When you inscribe an image or other data, you are essentially adding that data to a Bitcoin transaction. This data is inscribed onto a specific satoshi within the transaction, making it a unique digital artifact recorded permanently on the Bitcoin blockchain.

Once the inscription is made, the Ordinals protocol tracks the movement of the satoshi containing the inscription. It does this by following the location of that satoshi as it moves from one Bitcoin output to another.

For example, if you inscribe an image in a transaction, the data’s location might be:

Location:
​c2dfa21c2c17d8241d472eea2534314bfe65c619be76e23f58c72bc388fd7220:2:0

This refers to the transaction ID, the specific output, and the position of the inscribed satoshi within that output.

As that satoshi moves, the Ordinals protocol tracks it across the blockchain. For example, its new location might be:

Output:
​c2dfa21c2c17d8241d472eea2534314bfe65c619be76e23f58c72bc388fd7220:2

This allows the inscription to be traced wherever the satoshi goes, preserving its unique data and ensuring that its history can be verified on the blockchain.

Ordinals Theory allows for unique digital artifacts to exist and be tracked on the Bitcoin blockchain, making them permanent and traceable through the protocol’s ability to follow the movement of inscribed satoshis. This makes Ordinals a powerful tool for creating and maintaining digital ownership of assets on Bitcoin.