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Expert Analysis
February 24, 2022

Joe Looney on Ordinals

The founder of Rare Pepe Wallet explains the new class of Bitcoin NFTs to Jason Bailey
Credit: Screenshot of inscriptions on, February 2023. Courtesy
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Joe Looney on Ordinals

Joe Looney was among the first to popularize NFTs through his 2016 Rare Pepe Wallet, which has become the blueprint for all modern NFT marketplaces. A renowned expert in the field of Bitcoin and NFTs, he understands the intricate workings of blockchain technology better than most. So when Bitcoin Ordinals emerged, I reached out to learn more about this new class of NFTs that has generated significant interest among the community. In the following conversation, he explains exactly what Ordinals are, how they differ from other NFTs, and how they stand to alter the future of digital assets. 

Screenshot of inscriptions on, February 2023. Courtesy

Jason Bailey: It felt like we were going to have a quiet year. The majority of people didn’t seem so interested in NFTs anymore, and the markets were starting to die. But that seems like prime Bitcoin time. After all, Rare Pepes were born in a down market. I don’t fully understand what Ordinals are, but I’m excited to figure it out.  

Joe Looney: We go in cycles — everything old is new again. But I think part of the market was ready for something different. A lot of the people who jumped on Ordinals were Ethereum people figuring out how to run a Bitcoin node. In fact, there’s a whole group of Bitcoiners who don’t like how Ordinals put all the images and media on-chain. The last couple of weeks have been like a gold rush. I’m hoping things start to die down and that we’ll see fees come down a little bit. Ordinals raise a lot of philosophical questions that nobody really talks about — they’re forcing people to have those conversations. 

JB: How do Ordinals fit within the history of art on the Bitcoin blockchain?

JL: In 2012, Colored Coins looked at the smallest unit of Bitcoin, the Satoshi. Eight decimal places deep is the lowest you can go, the smallest whole unit, so Satoshis are the pennies of Bitcoin. Colored Coins regarded individual Satoshis as tokens, marking them as, for example, green or blue. The problem with that type of implementation is that the issuer of the token holds all the data anchored to the chain that has been colored. So if you don’t know that something is a Colored Coin transaction, it just looks like a regular Bitcoin transaction. 

What I’ve come to appreciate is that if you don’t have network effect, you don’t have anything, you just have a toy that a couple of people can play with.

At the end of 2013 a platform called Mastercoin (now Omni Layer) emerged, which was the first ever ICO (initial coin offering) in crypto. Mastercoin embedded data in Bitcoin transactions and, through its indexing software, was able to examine every Bitcoin block to build a picture of a token’s ecosystem. So issuing tokens would be one type of transaction, and sending tokens would be another type of transaction. Now, everyone in the Mastercoin ecosystem could see each other, and no one was on an island — network effect was possible. But because Mastercoin required you to be on a whitelist to issue a token, you couldn’t achieve network effect after all.

Fast forward a few months and Counterparty was created, which was very similar to Mastercoin except it required users to burn Bitcoin to receive the Counterparty token. That was a fairer way of distributing tokens without enriching any individual. Counterparty really marked the start of the network effect of user-issued tokens. That was when you started to see experimentation with Spells of Genesis doing trading cards in 2015 and then Rare Pepes in 2016, which allowed anyone to produce a card. The birth of crypto art followed soon after, whereby anyone could make their own token and associate images with it, which brings us to Ethereum, Tezos, and the NFT mania of 2021. 

Spells of Genesis, 2015. Courtesy Spells of Genesis

JB: When did you first come across Bitcoin Ordinals?

JL: I saw that Ordinals had gone live at the end of January, but I had already heard about the project at the Historic NFT Fest from another Counterparty developer, Dan Anderson. So I jumped on it relatively quickly. Ordinals takes the good parts of Colored Coins and the good parts of Counterparty and pushes them together in a very interesting way. The Ordinals indexer is very similar to Counterparty, with its own software running in tandem with a Bitcoin node. It’s federated in that way. 

The developer of Ordinals came up with a system for numbering every single Satoshi mined up to this point, essentially pre-coloring every single coin. The difference now is that everyone can visit and identify each inscription using the same indexing software. If you have a Bitcoin wallet, you have a wallet full of Ordinals, because every single Satoshi is an Ordinal with a specific number.

Ordinals turn Bitcoin into a bunch of one-of-one NFTs. Now every single Satoshi is an NFT, but they don’t all have art associated with them. 

An interesting thing about Ordinals is that you don’t issue them, they already exist. So while you don’t bring them into existence, you can inscribe information onto them. This produces a game dynamic that incentivizes players to get in quicker than others. What has happened in the last couple of weeks is that software was released allowing you to create fully on-chain Bitcoin NFTs. Of course, you’re not actually creating an NFT, you’re inscribing what you want onto a Satoshi that already exists. The problem comes if you try to use a non-Ordinal wallet, because you might accidentally spend away your treasured inscriptions. The ORD wallet won’t let you do that because it treats your inscriptions differently from your UTXOs (unspent transaction outputs), which are your stacks of coins. It’ll just say: “you don’t have the required balance.”

