What are Digital Artifacts on Bitcoin?

In 2023, Ordinals made a big splash in the Bitcoin ecosystem, bringing new excitement and energy to a space many thought of as stagnant. Yet, a year later, a lot of people still don’t know exactly what digital artifacts or their role in the most recent Bitcoin renaissance.

Despite the jumpstart Ordinals created for builders on Bitcoin, the nuances between digital artifacts and NFTs is still not clear for many users.

What are Bitcoin Ordinals?

Ordinals made it possible for inscriptions to embed content on the Bitcoin blockchain. Anything from images to text, SVGs, audio, to HTML can all be placed into the blockchain's transaction witness data. Ordinal Theory is the conceptual framework and set of principles used to organize and analyze the structure of information and transactions within a blockchain database.

When inscriptions are created using Ordinal Theory, they mark specific satoshis within Bitcoin transactions. Each inscription is uniquely tied to its transaction and the movement and ownership of these inscribed satoshis can be tracked across time and future transactions. This tracking allows inscriptions to be traded, gifted, bought, and sold within the Bitcoin ecosystem.

Ordinals opened a new dimension of usability on Bitcoin that many had not thought possible. Ordinal inscriptions have become integral parts of Bitcoin's decentralized, immutable ledger. They are enabling diverse applications and interactions while preserving the blockchain's core principles of security and decentralization.

What are Digital Artifacts?

Digital artifacts, much like tangible relics such as ancient coins or documents, possess distinct characteristics. It’s possible to own them, they should be fully intact without missing anything, and they cannot be changed by just anyone. But, as their name suggests, digital artifacts are made up of data rather than physical matter.

For a digital entity to qualify as a digital artifact, it must possess several specific attributes similar to physical artifacts. The requirements for digital artifacts include being:

• Ownable

• Complete

• Permissionless

• Uncensorable

• Immutabile

Unlike data alone or incomplete NFTs tethered to off-chain content, true digital artifacts are self-contained, unencumbered by royalties or centralization. They must be resistant to alteration and immutable. In essence, digital artifacts embody the ideal standards NFTs aspire to, but often fall slightly short of.

Digital Artifacts vs. NFTs

As Casey Rodarmor put it in his blog post on Ordinal inscriptions, “Digital artifacts are NFTs, but not all NFTs are digital artifacts.” Meaning, digital artifacts meet all the requirements and criteria of being called an NFT. But NFTs don’t always have the characteristics of digital artifacts. Much like all doves are birds, but not all birds are doves.

Non-Fungible Tokens (NFTs) are unique digital assets with distinct value and properties. To qualify as an NFT, an asset must meet these criteria:

• Uniqueness — NFTs are one-of-a-kind digital items, unlike fungible tokens, which are interchangeable.

• Ownership — They can be owned and transferred like physical assets, but their ownership is recorded on a distributed ledger, ensuring authenticity and provenance.

• Indivisibility — They cannot be divided into smaller units, unlike cryptocurrencies. They exist as whole, indivisible entities.

• Verifiability — The authenticity and ownership of NFTs can be easily verified on the blockchain, providing transparency and security.

• Interoperability — They can be bought, sold, and traded across different platforms and marketplaces, fostering a vibrant digital economy.

  
  

In contrast, digital artifacts like Ordinal inscriptions have additional qualities that set them apart from typical NFTs. While digital artifacts meet all the criteria above, they are also:

• Complete and Stored On-Chain — Digital artifacts store all of their data directly on the blockchain. This makes off-chain storage on L2s like IPFS or Arweave unnecessary.

• Permissionless and Uncensorable — Digital artifacts are inherently permissionless, meaning ownership and transferability are decentralized and trustless.

• Immutable — Unlike some NFTs that may have upgrade keys or centralized control mechanisms, digital artifacts can’t be modified once inscribed on the blockchain.

• Native Ownership — Like physical objects, digital artifact owners have complete control over storage or transfers without transfer fees or intermediaries.

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While NFTs represent unique digital assets with ownership recorded on the blockchain, digital artifacts provide enhanced qualities like on-chain immutability. This aligns them more closely with the ideal standards of decentralized digital assets.

Why are Digital Artifacts Significant?

The fact that digital artifacts store their complete data on the blockchain makes them inherently on-chain assets. This is hugely significant. It means all the content and metadata associated with things like Ordinal inscriptions are directly within the blockchain's data structure. Off-chain storage has long been a complaint of decentralization proponents regarding traditional NFTs.

Before Ordinals came along, building practical use cases Bitcoin presented significant challenges due to scalability limitations. Limited block size and throughput bottlenecks made building on Bitcoin extremely difficult. In fact, before Ordinals, many people had come to believe that more practical use cases would never be built on Bitcoin at all.

Bitcoin's Layer 1 was primarily designed to facilitate secure and decentralized transactions of its native cryptocurrency, BTC. The network’s constraints on the amount of data that could be stored and processed directly on-chain was a security feature. But the resulting trade-off called the “Trilemma,” meant complex data usage was nearly impossible. Bitcoin transactions faced practical limitations and were often inefficient.

The introduction of Ordinals expanded the possibilities because it revealed to the builder community that new solutions were still possible. The breakthrough of Ordinal Theory overcame Bitcoin’s scalability limitations and opened the door for things like BRC-20 and recursive inscriptions.

Because of how Ordinals and digital artifacts changed the narrative on Bitcoin’s potential, the world understood what was possible. Digital artifacts opened the way for DeFi on Bitcoin, Web3 applications and implementations like digital identity, bridges, swaps, wallets, and all kinds of other decentralized infrastructure.

Conclusion

Ordinals and digital artifacts have proven to be one of the greatest goods for Bitcoin in recent years and they breathed life into the Bitcoin builder community. Before digital artifacts, many decentralization enthusiasts were searching for a solution to some of the security issues that NFTs posed.

The crypto world is known for moving fast and changing quickly. And now, research is being done and tools are being built to expand the capabilities of Bitcoin even further. Most of the attention and hope for innovation rested on Ethereum in the past, but Bitcoin has maintained its place as the oldest and most secure blockchain — and thanks to Ordinals, it’s now becoming the most innovative once again.

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