Inscriptions

What Are Inscriptions in Crypto?

In the blockchain industry, the term "inscription" refers to metadata attached to individual units of cryptocurrency. Inscriptions gained popularity when the crypto community began attaching data to satoshis, the smallest units of bitcoin (BTC). Essentially, inscriptions are information—such as text, images, or code—that are added to transaction outputs on the Bitcoin blockchain network. This innovative approach has transformed how digital assets are created and stored on the blockchain.

How Inscriptions Work on the Bitcoin Network

When a user conducts a transaction on the Bitcoin network, they can attach additional data in the form of an inscription. These metadata become a permanent and immutable part of the transaction, recorded in the decentralized and public ledger of the Bitcoin blockchain network. This ensures that the inscribed information is cryptographically secured and cannot be altered or removed.

Inscribing satoshis enables the creation of unique, non-fungible "digital artifacts." This is achieved using a numbering system called ordinal number theory. The emergence of inscriptions on blockchain networks is closely linked to the Bitcoin Ordinals protocol, which assigns a sequential number to each satoshi unit based on the order in which they were mined. This numbering system creates a permanent identity for each satoshi, allowing developers to build complex applications on top of Bitcoin.

Bitcoin Ordinals

The Bitcoin Ordinals format was introduced in 2023 as a method for creating NFT tokens on the Bitcoin network by attaching information to satoshi units. Ordinals, or ordinal numbers, represent numbered satoshi units with inscriptions created using the Ordinals protocol. This innovation opened new possibilities for Bitcoin, traditionally viewed as a payment network, to support digital collectibles and non-fungible assets. Each ordinal is uniquely identifiable and traceable throughout the blockchain, providing verifiable proof of ownership and authenticity.

BRC-20 Tokens

BRC-20 is an experimental token standard that enables the minting and transfer of fungible tokens through the Ordinals protocol on the Bitcoin blockchain. BRC-20 tokens are simple, immutable, and secure, inheriting the robustness of the Bitcoin network. Each token generated using the BRC-20 standard is essentially an inscription on a satoshi unit. This standard has gained significant attention as it allows developers to create and manage tokens directly on the Bitcoin blockchain without requiring separate sidechains or layer-2 solutions.

What Are the Differences Between Inscriptions, Ordinals, and BRC-20?

Understanding the distinctions between these three concepts is crucial for anyone working with Bitcoin's extended functionality:

Inscriptions vs. Ordinals: Inscriptions are metadata added to cryptocurrency units, while Ordinals are the result of this process and represent numbered satoshis with inscriptions. In other words, inscriptions are the data layer, while ordinals are the numbering and identification system that makes those inscriptions trackable and tradeable.

Ordinals vs. BRC-20: Ordinals represent a protocol for numbering and inscribing satoshi units, while BRC-20 is a token standard that creates fungible tokens on the Bitcoin blockchain using the Ordinals protocol. Ordinals provide the underlying infrastructure, while BRC-20 is an application layer built on top of that infrastructure.

Inscriptions vs. BRC-20: Inscriptions are metadata added to satoshi units, while BRC-20 tokens are a specific application of inscriptions that represent fungible tokens on the Bitcoin blockchain. All BRC-20 tokens are inscriptions, but not all inscriptions are BRC-20 tokens—some may represent NFTs, digital art, or other types of digital assets.

Advantages and Disadvantages of Inscriptions on Bitcoin

Through the Ordinals protocol, inscriptions on the Bitcoin network have expanded its range of applications. They enable the creation of digital artifacts such as non-fungible tokens (NFTs), digital artwork, and collectible items. This has attracted new users and developers to the Bitcoin ecosystem who were previously focused on other blockchain platforms like Ethereum.

However, the introduction of inscriptions has not been without controversy. Some members of the Bitcoin community argue that the network should maintain its relative simplicity, focusing on the transmission and storage of value. They express concerns that adding complex features could compromise Bitcoin's core purpose as a secure and efficient payment system. On the other hand, supporters view inscriptions as a positive development that introduces new functionality and tools to the Bitcoin network, enhancing its versatility and competitive position.

One significant challenge is the competition for block space between ordinary Bitcoin transactions and inscriptions on satoshi units, which has led to increased network fees. During periods of high inscription activity, transaction fees can rise substantially, making it more expensive for users to conduct regular Bitcoin transactions. Despite these divided opinions, the Ordinals project has undeniably brought innovation to the Bitcoin network and demonstrated its technical flexibility.

Inscriptions in Non-Bitcoin Networks

The trend of inscriptions in blockchain networks, originally popularized by the Bitcoin Ordinals protocol, has extended beyond the Bitcoin community. The concept of inscriptions is being adopted in networks such as Ethereum, Avalanche, and an increasing number of blockchain projects to enhance functionality and network versatility. This cross-chain adoption demonstrates the universal appeal and practical value of the inscription model as a method for creating and managing digital assets on various blockchain platforms.

Conclusion

Inscriptions represent an innovative approach to expanding the functionality of blockchain networks. In the context of Bitcoin, inscriptions serve as a mechanism within the Ordinals protocol for attaching metadata to satoshi units, enabling the creation of unique digital assets. The relationship between inscriptions and BRC-20 tokens illustrates how Bitcoin, traditionally perceived as a vehicle for financial transactions, continues to evolve and adapt to a broader range of functions. As the blockchain industry matures, inscriptions are likely to play an increasingly important role in enabling diverse applications across multiple blockchain networks.

FAQ

What are Bitcoin Inscriptions and how do they work?

Bitcoin Inscriptions are digital artifacts created by embedding data directly onto the Bitcoin blockchain. They attach metadata, images, or code to individual satoshis (Bitcoin's smallest units), allowing permanent storage and ownership transfer. This innovation enables NFT-like functionality and new use cases on Bitcoin's immutable ledger.

How do I create and mint an inscription on the blockchain?

To mint an inscription, connect your wallet to an inscription platform, prepare your data or content, pay the network fee, and submit your transaction. The data gets permanently recorded on the blockchain as an immutable inscription associated with your wallet address.

What is the difference between Inscriptions and NFTs?

Inscriptions store data directly on blockchain, making them immutable and permanent. NFTs reference external metadata, which can be altered or lost. Inscriptions offer greater permanence and decentralization, while NFTs provide more flexibility in design and storage options.

What are the costs and fees associated with creating inscriptions?

Inscription creation costs depend on network conditions and data size. Fees typically include base transaction costs plus per-byte charges. Bitcoin inscriptions generally require 0.0001-0.001 BTC depending on network congestion. Users pay to the blockchain for permanent data storage. Costs fluctuate based on network demand and transaction priority.

Are inscriptions permanent and immutable on the blockchain?

Yes, inscriptions are permanently recorded on the blockchain. Once inscribed, data cannot be altered or deleted, ensuring true immutability and permanent ownership of digital assets.