Satoshis and ordinal theory
Every bitcoin divides into 100 million satoshis. "Ordinal theory" is a convention for assigning each satoshi a serial number based on the order it was mined, and tracking it as it moves between transactions. Crucially, this is just a way of interpreting ordinary Bitcoin data — it requires no change to Bitcoin's consensus rules. That interpretation is what makes individual sats addressable, and therefore "inscribable."
Inscriptions & Ordinals
An inscription attaches content — an image, text, or other data — to a specific satoshi by embedding it in the witness portion of a Taproot transaction. Because each inscribed sat is individually tracked, inscriptions behave like non-fungible assets native to Bitcoin: no sidechain, no bridge. The "Ordinals" ecosystem grew up around discovering, trading, and displaying these inscriptions. For the current state of the market — what is being inscribed and who is buying — see our Ordinals 2026 analysis.
BRC-20: the first Bitcoin tokens
BRC-20 took inscriptions a step further: instead of inscribing art, it inscribed small JSON text snippets that clients agree to read as token operations (deploy, mint, transfer). It was an experiment, and it worked well enough to prove there was real demand for fungible tokens on Bitcoin. But because it piggybacks on inscriptions, BRC-20 is inefficient — it tends to create lots of UTXOs and on-chain clutter.
The Runes protocol
Runes was designed by Ordinals creator Casey Rodarmor specifically to fix BRC-20's inefficiency. Rather than storing token state as inscribed text, Runes encodes balances directly into Bitcoin's UTXO model using compact data in an OP_RETURN output. The result is a fungible-token standard that is leaner with block space and fits Bitcoin's native accounting. Our Runes protocol deep-dive covers etching, minting, and the UTXO mechanics in detail.
Ordinals vs Runes vs BRC-20 at a glance
| Ordinals / inscriptions | BRC-20 | Runes | |
|---|---|---|---|
| Primary use | Non-fungible content | Fungible tokens (experimental) | Fungible tokens (purpose-built) |
| How state is stored | Data inscribed on a sat | JSON text inscriptions | Encoded in UTXOs / OP_RETURN |
| UTXO efficiency | n/a | Low | High |
| Needs a sidechain? | No | No | No |
We expand this comparison with practical trade-offs in Ordinals vs Runes vs BRC-20.
Using them safely
Metaprotocol assets live in the same wallets as your BTC, which means the same security rules apply — and a few extra cautions:
- Use a wallet that understands inscriptions/Runes so you do not accidentally spend a valuable inscribed sat as ordinary change.
- Beware fake mint sites and "free claim" scams — the same seed-phrase rules from our self-custody guide apply.
- Mind fees: minting competes for block space, and popular launches can spike network fees.
Go deeper & how-tos
Bitcoin Penguins is an independent research publication — not a token. Educational content only; nothing here is financial advice. Always DYOR.