Ordinals, Inscriptions, and BRC-20: What Bitcoin NFTs Really Are (and Why They’re Different)

Whoa! Ordinals turned Bitcoin into a gallery almost overnight. Seriously? Yes — and no. The truth sits somewhere in the middle. I’ll be honest: when I first saw an inscription hit the chain I felt the same mix of thrill and mild dread as anyone who’s watched a new market spin up. My instinct said this would change how people think about Bitcoin. Something felt off about the hype though… and that’s worth unpacking.

At a glance: Ordinals let you attach arbitrary data to individual satoshis. That’s the technical hook. Then inscriptions put files — images, text, small apps — directly on-chain, encoded into witness data. BRC-20, meanwhile, is a clever monkey patch: it uses ordinal inscriptions to mint fungible tokens that behave like ERC-20 tokens in function, not design. They’re not smart contracts. They’re creative reuse. This distinction matters because it changes risk, permanence, and composability.

Okay, so check this out — the mechanics, briefly. Miners include transactions. Ordinal indexing assigns serial numbers to satoshis by transaction order. Developers then inscribe data onto those satoshis by writing into the witness space. The data sits there as part of the transaction and, once confirmed, the inscription is permanent as long as that UTXO exists. Not exactly a blockchain museum with curators. More like a permanent sticker on a coin.

Why people call these ‘Bitcoin NFTs’

People like labels. NFT stuck because it’s a shorthand everyone understands. But compare: Ethereum NFTs are metadata pointers plus smart-contract ownership rules. Bitcoin inscriptions are raw bytes attached to satoshis. Ownership of an inscribed piece of data flows with the satoshi. No contract, no royalties baked in, and no complex token logic by default. It’s simpler. And rougher.

That simplicity creates both beauty and headaches. On the one hand, inscriptions are durable. They live where Bitcoin lives: decentralized, widely distributed, and censorship-resistant. On the other hand, there’s no standardized marketplace logic, no built-in royalties, and fewer guardrails. If you want to trade or programmatically interact with an inscription, you rely on tools and conventions — wallets, indexers, marketplaces — that emerged very quickly but are still immature.

BRC-20 explained in plain English

Briefly: BRC-20 uses inscriptions as a storage medium for JSON-like minting and transfer commands. Developers create a schema for operations (deploy, mint, transfer) and then inscribe those operations. Indexers read inscriptions and maintain off-chain ledgers to represent token balances. It’s clever because it doesn’t require new opcodes or consensus changes. It’s also fragile: the whole system depends on indexing tools and user conventions rather than on-chain enforcement.

Implications? Big ones. BRC-20 tokens can be minted by anyone who can create appropriate inscriptions, and token scarcity is a social agreement enforced by indexers and marketplaces. That means attacks are possible — spam inscriptions, replayed operations, or indexer bugs can cause confusion. Always verify with multiple sources. Use caution when you trade or mint.

Here’s what bugs me about the hype: people often treat BRC-20 tokens as if they offer the same guarantees as ERC-20 tokens. They don’t. Not even close. The token rules live off-chain. Your trust boundary shifts from the chain to the tooling ecosystem. I’m biased, but that changes how I evaluate projects — much more scrutiny on who runs the indexer, who has access to bulk-inscription tools, and whether the token behaviour is reproducible by independent parsers.

Practical tips for users (especially if you’re newer to ordinals)

First: use a wallet that explicitly supports inscriptions and BRC-20 workflows, and understand what it stores locally versus what it reads from indexers. For a straightforward experience, check out the popular wallets built for ordinals — like unisat wallet — which many users rely on to view, send, and manage inscriptions. It’s easy to get lost without a UI that understands these weird-on-purpose artifacts.

Second: expect higher fees for large inscriptions. Because inscriptions place data into witness space, they can be expensive if you’re embedding images, audio, or other non-trivial payloads. Batch wisely. Compress images. Consider off-chain reference strategies where appropriate (but recognize that off-chain undermines permanence).

Third: verify provenance. On Bitcoin, permanence is powerful. But permanence without provenance can be a problem. If a market lists an inscription, trace the inscribed txid, review the indexer’s interpretation, and understand who controls the UTXO. If ownership is represented by controlling the satoshi, then losing the private key = you lose the art. No second chances.

Fourth: don’t assume composability. BRC-20 tokens are fun experiments — they’ve launched speculative markets and created liquidity — but they generally don’t interoperate with DeFi the way ERC-20 tokens do. Liquidity pools, lending, and composable smart contracts are still the dominant story on chains built for that purpose. Bitcoin’s strength is settlement and security. Giving it EVM-like behavior is messy and incomplete.

Common pitfalls and how to avoid them

Spam and congestion. When inscription demand spikes, fee markets follow. That’s not a bug unique to ordinals; it’s Bitcoin economics. But it’s more visible now because people inscribe media files. Strategy: monitor mempool, use fee-estimation tools, or stagger your inscriptions. Also consider aggregating content off-chain and inscribing pointers only when necessary.

Indexer trust. If you rely on a single indexer to show balances and provenance, you’re effectively trusting that service. Mitigate risk by cross-checking with at least one alternative indexer and by examining raw txids on-chain.

Market risk. Many BRC-20 projects launch with no clear utility. Prices may be volatile. Treat most early mints as experiments, not long-term stores of value. If you’re a collector, focus on creators you trust. If you’re a trader, keep exits planned.