Guide
Ordinals and Runes Explained: NFTs and Tokens on Bitcoin
The bottom line: new ways to put "NFTs" and "tokens" on Bitcoin
Ordinals and Runes are new mechanisms that layer NFT-like inscriptions and custom tokens on top of Bitcoin, a network originally designed as "money." Ordinals appeared in early 2023 and Runes at the April 2024 halving, and both sparked heated debate over how the network should be used. This article lays out how they work and the arguments around them, neutrally.
Key takeaways
- Ordinals = a system for writing images or text onto individual "satoshis," known as inscriptions (launched in early 2023 by Casey Rodarmor).
- BRC-20 = an early, experimental fungible-token standard built on top of Ordinals.
- Runes = a mechanism that uses the UTXO model to issue tokens more efficiently (released at the April 2024 halving, block 840,000).
- Both are debated within the community over rising fees and how block space is used.
What Ordinals (inscriptions) are
Ordinals number Bitcoin's smallest unit, the satoshi, and inscribe data such as images or text onto them. This made it possible to handle "one-of-a-kind data, like an NFT" on Bitcoin. Groundwork such as the 2021 Taproot upgrade made this possible (What is Taproot?).
The difference between BRC-20 and Runes
| Item | BRC-20 | Runes |
|---|---|---|
| Launched | 2023 (experimental) | April 2024 (released at the halving) |
| Mechanism | Uses Ordinals inscriptions | Uses the UTXO model directly |
| Efficiency | Tends to be data-heavy | Designed to be relatively efficient |
| Positioning | An early attempt | An independent standard that doesn't rely on Ordinals |
Runes was proposed by Casey Rodarmor and is designed to issue and transfer fungible tokens in line with Bitcoin's UTXO structure.
Why it's controversial
- The positive view: New uses generate fee revenue and could become a long-term income source for mining. Bitcoin's usage expands.
- The critical view: Ordinary "money" payments get squeezed, and fees spike during congestion. Speculative uses hog block space.
Indeed, around the halving just after Runes launched, transactions flooded in and fees temporarily surged. This was a one-off event, and things settled down afterward.
A highly speculative space
Many Ordinals-related tokens and memes are extremely speculative, with prices spiking and crashing. Keep understanding the mechanism separate from investment decisions, and watch out for scams and hype.
Frequently asked questions
Q. Are Ordinals and Runes the same thing? A. No, they're different. Ordinals are for "inscriptions (NFT-like)," while Runes are for "issuing fungible tokens," and Runes doesn't depend on Ordinals.
Q. When did Runes start? A. It was released at the April 2024 halving, the moment block 840,000 was reached.
Q. Can you create NFTs on Bitcoin? A. Yes—Ordinals inscriptions let you record one-of-a-kind data onto a satoshi.
Q. Is this why fees get expensive? A. It can be a contributing factor during periods of concentrated demand. Fees fluctuate with supply and demand, and there are quieter periods too.
Sources
- Ordinals official documentation: https://docs.ordinals.com/
- Kraken, "What is the Bitcoin Runes protocol": https://www.kraken.com/learn/bitcoin-runes-protocol
A note before investing
This article is for informational purposes only and is not investment advice. Bitcoin carries risks including price volatility, hacking, and loss. Make investment decisions at your own responsibility and only with money you can afford to lose. Tax rules and regulations may change, so always check the latest official primary sources.
Sources
FAQ
- Are Ordinals and Runes the same thing?
- No, they're different. Ordinals are inscriptions (NFT-like), while Runes issue fungible tokens, and Runes doesn't depend on Ordinals.
- When did Runes start?
- It was released at the April 2024 halving, the moment block 840,000 was reached.
- Can you create NFTs on Bitcoin?
- Yes—Ordinals inscriptions let you record one-of-a-kind data onto a satoshi.
This article is informational only and is not financial, investment, or trading advice. Prices are reference snapshots and may be outdated. Always do your own research.
