# Does ordinal theory affect fungibility?

I've read the ordinal theory post on Casey Rodarmor's blog and the article by pourteaux and I'm trying to wrap my head around ordinals and what they are exactly.

Are ordinals just serial numbers attached to specific satoshis? Does this not affect the fungibility of sats? For example, rot13maxi writes on Twitter:

Bounty for an exotic ordinal!
I am looking for a satoshi who's ordinal number is in the range 570548.0-570548.1249999999. Or in the range 1763185000000000-1763186249999999. I will pay 500,000 sats to the first person who sends me a sat in that range. ... 1/3

Also, as a confirmation of what I've read, are the various files (e.g. images) that are now linked to certain satoshis (through this ordinal system?) actually present in the witness data that I store when running my node?

Are ordinals just serial numbers attached to specific satoshis?

As I understand it yes. The serial numbers are assigned to transaction outputs.

As I understand it, when an output is spent in a later transaction, the serial number assignment algorithm effectively transfers the serial number from each input to the next sequential output. See draft BIP

When satoshis are spent in a transaction, the input satoshi ordinal numbers are assigned to output satoshis using a simple first-in-first-out algorithm.

Note that normally there is no guaranteed correspondence of this sort in Bitcoin transactions. I believe many (most? all?) wallets deliberately scramble the order of outputs for better privacy.

Does this not affect the fungibility of sats?

No, because, as I understand it, the transfer of this serial number from one UTXO to another is arbitrary for any transaction created by normal wallets

By normal wallets I mean wallets other than the specific wallet used for the purpose of assigning these particular serial numbers to satoshis and transferring them.

If, for example, one Bitcoin transaction combines a payment from A to B with an unrelated payment from P to Q, the serial number of A might transfer to P not to B. So the fungibility for normal electronic cash purposes should be unaffected. Normal bitcoin use produces many such transactions from mixers, coinjoins, exchange batching, etc.

Even in the simplest normal transaction with one input, a payment output and a change output, the serial number might be assigned to the recipient amount or to the sender's returned change.

The transfer of the serial number does not necessarily correspond to any underlying real-world transaction and often won't.

The exception is of course transactions created by the special wallet whose purpose is to carefully order transaction outputs to specifically correspond with the project's algorithm's rules for transfers of this serial number. For this particular wallet, the aim is non-fungibility of any associated token - though they claim the fungibility of the associated money is unaffected - which I suspect would only be true when that money is spent in a normal wallet.

are the various files (e.g. images) that are now linked to certain satoshis (through this ordinal system?) actually present in the witness data that I store when running my node?

Yes, the images (and other objects) listed in ordinals.com/inscriptions are stored in every full Bitcoin node. See comments and addendum to Follow-up to Segwit: Arbitrary data storage in witness?

Footnote: I am not very familiar with this project so the above might be wrong in some important aspect. What I wrote seems to make sense to me.

• it does affect the fungibility of sats - some sats are more valuable than others - not every sat can be used exactly the same way Jan 31, 2023 at 13:25
• Im pretty sure that the input data is ONLY on the spenders side, when you receive an output it only has a reference to the previous input. That means that when you spend it you have a chain referencing back to the ordinal, but in no sense are committing to providing the ordinal date every time you use the output. It is a bottleneck on the senders side mainly. Feb 2, 2023 at 15:58
• The answer by RedGrittyBrick makes sense to me. Using ordinals isn’t necessary and will be ignored by software not specifically made to track them. Just because certain people care about which sat they own doesn’t mean sats in general aren’t fungible. It’s like someone paying 5 dollars for a dollar bill that has their birthday stamped on it. If that person cares about that bill then they’ll “track” it and pay extra dollars for it. Doesn’t mean dollars are no longer fungible. Feb 2, 2023 at 16:19

This sort of thing was already possible.. ie new utxos generated from coinbases might be considered more "exotic" or valuable etc