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Bitcoin NFTs gain momentum at rocket pace

Bitcoin NFTs are trading at larger and larger volumes, and new developments keep happening in the blossoming Bitcoin ecosystem.

Posted July 11, 2023

Rocket launch by SpaceX
Rocket launch by SpaceX

The non-fungible token (NFT) market has witnessed an interesting shift with the emergence of Bitcoin Ordinals, despite a 38% decline in total NFT trading volume this quarter. In fact, Bitcoin has surpassed Solana to become the second-most popular NFT blockchain, positioning itself right behind Ethereum as the leading ecosystem for NFTs. 

Currently, Ethereum leads the NFT sector with over $24 million in sales, but the rapid rise of Bitcoin’s Ordinals suggests a potential “flip” in the near future, as Bitcoin’s Ordinals NFT are boasting remarkable 129.50% growth in USD sales and attracting close to 10% of the buyer market. 

Ordinals are unique digital assets inscribed on a satoshi, the smallest unit of Bitcoin. The Taproot upgrade, launched in November 2021, facilitated the creation of Ordinals. Although initially met with criticism, the general Bitcoin community has now significantly embraced Ordinals since their introduction.

Bitcoin Ordinals’ Trading Volume Statistics

The trading volume of Bitcoin Ordinals soared to $210.7 million in Q2 2023, marking a staggering 2834% increase compared to Q1 of the same year. DappRadar reports that the introduction of Bitcoin Ordinals inscriptions on the blockchain has resulted in over $210 million in trade volume.

The rising interest among new traders in this digital asset were highlighted by the all-time trades and unique traders figures, which stood at 554,215 and 150,969 respectively.

Bitcoin Ordinals Trading Volume by Quarter (2023). Source: DappRadar
Bitcoin Ordinals Trading Volume by Quarter (2023). Source: DappRadar

According to a Dune blockchain analytics dashboard, which provides insights into various Bitcoin Ordinals marketplaces, the number of unique users experienced a significant surge starting in May 2023. The majority of unique users across marketplaces are represented by UniSat, an open-source Chrome browser extension for Bitcoin Ordinals and BRC-20 tokens, Magic Eden, and Ordinals Wallet.

Unique Users by Bitcoin NFT Marketplace. Source: Dune Analytics
Unique Users by Bitcoin NFT Marketplace. Source: Dune Analytics

Teleburning: Moving Ethereum NFTs to Bitcoin

The development of the BRC-721E token standard has enabled the idea of “moving” Ethereum NFTs to Bitcoin. Both networks are technically not compatible with each other, so moving or “bridging” Ethereum NFTs isn’t as simple as transferring, say, ERC-20 tokens from Ethereum to Polygon or from Polygon to Solana.

The way it works is that users send an ERC-721 token to a burn address on Ethereum. Through a protocol called Bitcoin Milady Bridge, the NFT will be minted on Bitcoin using Ordinals inscriptions. The protocol uses a low-resolution version of the NFT as data to inscribe the Bitcoin satoshi unit with it, and it also contains a reference to the burned NFT.

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The burning of Ethereum prevents duplicate NFTs, and as such, it is regarded as having been bridged to Bitcoin. Note that burning is an irreversible action, so calling Bitcoin Milady a bridge is misleading. A true NFT bridge locks an NFT in a smart contract on one network while letting an unlocked “duplicate” circulate on the other blockchain. The duplicate can be destroyed, and the locked NFT in the smart contract can be released.

A notable NFT has been teleburned into Bitcoin. An Ethereum NFT from Web3’s PFP collection, valued at $95,000, has been permanently removed from circulation and symbolically tied to an Ordinals inscription.

CryptoPunk #8611 was sold to Bitcoin Bandits for approximately 55 Ethereum, or $95,000, according to Etherescan. Shortly thereafter, the NFT was burned, indicating its association with the inscription 12,456,749 on Bitcoin, which bears the same image as its predecessor.

CryptoPunk #8611 has been sent to an Ethereum burn address (0x0000). Source:
CryptoPunk #8611 has been sent to an Ethereum burn address (0x0000). Source:

Bitcoin Bandits’ ultimate goal is to create a series of Ordinals inscriptions that correspond to fractional ownership of CryptoPunk #8611, even though the original asset can no longer be owned on its original chain.

The collection of inscriptions will be created once the existing one pointing to CryptoPunk #8611 is ceremonially sent to a digital wallet belonging to Satoshi Nakamoto, the pseudonymous creator of Bitcoin, resulting in a one-way trip.

BRC-20 tokens are moving over to Ethereum.

Two of the biggest BRC-20 tokens, ORDI and OXBT, have moved to the Ethereum blockchain as tradable NFTs on OpenSea and Blur. The platform that enabled this is Emblem, which allows users to store tokens across blockchains without a bridge.

The solution proposed by Emblem, developed internally, involves the creation of specialised vaults. Emblem Vaults are essentially a series of blockchain addresses (from different networks) that share the same secret phrase. A user can store digital assets like NFTs in each of the wallets, and only the user with access to that secret phrase can move the assets across the different networks.

Prior to the introduction of Ordinals, Emblem vaults served as a means to transfer digital artwork that had been minted on alternative Bitcoin-related protocols, such as Counterparty, to the Ethereum blockchain. This transfer process involved the conversion of the artwork into newly minted ERC-721 non-fungible tokens (NFTs).

In this scenario, utilising Ordinals-based BRC-20 tokens, individuals transmit their ORDI or OXBT to a vault that safeguards the corresponding private keys and retains custody of the tokens. Subsequently, by using ERC-721 tokens, individuals will generate their non-fungible token (NFT) backed by Bitcoin on the Ethereum blockchain.

In effect, BRC-20 tokens that are minted on Ethereum are still very much BRC-20 tokens that live inside an NFT, but on a different blockchain. This novel asset class somehow sits between an NFT classification and a crypto token. “This should be considered a day in which BRC-20s began exploring what their asset class is,” said Jake Gallen, who is in charge of NFT strategy and product at Emblem.

The takeaways

The crypto market, though far from the mania that defined the market in 2020 through 2021, is still very much alive. Developers continue to innovate and solve niche problems, which may one day turn out to be the “next big thing”.

Watch this space for more updates on developments in the fresh new Bitcoin ecosystem!

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Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.

Last updated July 11, 2023

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