What Is a Bitcoin Ordinal NFT? and more

11/29/2023 0 Comments

1. What Is a Bitcoin Ordinal NFT?

What Are Bitcoin Ordinals?

Bitcoin Ordinals are the equivalent of non-fungible tokens on the Bitcoin blockchain using satoshis, the smallest denomination on the chain. Every satoshi is given a serial number based on the order in which it was mined. These numbers are called ordinals, and they help the blockchain keep track of where every satoshi is and who owns it. These ordinals can have additional content written to them, a process called inscribing.

By attaching extra data to a satoshi, such as an image or a text, the Ordinal protocol makes it possible to create unique and scarce digital assets, such as non-fungible tokens (NFTs), that benefit from the security and decentralization of Bitcoin’s blockchain. The Bitcoin mainnet Ordinals software was released in January 2023.

How Do Bitcoin Ordinals Work?

The Ordinals protocol assigns more information to the serial numbers of each satoshi, the smallest bitcoin unit. This extra data is referred to as an inscription. A single bitcoin can be divided into 100 million satoshis, each worth 0.00000001 BTC. Satoshis are numbered according to the order they were mined on the Bitcoin blockchain.

Ordinal inscriptions are embedded directly into individual satoshis and stored in Bitcoin blocks. This way, Ordinals inherit the security, immutability, and durability of Bitcoin itself.

How to Mine Bitcoin Ordinals

Bitcoin Ordinals are mined (minted) in the same manner as traditional Bitcoin transactions, as they are just special types of Bitcoin transactions following a specific protocol. However, there are two key ways in which mining Bitcoin Ordinals is different from the way in which traditional NFTs are mined.

For one, Bitcoin Ordinals point to data that is inscribed directly on the Bitcoin blockchain. While this is also possible on other blockchains, such as Ethereum and Solana, the NFT information is generally stored in an off-chain location. Second, Bitcoin uses proof-of-work (PoW) for its mining process, while other chains that have been more closely associated with NFTs in the past use proof-of-stake (PoS).

Bitcoin Ordinals vs. NFTs

The key difference between Bitcoin Ordinals and traditional NFTs is how the data related to the token is stored. Traditional standards for the NFT issues on other crypto networks usually only contain metadata or a URL pointer to some off-chain data. However, Ordinals store the content on the blockchain via inscriptions. The intention here is to make Ordinals more decentralized and censorship-resistant. But this also makes them more expensive and limited in size.

Another difference between Ordinals and traditional NFTs is how they derive rarity and value. Traditional NFTs often depend on the attributes of the artwork or the scarcity of the supply to determine their price.

While this is also true for Bitcoin Ordinals, other factors might influence prices. Ordinals might eventually rely on key moments in Bitcoin’s history associated with certain satoshis. For example, the first Ordinal inscribed on a new block, a new adjustment period, or a new halving epoch could be viewed as more rare and valuable than others.

Finally, there is the issue of how these NFTs are added to their respective blockchain networks. In the case of Bitcoin Ordinals, PoW is used in the mining process—minting Ordinals contributes to the already massive Bitcoin network energy requirements. NFTs on chains that use PoS consume much less energy and are faster.

2. Bitcoin miner repurposes former sustainability-focused EU data center prototype

Crypto miner Hive Digital Technologies is repurposing a Sweden data center formerly used by the European Union as a prototype to test energy efficiency and sustainability.

The facility is set to house Hive’s ASIC servers to increase the company’s mining capacity by roughly 300 petahash, Hive Executive Chairman Frank Holmes told Blockworks. 

It was previously constructed as part of EU Horizon 2020 — a research and innovation funding program that ran from 2014 to 2020 with a budget of roughly 80 billion euros ($88 billion). Horizon Europe has since succeeded that program.

The goal of what was known as the Boden Type Data Center was “to build the prototype of the most energy and cost-efficient data [center] in the world,” according to a project brief.

The prototype comprised a fresh air cooling system and evaporative cooler apparatus “using solely harmonic free renewable energy,” it adds.

Johanna Thörnblad, president of Hive’s Swedish operations, confirmed to Blockworks this former prototype facility is the data center Hive has purchased.

“This data center was initially built together with the Research Institute of Sweden to address the need for more energy efficient data centers,” she told Blockworks in an email. “It has since been expanded to include four additional buildings using low-carbon and locally sourced building materials.”

The site is near Hive’s existing Boden facility and no more than 500 meters from the city’s hydro plant, Thörnblad said. The data center runs on renewable hydro energy and relies on air and evaporative cooling technologies.

“Hive has always had a strong focus on sustainability and this data center fits very well into our strategy,” Thörnblad added.

HIVE acquired the property with a payment structure that includes up to $750,000 in cash and up to $1.5 million in common shares of the company. According to an announcement from the company, the common shares portion is to be paid in two installments, with the share price determined by specific conditions related to the TSX Venture Exchange’s closing prices.

Holmes noted the data center was most recently in private hands, declining to disclose the owner. The company, which was involved in high-performance computing, sought to sell ahead of the bitcoin halving slated for April — an event expected to put financial pressure on segment players.

The purchase comes just months after the company formerly known as Hive Blockchain Technologies changed its name as it shifted its focus to supporting the growth of artificial intelligence.

Holmes said the Vancouver-based company looks to continue expanding in British Columbia, Manitoba, Ontario and Quebec. Competitors such as Marathon Digital have recently shared plans to continue diversifying geographically.

“Buying this facility right beside us is just another long-term vision of the great digital transformation that we’re putting long-term assets on our balance sheet,” Holmes said.

3. Crypto miner Hive expands data center operations in Sweden

The cryptocurrency mining company Hive Digital Technologies has revealed plans to expand its global presence through a new acquisition of property and a data center in Boden, Sweden.

On Nov. 27, the company announced that it entered a property transfer agreement with Turis AB to take over the property of a data center previously constructed as a part of the European Union’s Horizon 2020 project.

Hive said this new property is in “close vicinity” to its existing data center in Sweden, and it plans to further develop the facility in its portfolio. It says the property will also house its incoming generation of ASIC servers and increase its Bitcoin production.

Hive owns and operates data center facilities in Canada, Sweden, and Iceland, and it promotes the use of green energy to mine digital assets such as BTC on the cloud.

Cointelegraph has reached out to Hive for more information on the development. 

Earlier in 2023, Hive dropped the word “blockchain” from its official name to reflect its “evolving focus” on financial opportunities in artificial intelligence (AI), cloud computing and graphics processing units (GPUs).

The company then said it plans to use its 38,000 Nvidia GPUs to offer small and medium-sized businesses a more efficient alternative to major cloud service providers.

The CEO of Hive, Aydin Kilic, and its chairman, Frank Holmes, told Cointelegraph in an interview that the pivot toward AI doesn’t negate or lessen its involvement in Bitcoin and crypto mining. Instead, they said the company is still heavily involved but that “blockchain and AI can certainly co-exist” and remain “pillars of Web3.”

In September, Hive was one of the mining companies involved in launching the Digital Power Network (DPN), which is a coalition affiliated with the Chamber of Digital Commerce to stress the importance of proof-of-work (PoW) mining.