Full Report
Ordinals are a numbering system for all Satoshi's (small unit of a Bitcoin) on the Bitcoin network. They can be referenced in a few different ways, such as the block.satoshi or just a decimal number. In reality, this gives every satoshi a serial number. The ordinals themselves can have interesting rarity metrics. There are events that happen on Bitcoin with different rarity metrics. Blocks, difficulty adjustments, halvings, and cycles. This change appears to be an extension on top of the Bitcoin core protocol. Inscriptions, made of the data after a script, have their own special formatting. First, the OP_FALSE opcode is used to make the script always fail. After that, the data is wrapped in an IF statement that will never execute. The data itself is added via PUSH instructions to create an envelope. With ordinals, ord is pushed first, followed by the content type and data. Different values being pushed, such as 1 for Content Type, signify the data being added on the ordinals. Inscriptions use the TapRoot script type, which has two transactions: a commit and a reveal. The inscription content is contained within the input of a reveal transaction. The inscription itself it made on the first sat of its input. The specification appears to have a deploy, mint and transfer for BRC20 tokens. The inscription string being added is minimized JSON. The fields include the type, inscription mark, operation and amount being transferred. Of course, this begs the question - how do we limit the amount of tokens, false transfers and such? I'm still trying to figure this out :)
Analysis Summary
# Morning News Roll-up October 24, 2023
## Overview
This roll-up focuses on the emergence and technical specification of **Ordinal Theory** on the Bitcoin network. While not a traditional "malicious" threat, it represents a significant shift in Bitcoin's utility, introducing a method to track, tag, and transfer individual satoshis as unique assets (NFTs). This technology introduces new complexities regarding blockchain bloat, "inscription" data storage, and the creation of BRC-20 tokens within the Bitcoin Core protocol.
## Top Stories
### Ordinal Theory: A Numeric Namespace for Bitcoin
- Summary: Ordinal Theory provides a numbering scheme for satoshis (the smallest unit of Bitcoin) based on the order in which they are mined. This allows individual satoshis to be tracked and transferred in a first-in-first-out (FIFO) order, effectively turning them into non-fungible atoms that can carry arbitrary data.
- Source: hxxps://rodarmor[.]com/blog/ordinal-theory/
### Technical Implementation of Bitcoin Inscriptions
- Summary: Inscriptions utilize the Taproot script type to embed data within "envelopes" on the blockchain. By using the `OP_FALSE` opcode followed by an `IF` statement that never executes, developers can push data (including JSON for BRC-20 tokens) into the witness field of a "reveal" transaction, bypassing execution while remaining stored on-chain.
- Source: hxxps://github[.]com/casey/ord
### BRC-20 Token Standards and Rarity Metrics
- Summary: Beyond simple numbering, Ordinal Theory establishes a rarity hierarchy (Common to Mythic) based on Bitcoin network events like difficulty adjustments and halvings. It also supports the BRC-20 standard, which uses minimized JSON inscriptions to deploy, mint, and transfer tokens directly on the Bitcoin layer-1.
- Source: hxxps://ordinals[.]com/
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# Ordinal Theory and Bitcoin Inscriptions
## Key Points
- **System Definition:** Ordinals assign a serial number to every satoshi mined, allowing them to be tracked across transactions.
- **Notation Methods:** Ordinals can be represented via integer (raw), decimal (block height.index), or degree notation.
- **Rarity Levels:** A subjective but structured rarity system exists:
- **Common:** Not the first sat of a block.
- **Uncommon:** First sat of a block.
- **Rare:** First sat of a difficulty adjustment period.
- **Epic/Legendary/Mythic:** Associated with halvings, cycles, and the genesis block.
- **Inscriptions:** Data is "inscribed" onto a satoshi using a Taproot "commit and reveal" transaction pair. The data is wrapped in an execution-failing script (`OP_FALSE` `OP_IF`) and added via `PUSH` instructions.
- **BRC-20:** A sub-protocol using minimized JSON (containing fields like `op`, `tick`, and `amt`) to manage token life cycles on-chain.
## Threat Actors
- **Note on Attribution:** There are no specific "malicious actors" in the traditional sense. However, the primary developers and early adopters (referred to as "Ordinal Theorists") drive the protocol.
- **Motivation:** Financial speculation, creation of digital artifacts (NFTs), and expanding Bitcoin's utility beyond a simple medium of exchange.
## TTPs
- **Data Obfuscation/Storage:** Use of `OP_FALSE` and `OP_IF` to hide arbitrary data within a Bitcoin script that will never be executed by nodes but is indexed by Ordinal-aware software.
- **Transaction Chaining:** Utilizing the "Commit" and "Reveal" mechanism of Taproot to associate data with specific transaction inputs.
- **Minimizing JSON:** Reducing the footprint of token metadata (Type, Inscription Mark, Operation, Amount) to fit within witness data limits.
- **Resource Consumption:** Large inscriptions can fill Bitcoin blocks, potentially leading to increased transaction fees and "blockchain bloat."
## Affected Systems
- **Bitcoin Core Protocol:** While not requiring a fork, it places a heavy load on nodes processing witness data.
- **Digital Wallets:** Standard wallets are generally "ordinal-unaware" and may accidentally spend "rare" or "inscribed" satoshis in regular transactions.
- **Taproot-enabled Nodes:** Systems interacting with Taproot scripts must process the signatures associated with the "Reveal" transactions.
## Mitigations
- **Ordinal-Aware Wallets:** Users should use specialized wallets (e.g., `ord` wallet) to prevent the accidental spending of specific satoshis.
- **Indexing Software:** Use of the `ord` indexer to communicate with a Bitcoin Core node to track the location of specific ordinals.
- **Fee Management:** Users should monitor mempool congestion caused by high-volume inscription activities (like BRC-20 mints).
- **Validation:** Verification of the minimized JSON format in BRC-20 transactions to prevent "false transfers" or invalid mints.
## Conclusion
Ordinal Theory represents a paradigm shift in how Bitcoin's block space is utilized. While technically an extension of existing protocols (SegWit and Taproot), it introduces a new layer of asset management that challenges the fungibility of satoshis. From a threat intelligence perspective, the primary "risk" is the unintentional loss of high-value individual satoshis by users using legacy software and the potential for increased network congestion due to the massive influx of non-financial data stored on the blockchain.