Which Standard Preserves Value Better: NFTs or Ordinals?

NFTs and Ordinals share similarities but differ in how they store value. Ordinals are pure data, including the image, while NFTs often store metadata offline. 

This difference has led some to argue that Ordinals are better at preserving value. Both NFTs and Ordinals have distinct risk profiles. While NFTs have been around longer and have seen significant losses, Ordinals are currently more popular. Despite this, some Ordinals have achieved valuations comparable to top NFTs, although the Ordinals market is still evolving.

Ordinals as true digital collectibles

Ordinals aim to establish themselves as “true digital collectibles” with transparent, rare records based on specific blocks. In contrast, NFT collections have shifted towards a utility narrative, with owners using NFTs for staking, gaming, or accessing future airdrops. By focusing on rarity, Ordinals may revive this aspect of digital collectibles.

Ordinals were introduced after NFTs, and some of the same milestones for issuing collectibles have been adopted. While Ordinals prioritize on-chain data availability, NFTs often require issuers to secure long-term storage and hosting for their images. This fundamental difference may influence their value preservation.

As of June 2024, NFT markets have stabilized, with daily trading volumes between $15-30M and a total tracked value of around $40B. Blue-chip NFT collections continue to trade at high floor prices. In contrast, Bitcoin-based Ordinals collections are just starting to gain traction, with a total value of under $900M.

Ordinals face challenges due to the high cost of storing data directly on the Bitcoin blockchain, which may limit mass minting. This is in contrast to NFTs, which benefit from the scalability of blockchains like Ethereum, Solana, and Polygon.

Uncertain value of ordinals

The value of Ordinals is not guaranteed. Early experiments and recent creations show varying resale values, with some losing more than 98% of their value. Even minimal collections, such as the original Bitcoin Punks, have seen significant value drops due to limited demand.

Ordinals aim for transparency, with collections visible before minting. This predictability contrasts with the initial trading frenzy in NFT collections, where bots and traders quickly determine floor prices based on rare traits.

Ordinals use a unique inscription method, turning each Satoshi into a unique item. The image is added as a payload to a regular Bitcoin transaction. This method allows projects to choose appealing inscription numbers, adding another layer of rarity.

Prospects

Existing NFT collections can switch to Bitcoin using Ordinals, although this requires gas payments dependent on blockchain conditions. The rarity of Bitcoin blocks could make Ordinals more scarce, but there is yet to be a clear winner between Ethereum NFTs and Bitcoin Ordinals. Both standards have caused network congestion, affecting users focused on financial and payment use cases.

The debate between NFTs and Ordinals continues. Each standard has its strengths and challenges, with their long-term value preservation still to be determined. As the markets evolve, NFTs and Ordinals will likely find their niches within the broader digital collectible landscape.

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