The Ordinal Theory is a framework for assigning individual identities to satoshis, the atomic units of the Bitcoin cryptocurrency. This allows each satoshi to be tracked, transferred, and imbued with meaning, giving rise to various use-cases beyond simple transactions.
Ordinal theory works by inscribing arbitrary content onto individual satoshis, creating unique Bitcoin-native digital artifacts that can be held in Bitcoin wallets and transferred using Bitcoin transactions. This content is as durable, immutable, secure, and decentralized as Bitcoin itself, making it an attractive option for various applications.
One possible use-case is to imbue satoshis with numismatic value, allowing them to be collected and traded as curios. This could create a new type of digital asset called “Ordinals,” which can include smart contracts and other data as in Ethereum, allowing the creation of the same applications as non-fungible tokens or NFTs.
The new Ordinals Protocol allows data to be inscribed onto every single satoshi, enabling the creation of these new use-cases. Each Bitcoin can be divided into 100,000,000 sats, allowing the same number of ordinals to be included in each Bitcoin.
The idea was originally proposed in 2022 by Casey Rodarmor but dates back to 2012. The term “Ordinals” comes from mathematics and refers to a linearly ordered set of numbers.