralized hard drive.
Ordinals are inscriptions on blocks in the Bitcoin blockchain. You can inscribe a “digital artifact” like an image on the witness signature field of a Bitcoin transaction. This digital artifact is then stored on-chain in contrast to an NFT image, which isn’t.
This is an important difference, as it makes Ordinals Inscriptions completely decentralized and on-chain.
Metadata for NFTs and Ordinals is also stored in different places. For NFTs, metadata is stored in the IPFS, while the metadata for Oridinals is stored directly in the inscription.
Thanks to the Taproot upgrade and some clever coding, the Bitcoin blockchain can now host tokens. Tokens are a way of putting additional assets on a blockchain, like stablecoins or NFTs, which are popular on Ethereum.
The emergence of tokens on Bitcoin is significant because it gives the Bitcoin the blockchain the ability to host a much wider ecosystem of assets than previously imagined. This enhances Bitcoin’s utility and opens up a range of new applications that could fundamentally change how Bitcoin is used.
Ordinals and BRC-20 tokens have become popular for a variety of reasons.
Generally speaking, many in the Bitcoin community are excited to see Bitcoin used as a platform to create and store assets other than the native bitcoin (BTC) token.
Anyone can now create a BRC-20 token on Bitcoin using the UniSat Wallet and marketplace. In the future, people may do so as a means to fundraise, offer equity in a venture or confer voting rights. For now, though, most of these tokens have no real value and most are susceptible to price manipulation and notable volatility.
The emergence of Bitcoin ordinal inscriptions has elicited a similar degree of excitement that NFTs on Ethereum first did.
Currently, ordinal inscriptions are predominantly being used in a more playful way — to preserve JPEGs on Bitcoin — but people could use them to preserve anything from legal documents to any other information they’d like to save as a digital artifact in the future.
Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.
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