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Sats, short for satoshis, are the atomic native currency of the Bitcoin network. One Bitcoin can be divided into 100,000,000 sats, and they cannot be further subdivided. Ordinals are a numbering scheme for sats that allows for the tracking and transfer of individual sats. These numbered sats are referred to as ordinals. Ordinals are numbered in the order they are mined and transferred in a first-in, first-out manner from transaction inputs to outputs. The numbering scheme and transfer scheme both rely on sequence, with the numbering scheme based on the order of mined sats and the transfer scheme based on the sequence of transaction inputs and outputs. Hence the name "Ordinal," derived from the concept of ordinal numbers.
The Ordinal theory does not require separate tokens, another blockchain, or any changes to Bitcoin itself. It ascribes value to sats, allowing them to be collected and traded as collectibles. Individual sats can be engraved with arbitrary content, creating unique Bitcoin-native digital inscriptions, which can be stored in Bitcoin wallets and transferred using Bitcoin transactions. These inscriptions are as durable, immutable, secure, and decentralized as Bitcoin itself.