Inscription

The content goes into a script branch that the network commits to but never runs, so nodes keep the bytes without ever executing them. Each push inside that branch is capped at 520 bytes, and the pieces are chained together until the file is complete. What reaches an ordinary saver is the price: witness data is billed at a quarter rate, making this the cheapest way to buy block space.

How it works

An inscription is built across two transactions, a commit and a reveal, because a Taproot script only becomes public at the moment somebody uses it.

The commit transaction pays to an ordinary looking Taproot address whose hidden script tree contains an envelope. The envelope is a piece of script that can never run: it opens with OP_FALSE followed by OP_IF, so evaluation jumps straight to the matching OP_ENDIF. Between them sit the pushes nobody will ever execute, beginning with the three bytes "ord", then a field naming the content type, then the content itself cut into chunks of at most 520 bytes because that is the largest single push script permits.

The reveal transaction spends that output. Spending a Taproot script path means publishing the script, so the envelope lands in the witness of the reveal transaction and is now permanently in a block. Ordinal theory then decides which satoshi the content belongs to: the first satoshi of the reveal transaction's first output.

Price is why all of this happens in the witness rather than anywhere else. SegWit charges witness bytes one weight unit each while everything else costs four, and a block holds 4,000,000 weight units. A file placed in a witness therefore buys four times as much room per satoshi of fee as the same file anywhere else in the transaction.

There is a ceiling, and it is policy rather than consensus. Bitcoin Core will not relay a single transaction heavier than 400,000 weight units, so anything bigger has to be handed to a miner directly. That is precisely what happened with the largest block bitcoin has ever produced, block 774,628, mined by Luxor on February 1, 2023, where one 3.94 MB image of a wizard accounted for almost all of the 3.96 MB total.

Numbering has a wrinkle worth knowing before you read a marketplace listing. Inscriptions that the ord software originally refused to recognise were given negative numbers and called cursed, and at block 824,544, a moment the project named the jubilee, the rules changed so those forms count normally and receive positive numbers like everything else.

Why this matters when you buy bitcoin

You do not need to own an inscription to be affected by one, and the two ways they touch a saver pull in opposite directions.

The first is cost, and everybody notices it. Inscriptions bid for the same blocks as your withdrawal from an exchange, and because witness data is discounted they can outbid ordinary payments while paying less per byte of content. That is not a loophole. It is the fee market behaving exactly as designed, and the only defence available to you is timing: move coins when the queue is short instead of when it is not.

The second is custody, and it is the one that actually costs people money. An inscription lives on one specific satoshi inside one specific output. A wallet that knows nothing about ordinal theory sees that output as a pile of value, and the moment it uses it for change or fees the inscription is gone. Anyone holding inscriptions needs coin control, needs to freeze the relevant outputs, and should keep them well away from the wallet holding savings. A hardware wallet paired with software that lists every output individually is the sane arrangement, and it happens to be the same arrangement that serves people who care about privacy.

If your interest is buying and holding bitcoin, the honest advice is narrower. You can ignore inscriptions completely. The only thing you should not ignore is that a coin arriving from an exchange might carry one you never asked for.

Worked example: what a 100 kilobyte image costs

A 100,000 byte image placed in a witness costs 100,000 weight units, which is 25,000 virtual bytes once divided by four.

At a quiet 2 sat/vB that comes to 50,000 satoshis, before counting the commit transaction and the envelope's own overhead. At 100 sat/vB, a level the market reaches during a rush, the same image costs 2,500,000 satoshis. The identical bytes carried in ordinary transaction outputs instead would weigh 400,000 weight units, four times as much, and would land exactly on the relay limit for a standard transaction. That is the whole reason the technique settled on Taproot.

The ceiling is worth seeing in the same units. A block is 4,000,000 weight units, so the 3.94 MB wizard consumed very nearly the entire budget on its own and left the other 62 transactions in that block to share what remained.

Inscription vs BRC-20

An inscription is a container; BRC-20 is one thing people write inside it. The container holds any bytes with any content type: an image, a page of HTML, an audio clip. BRC-20 is a convention where those bytes are a short piece of JSON that reads like an instruction, and a separate indexer adds the instructions up to decide who owns what. Bitcoin validates the inscription only in the sense that the transaction carrying it is valid; it validates nothing whatsoever about a balance. Confusing the two leads people to assume a token is as durable as the chain beneath it, when the only durable part is the text.