Bitcoin continues to evolve beyond its original purpose as a peer-to-peer electronic cash system. With innovations like inscriptions, runes, and ordinals, the network is becoming a robust platform for native digital artifacts and collectibles. Yet, one critical piece remains missing: efficient, decentralized trading mechanisms. This is where light pools come in — a promising solution tailored for Bitcoin’s unique constraints.
Unlike other blockchains that rely on Automatic Market Makers (AMMs), Bitcoin lacks Turing-complete smart contracts, making traditional on-chain liquidity pools impractical. AMMs also suffer from high transaction costs and inefficient pricing due to their reliance on on-chain activity for every swap. In contrast, light pools offer a more scalable and cost-effective alternative by moving pricing and order matching off-chain while preserving decentralization.
How Light Pools Work
Light pools operate through a peer-to-peer gossip network of nodes run by users who wish to trade Bitcoin-native assets — such as rare sats, inscriptions, or runes. These nodes broadcast signed price quotes for swaps, which include BIP-322 signatures proving ownership of the underlying UTXOs. This prevents spam and ensures that only valid offers are propagated.
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When a trader wants to accept an offer, they construct a Partially Signed Bitcoin Transaction (PSBT) using the quote details, sign it with their inputs, and broadcast it. The maker node receives this asynchronously, counter-signs, and submits the completed transaction to the Bitcoin network. Because all inputs and outputs are committed in the signatures, these transactions are immune to mempool sniping.
This model drastically reduces on-chain overhead. Instead of requiring multiple confirmations for liquidity provisioning or price updates, light pools enable real-time price discovery between blocks — all without touching the blockchain until settlement.
While implementing light pools requires development effort — including standardizing the gossip protocol, message format, and PSBT handling — it avoids the speculative research hurdles plaguing many crypto projects. It's a practical path forward grounded in existing Bitcoin tooling.
Introducing Ordinals: A Numeric Namespace for Satoshis
At the heart of Bitcoin’s emerging digital artifact ecosystem lies ordinals, a numbering system that assigns a unique identifier to each satoshi based on its mining order. Developed by Casey Rodarmor, ordinals enable tracking and transferring individual sats across transactions using a first-in-first-out (FIFO) rule.
Ordinals require no new tokens, sidechains, or protocol changes — they work today on Bitcoin’s base layer.
There are several ways to represent an ordinal:
- Raw notation:
1905530482684727° - Decimal notation:
738848.482684727°(block height.index within block) - Degree notation:
0°108848′992″482684727‴— designed to reflect rarity at a glance
A public block explorer at ordinals.com allows users to explore ordinals by number, decimal, degree, or name. The project is open-source and includes a full index, wallet support, and tools for minting ordinal-based NFTs.
The Rarity Framework
Because ordinals can be uniquely identified, collectors have begun assigning value based on scarcity. Several natural periodic events in Bitcoin create tiers of rarity:
- Common: Any sat not first in its block
- Uncommon: First sat of each block (~every 10 minutes)
- Rare: First sat of each difficulty adjustment period (~every 2 weeks)
- Epic: First sat of each halving epoch (~every 4 years)
- Legendary: First sat of each cycle (~every 24 years)
- Mythic: The first sat of the genesis block
Degree notation encodes this hierarchy clearly:
A°B′C″D‴
│ │ │ ╰─ Index of sat in block
│ │ ╰─── Index of block in difficulty adjustment period
│ ╰───── Index of block in halving epoch
╰─────── Cycle number (starting at 0)For example:
1°1′1″1‴→ Common1°1′1″0‴→ Uncommon1°1′0″0‴→ Rare1°0′1″0‴→ Epic1°0′0″0‴→ Legendary0°0′0″0‴→ Mythic
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Supply and Collectibility
The total supply of each rarity tier underscores their scarcity:
| Rarity | Total Supply |
|---|---|
| Common | 2.1 quadrillion |
| Uncommon | 6,929,999 |
| Rare | 3,437 |
| Epic | 32 |
| Legendary | 5 |
| Mythic | 1 |
As of now, only three epic ordinals have been mined, and no legendary ones yet exist outside the current cycle. Even "uncommon" sats remain scarce — just over 745,000 have been created so far.
Names and Exotics
Each ordinal also has a human-readable name, derived algorithmically from its number. Names get shorter as ordinals increase — ensuring valuable short names aren't locked forever in early unspendable blocks. For example, ordinal 1905530482684727° is named "iaiufjszmoba", while the final ordinal ever to be mined will simply be named "a".
Beyond rarity and names, some ordinals gain value due to exotic properties — such as mathematical uniqueness (e.g., perfect squares or cubes) or historical significance. Examples include:
- Ordinals from block 477,120 (SegWit activation)
- The final ordinal ever to be mined:
2099999997689999°
These exotics are subjective but highly sought after by collectors.
Are Ordinals Historically Significant?
A debate exists over whether ordinals qualify as historically important artifacts. While the concept was formalized in 2022, the underlying logic dates back to Bitcoin’s creation in 2009.
Notably, similar ideas were independently proposed:
- August 2012: Charlie Lee suggested a PoS mechanism using ordinal-like logic.
- October 2012: jl2012 described a decimal-based numbering scheme nearly identical to today’s ordinals.
These precursors suggest that ordinals are not invented but discovered — an inevitable consequence of Bitcoin’s design.
Frequently Asked Questions
What are Bitcoin ordinals?
Ordinals are a system that assigns a unique number to each satoshi based on its mining order. This enables tracking and transferring individual sats, forming the foundation for Bitcoin-native NFTs and digital collectibles.
How do light pools differ from AMMs?
Light pools use off-chain signed quotes and PSBTs for trading, avoiding costly on-chain computations. AMMs rely on on-chain liquidity pools and constant rebalancing, leading to higher fees and less efficient pricing.
Can I trade ordinals today?
Yes, but most trading occurs via manual peer-to-peer deals or centralized marketplaces. Light pools aim to decentralize this process while maintaining low costs and high efficiency.
What makes a "rare" satoshi?
A satoshi is considered rare if it was the first mined in a block (uncommon), difficulty adjustment period (rare), halving epoch (epic), or cycle (legendary). The first sat of the genesis block is mythic.
Why use degree notation?
Degree notation (A°B′C″D‴) makes it easy to visually assess an ordinal’s rarity by encoding cycle, epoch, difficulty period, and block position directly into the format.
Are light pools secure?
Yes. By requiring BIP-322 signatures on UTXOs and using fully signed PSBTs, light pools prevent fraud and mempool manipulation. Offers become invalid once UTXOs are spent.
The Road Ahead
Bitcoin’s evolution into a platform for digital artifacts is accelerating. With runes on the horizon and growing interest in inscriptions and ordinals, demand for efficient trading infrastructure will surge.
Light pools represent a native-Bitcoin approach — leveraging decentralization without overreaching technical complexity. Combined with ordinal-based collectibility and emerging Layer 2 solutions like federated blind mints, the ecosystem is poised for deeper innovation.
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The future of Bitcoin isn’t just about money — it’s about ownership, identity, and expression built directly on the most secure blockchain in existence.