What began as a clever hack has split the Bitcoin world in two. A protocol called Ordinals, which lets people etch files directly onto the Bitcoin network, is being praised as a brilliant second act for the original crypto. At the same time, others see it as a hostile takeover of its core mission.
This new ability to create permanent digital artefacts, backed by Bitcoin’s legendary security, has conjured a multi-billion dollar market out of thin air.
It’s also forced a bitter argument over what Bitcoin should even be, setting the stage for a fight between its old guard and a new wave of creators.
The code that broke the rules!
In January 2023, developer Casey Rodarmor cracked open a door no one knew was there. His Ordinals protocol gave every single satoshi—Bitcoin’s smallest fraction—a unique serial number. Suddenly, individual sats could be found, tracked, and “inscribed” with anything from pictures to text.
This wasn’t possible before two major network upgrades laid the groundwork:
- The SegWit update in 2017 rearranged transaction data, incidentally creating a discounted section for storage.
- Then, 2021’s Taproot upgrade relaxed the data size limits, effectively leaving the back door wide open for the large files Ordinals now use.
Unlike NFTs on other chains that often just link to a file stored elsewhere, Ordinals cram the entire piece of data into the transaction itself. This makes the artifact a permanent fixture on the blockchain, just as secure and unchangeable as Bitcoin itself—a key part of their appeal.
Building on this, an anonymous developer named Domo launched the BRC-20 standard in March 2023. It used simple text inscriptions to mimic creating new tokens on Bitcoin. The experiment worked, but it also spammed the network with what critics called “digital dust.”
In response, Rodarmor himself designed a cleaner, more efficient system. His Runes protocol, which went live in April 2024, aims to create these tokens without clogging the system and is built to play nice with scaling technologies like the Lightning Network.
A gold rush for digital objects
The market for these digital oddities went ballistic, generating over $6.2 billion in sales from nearly 4 million trades. Trading activity has spiked wildly, with one day in July 2025 alone seeing $11.5 million in sales, a high for the year.
Source: Dune Analytics
A turf war for traders’ attention has left Magic Eden and OKX as the main arenas. By September 2024, Magic Eden was handling 61% of all Ordinals trading. Other hubs like Gamma.io and UniSat have also carved out niches, with UniSat becoming a go-to for BRC-20 token action.
This explosion of trading minted a new class of top-tier collections, including the likes of NodeMonkes, Bitcoin Puppets, Taproot Wizards, and Ordinal Punks.
The BRC-20 token craze also took off, with the total value of these improvised tokens briefly soaring past $3.3 billion.
The Fight – Progress or Pollution?
The rise of Ordinals has been anything but peaceful, triggering a fierce debate that gets at the heart of what Bitcoin is for.
To the critics, many of whom are long-time Bitcoin believers, Ordinals are a perversion of Satoshi’s vision for a peer-to-peer cash system. They see inscriptions not as art, but as spam that’s filling the blockchain with useless, non-financial data.
Their complaints are backed by hard numbers:
- Sky-high fees – The fight for space inside each new block has sent transaction fees through the roof. One analysis showed the average fee jumped 25 times in the last year. This threatens to make small, everyday payments impractical, especially for users in the developing world.
- A bloated blockchain – Ordinals, particularly the large image and video files, add a huge amount of data to the chain. This makes it more expensive and difficult for everyday people to run a full node, chipping away at the very decentralization that makes Bitcoin strong.
- Transaction junk – The BRC-20 standard became infamous for creating millions of tiny, almost worthless transaction outputs (UTXOs) that every node in the network has to track, slowing things down for everyone.
Supporters see things completely differently. To them, Ordinals are a vital innovation that gives Bitcoin new purpose and, more importantly, a way to pay its bills long-term. The fees from all this activity will be needed to pay miners to secure the network as the built-in “block subsidy” reward dwindles to nothing.
They point out that Ordinals have attracted a flood of new developers and creative energy, fostering a “builder culture” that used to be found almost exclusively on competing chains like Ethereum. The billions of dollars pouring into the market, they argue, is all the proof needed that these assets have real value.
More than just JPEGs?
The creativity unleashed by Ordinals is already moving beyond pricey digital art, with developers pushing into new territory.
An entire toolset has popped up almost overnight, with specialized wallets like Xverse, Hiro, and Unisat giving people the gear they need to hold and trade their inscriptions.
Source: Dune Analytics
The network traffic jam caused by Ordinals has also put a fire under the development of Layer 2 scaling solutions. Networks like Stacks, Rootstock, and Liquid are being retooled to handle Ordinal-related activity more cheaply and quickly. Getting Ordinals to work on the Lightning Network is still a complex puzzle, but developers are working on ways to “wrap” them for easier transfers.
Perhaps the most fascinating frontier is digital identity.
The corporate Bitcoin giant MicroStrategy recently launched its “Orange Protocol,” a system that uses Ordinals to create a permanent, forgery-proof digital identity on the Bitcoin blockchain. The idea is to revolutionize how we prove who we are online, with tools already being built to let people cryptographically sign emails using their Bitcoin-based ID.
Dodging the regulators?
The sudden appearance of Ordinals and BRC-20 tokens has left regulators scrambling to keep up, creating a treacherous legal environment.
- Securities risk – The U.S. SEC is watching closely to see if some of these assets are actually illegal securities. BRC-20 tokens are particularly vulnerable, as they are often created and promoted by a central group with the clear expectation of profit, a classic red flag for regulators.
- Copyright chaos – Because inscriptions are permanent, they create a nightmare scenario for intellectual property. Anyone can inscribe a copyrighted image or a company’s logo, and once it’s there, it can’t be taken down. Major lawsuits in the NFT world, involving brands like Nike and Hermès, are already creating the legal playbook for how these fights over digital ownership will play out. In a landmark decision, the Ninth Circuit court confirmed in the Yuga Labs v. Ryder Ripps case that NFTs can, in fact, be trademarked, giving brands a new weapon in this space.
A fad, the future, or a fundamental break?
The initial speculative fever for Ordinals has cooled, with monthly sales figures dropping from their frenzied peaks. Even so, the technology has permanently expanded the idea of what Bitcoin can do.
While the purists’ concerns about network health and mission creep are valid, the argument that Ordinals provide a long-term economic engine for Bitcoin is powerful. The new fee income, the influx of talent, and the push into serious applications like decentralized identity suggest this is far more than a passing craze.
In the end, Ordinals may not just be the “next big thing.” They represent a fundamental shift, proving Bitcoin can be a platform for a whole new suite of tools. The world paid attention because of JPEGs on the blockchain, but the real revolution may be the one that turns Bitcoin into a programmable foundation for the digital economy to come.