Bitcoin NFTs Explained: Ordinals and the BRC-20 Inscriptions Ecosystem

Ordinals assigns trackable serial numbers to satoshis, the smallest units of Bitcoin, while inscriptions allow data such as text and images to be written into Bitcoin transactions. This has enabled Bitcoin-native digital assets commonly referred to as “Bitcoin NFTs”. BRC-20 is a separate experimental fungible token standard built around inscription-based data and uses operations such as Deploy, Mint, and Transfer to represent token states. Ordinals, inscriptions, BRC-20, and Bitcoin NFTs are closely related, but they are not the same thing. Understanding how these concepts fit together is essential for anyone exploring the Bitcoin inscription ecosystem.

What Are Ordinals?

One BTC can be divided into 100 million satoshis, commonly called sats.

Ordinal Theory provides a system for assigning serial numbers to individual satoshis and tracking them based on their order within Bitcoin transactions. On top of this system, inscriptions make it possible to attach content such as text, images, and other media to Bitcoin transaction data and associate that content with specific satoshis. As a result, digital assets containing unique inscription content are often referred to by the market as “Bitcoin NFTs.”

Technically, however, Ordinals and NFTs are not the same thing. Ordinals refers primarily to the numbering and tracking system for satoshis. An inscription refers to the content written to Bitcoin. The resulting inscribed digital assets may then be collected and traded in ways similar to NFTs.

Unlike many conventional NFTs, Ordinals inscription content can be stored directly on the Bitcoin blockchain and transferred through regular Bitcoin transactions and the UTXO model without requiring a separate sidechain or standalone token.

How Are Bitcoin Inscriptions Different From Ethereum NFTs?

Ethereum NFTs are commonly created through smart contract standards such as ERC-721 or ERC-1155. These smart contracts manage token ownership, transfers, and related logic. However, whether the associated image or media is stored on-chain or off-chain depends on the individual project.

Ordinals inscriptions use a different model. The inscription content is included within Bitcoin transaction data, while the associated satoshi exists within a Bitcoin UTXO. As a result, managing Bitcoin NFTs requires an understanding of UTXOs and satoshi ordering.

This is also why users should use wallets and tools that can correctly recognize and manage Ordinals. If a wallet does not identify the relevant inscribed satoshi when constructing a transaction, the satoshi may be transferred to an unintended output or potentially included as part of a miner fee. Being used as a transaction fee does not mean that the inscription data disappears from Bitcoin’s blockchain history. Instead, the original holder may lose control over the satoshi associated with the inscription.

For this reason, users should understand wallet compatibility and UTXO management before trading Bitcoin inscriptions.

What Is BRC-20?

BRC-20 was introduced by the community in 2023 as an experimental fungible token standard for Bitcoin.

It uses Ordinals inscriptions to record structured data and defines operations such as Deploy, Mint, and Transfer to describe token creation, issuance, and movement.

BRC-20 is fundamentally different from Ethereum’s ERC-20 standard.

ERC-20 tokens rely on smart contracts to maintain token balances and transaction logic directly on-chain. BRC-20 balances, by contrast, are determined by interpreting historical inscriptions, Bitcoin transactions, and protocol rules. This means indexers play an important role in the BRC-20 ecosystem.

It is also important to note that “BRC-20” does not automatically mean that a token has a fair launch, no team allocation, or investment value. The specific token deployment parameters and transaction history must be evaluated individually.

A simple way to understand the relationship is: Ordinals provides a numbering and tracking system for satoshis. Inscriptions attach data to them. Bitcoin NFTs generally refer to unique inscription-based assets. BRC-20 uses inscription data to represent fungible tokens.

FAQ

• Are Ordinals the same as Bitcoin NFTs?
  Not exactly. Ordinals is a system for numbering and tracking satoshis, while unique inscription-based assets are commonly referred to as Bitcoin NFTs.

• Is inscription data stored entirely on Bitcoin?
  Native Ordinals inscription content can be stored directly on the Bitcoin blockchain, which is one key difference from many NFTs that rely on external media storage.

• Is BRC-20 an official Bitcoin token standard?
  No. BRC-20 is an experimental community-created standard and is not a native token standard of the Bitcoin Core protocol.

• What is the main difference between BRC-20 and ERC-20?
  ERC-20 relies on Ethereum smart contracts to maintain token logic, while BRC-20 relies primarily on inscription data and indexing rules to calculate token state.

• Can any Bitcoin wallet manage Ordinals?
  Not necessarily. Users should confirm that a wallet can properly identify and manage Ordinals and the related UTXOs.

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Further Readings：

The Complete Beginner’s Guide to NFTs

What Is NFT: A Single Image Sold for Millions?

Types of NFTs: PFPs, Art, Gaming, Music, and Web3 Domains

How to Buy and Sell NFTs: OpenSea and Blur Trading Guide

NFT Market Analysis: How to Evaluate the Investment Value of an NFT