Fees spent inscribing Ordinals [$], February 24, 2023. Courtesy

I’ve heard Casey Rodarmor, who developed Ordinals, describe the project as a “lens” through which to view Bitcoin. I’ve also heard someone call it “Bitcoin astrology.” But overall I think it’s great for NFTs, and because you’re limited by block size, there’s also a cost — you might want to inscribe a 300 KB image but it could cost you $300 to get it in the next block. In that sense, you can look at Ordinals like Veblen goods, which are just expensive to be expensive. Obviously, we’re in a hype phase right now, so who knows if people will fall out of love with Ordinals in two or three months, but it is a very interesting use case for Bitcoin that also solves a number of problems. For example, currently, miners get compensated by a block reward and via fees paid in the block that they’ve discovered. But the block reward is being cut in half every four years. So now miners are going to be dependent on fees. Ordinals creates a new demand for block space, which has the potential to elevate fees to a point where the network is self-sustaining.

In my view, Ordinals are much closer to the base layer of Bitcoin, because when you’re sending tokens you’re actually sending Bitcoin itself. One thing I’ve been tinkering around with myself is whether we can achieve a level of synchronicity between Ordinals and Counterparty, now that we have two NFT platforms on Bitcoin. One thing that is cool is that, because Ordinals inscriptions are on-chain data, Counterparty can also reference them, which means that the Bitcoin NFTs on Counterparty can be just as on-chain as Ordinals since they’re referencing the same image.

One of the things you can’t do with Ordinals, at least not yet, is editions. But it isn’t that difficult to achieve from a technical perspective. In fact, POGs make for a useful analogy here. Your UTXO is your tube full of POGs, but the game POGs also requires slammers, which go at the top of your stack. 

Slammers are like POGs but a little cooler, a little denser, and with further attributes — these are your inscribed Ordinals, the ones you’ve attributed extra information to. 

In your UTXO envelope the top Satoshi is your inscribed Ordinal and all the others are your regular Satoshis. When you send Ordinals, the fee comes off the bottom, which the Ordinals developer refers to as “postage”. It’s fun, and it reminds me of the moment when Rare Pepe started to become popular and everyone had to figure out how to use Counterparty. It’s also cool that Bitcoin is showing how resilient it is as a system. 

The tube is the UTXO, the slammers at the top are the inscribed Ordinals, and the POGs are the uninscribed Ordinals. Image courtesy of Joe Looney

JB: I’d like to better understand the concept of inscription, and what role it plays in tying these pre-existing tokens to some sort of art or image. I wonder why some people might be angry about Bitcoin serving as more than currency. Of course, there are also people angry about folks inscribing work that isn’t theirs in order to sell it.

JL: There are two parts to Ordinals. There’s the numbering system, which pre-colors every coin and gives each Satoshi a serial number, so to speak. And then there are the inscriptions, which connect data — whether image, sound, or text file — to a specific Ordinal that you own. 

The cool thing with Ordinals is that they do everything on-chain, but there’s no reason you couldn’t inscribe metadata that points off-chain. People have already done it, partly because Ordinals limit the data capable of being inscribed on-chain to 400 KB. You could technically go up to 4 MB, but you’d need a miner to do it. Ordinals constitute a form of uniquely addressable data storage, whereby inscriptions live in the block in which they were inscribed. In this way, the art itself doesn’t move every time an inscribed Ordinal is sent somewhere. 

Like Counterparty, Ordinals only needs Bitcoin to exist. If the developer were to leave right now, it wouldn’t matter — the current software would run until it encounters a bug and then anyone could come in and try to fix it. So long as everyone runs the new updated software, we’re all running along fat, dumb, and happy. 

But on the issue of copyminting, I think that has been driven by the inscription numbering system, which goes 0, 1, 2, 3, etc. As a result, folks are liable to think: “Well, every inscription under 100 is going to be worth something and, because I don’t have an idea for something to inscribe, I’ll just use these other works that people are familiar with.” Right now, it’s a gold rush to get these low inscription numbers. But there’s also a lot of random stuff being inscribed. I decided to inscribe a scan of my great aunt’s shrimp dip recipe. 

Great Aunt’s Shrimp Dip (inscribed as an Ordinal by Joe Looney), 2023. Courtesy of Joe Looney

JB: It reminds me of the early days of NFTs, when “tokenize it” emerged as a meme. People didn’t even understand what they were doing but they were trying to tokenize the entire universe. 

JL: Ordinals are getting people to think outside the box we’ve built around ourselves in the last couple of years with NFTs, where everything runs through smart contracts. But what if we had this other system instead? How could we come up with creative methods for doing a drop? Bitcoin Punks was actually a pretty interesting project. 

JB: You famously said: “the token is the art.” But does Ordinals bring us closer to the token being the art if the content is less important than the numbering of the inscription?

JL: It only reinforces my opinion.

In this case, the individual Satoshi is the art.

Bitcoin maximalists don’t like that idea and might say: “But, the image doesn’t even move with the token, so how can the token be the art?” But why would you move it? It’s already in there! At the end of the day, what are you buying? It’s the token, or in this case, it’s the Satoshi, which is the token, which is the art.

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Joe Looney is a retired Rare Pepe Scientist and creator of Rare Pepe Wallet and Freeport

Jason Bailey is the creator of the art and tech blog and founder of GreenNFTs and ClubNFT, where he serves as CEO.