Bitcoin inscriptions: what is it?
by Minto
Inscriptions are formed by merging external services and additional data in bitcoin transactions. For example, we have bitcoin's smallest unit of measurement, 1 Satoshi (1 BTC / 100_000_000). The basic idea of inscriptions is to assign a sequential number to the satoshi. The Bitcoin network itself does not do this work, but an external protocol can do the job and number all the satoshis that exist on the network. By following this rule, we can determine what the sequence number of any given satoshi will be at any given moment.
It’s easy to put certain information into bitcoin transactions. For example, the bitcoin creator inscribed a message in the first bitcoin block. This information is not stored in the current state of the blockchain, but we can see it in the transaction history. Thus, we have the ability to put some information on the Bitcoin network despite the lack of a direct way to store additional data.
Inscriptions, on the other hand, embed data into satoshis. That is, an inscription is created in the following way: a transaction takes place that sends satoshis along with certain data to a certain address. The protocol assumes that the current owner of this satoshi is also the owner of the information that is inscribed in it. Since we know the sequence number of any satoshi, we can track the data flows and the sending of that satoshi in the future. And the data we attach to the transaction can be in absolutely any format, pictures, text or audio recordings, just in bit representation. You know what that smells like? Opportunity!
This technology has been used to create various tokens of the new bitcoin standard, such as BRC-20, as well as the emergence of NFT on it. In pursuit of hype, these products also began to appear in other blockchains, where they made little sense, since most modern blockchains have the ability to create smart contracts and store data directly inside them.
Despite the success, this technology remains quite controversial, because there may be several standards that can support inscriptions, as well as the rules of operation of external services that determine the order of satoshis or information "formally" attached to them. Everyone has their own truth, and it will most likely be impossible to come to a single standard in this form.