A New Chapter in the BTC Ecosystem: Ordinals Protocol and BRC-20 Token Standards

The emergence of the Ordinals protocol has opened up new narrative space for the BTC ecosystem. Recently, the BRC-20 token standards based on Ordinals have triggered a market frenzy, pushing the FOMO sentiment to its peak. This article will explore the origins of the Ordinals protocol, the opportunities and current status of BRC-20 tokens, as well as the future development direction of the BTC ecosystem.

Ordinals Protocol: The Renaissance of BTC

The Ordinals protocol gives the smallest unit of Bitcoin, "satoshi," higher transactional and collectible value, opening a new gateway for the development of the Bitcoin ecosystem. Since Casey Rodarmor created the Ordinals protocol on December 14, 2022, more than 6.41 million NFTs or Tokens have been minted as of May 14.

The Ordinals protocol assigns a unique identity to each satoshi, including a number and annotation, making the originally fungible satoshis become unique "NFTs". This method is fundamentally different from Ethereum NFTs:

1. BTC NFT information is fully on-chain, with no need for off-chain storage of Metadata.
2. Each NFT contains a unique number, ensuring the uniqueness of each coin.
3. On-chain storage of information has size limitations and is immutable, which is precisely the feature that BTC enthusiasts admire.

More and more well-known NFT projects are also joining the BTC NFT ecosystem and achieving success. Research reports predict that by 2025, the market size of Ordinals NFTs will reach $4.5 billion, and the related infrastructure will continue to improve.

BRC-20: The Evolution of the Ordinals Protocol

On March 9, the founder domo informally proposed the BRC-20 protocol, triggering a new round of market enthusiasm. As of May 14, there are over 18,279 BRC-20 token projects, with a total market value exceeding $500 million. The trading volume related to BRC-20 on the BTC network has surpassed that of the non-Ordinals protocol, accounting for more than 65% on May 7 and 14.

The BRC-20 protocol is a technology for creating and trading fungible tokens on the Bitcoin blockchain using the Ordinals protocol. It utilizes JSON data to store token contract information, including name, symbol, total supply, and decimal places, among others. However, BRC-20 tokens cannot interact with smart contracts or execute automated operations.

The price miracle of Ordi Token

Ordi is the first Token issued under the BRC-20 standard, with a total supply of 21,000,000 tokens. All tokens were minted in less than 18 hours. The price of Ordi rose from $0.1 to $29.04 in just three weeks, achieving a hundredfold increase.

The rapid expansion of the Ordinals trading market

The BRC-20 token mechanism is relatively complex, requiring additional steps for storage and trading. User demand and the potential for massive fee profits have accelerated the development of the Ordinals trading market. These infrastructures and auxiliary tools mainly serve Ordinals NFTs, BRC-20 tokens, and BTC domain names.

Currently, Unisat has become the platform with the highest trading volume, holding over 50% of the market share. The emergence of these tools and trading markets has facilitated the creation of more BRC-20 tokens, resulting in more than 30,000 ordinal inscriptions being minted in a single day.

The Carnival Driven by Multiple Parties

BRC-20 Token has greater speculation space than BTC NFT. From the perspective of retail investors, exchanges, developers, and miners, this is a carnival participated by all parties.

The victory of BTC miners

The minting and trading of BRC-20 have put unprecedented pressure on the BTC network, significantly increasing transaction fees. On May 7, the total transaction fees across the Bitcoin network reached 403.91 BTC, nearly an 18-fold increase compared to a month ago. High transaction fees and block rewards have created astonishing profits for miners.

The participation of head ecology and institutions

Multiple well-known Ethereum NFT projects have joined the Bitcoin ecosystem to issue NFTs. Major NFT markets and exchanges are also beginning to support the Ordinals ecosystem. For exchanges, this means more asset management opportunities and fee income.

BSV community boost

Currently, a large number of ecological applications of BRC-20 come from the original BSV community developers. Members of the BSV community have once again gained wealth opportunities in the BRC-20 track. The popularity of BRC-20 has also provided development opportunities for developers focused on POW chains.

Risks and Opportunities

The development of BRC-20 Tokens is still in its early stages, characterized by strong meme attributes and innovative concepts, lacking practical use cases. The BRC-20 standard is not as comprehensive and rigorous as the ERC token standards and is considered an experimental attempt.

BRC-20 has many flaws:

1. The ecological infrastructure is almost zero, and the tokens mostly have meme attributes, lacking practical value.
2. The BTC ecosystem lacks liquid exchanges, making it difficult to ensure the security of token trades.
3. Complex asset management mechanisms require additional tools or platforms, which may contradict the decentralized philosophy of BTC.
4. There are regulatory risks that may lead to the formation of an unregistered securities market on the Bitcoin blockchain.

In addition, the FOMO sentiment triggered by BRC-20 tokens has caused severe congestion on the Bitcoin network, even resulting in the rare phenomenon of no blocks being mined for 1 hour. When transaction fee income continues to exceed block rewards, it may lead to time thief attacks.

Future Ecosystem Development of BTC

Despite the controversy, BRC-20 has brought new possibilities to the BTC ecosystem. As more and more developers focus on the BTC ecosystem, solutions to the on-chain congestion problem are emerging continuously, and the BTC ecosystem is expected to gradually prosper.

better token standards and smart contract market

The industry is discussing more efficient alternative token standards, including alternative data structures to JSON to reduce block space consumption. In the future, better tools will be needed to index and manage these tokens.

Attract more investors to join in.

Currently, the participation of institutional investors is not high, mainly because there are still controversies surrounding token standards like BRC-20. However, the innovations brought by the Ordinals protocol provide new ideas for the future ecological development of BTC, and are expected to reshape investors' perceptions of the BTC ecosystem.

The development of the BTC second layer network

The BTC second layer network may迎来第二春. Projects like the Lightning Network can meet the diverse payment scenario needs and are one of the effective ways to solve network congestion. In addition, projects such as Liquid, RSK, and Stacks are also continuously promoting the development of the BTC ecosystem.

Overall, the BTC ecosystem is still in its early stages, with tremendous potential for future development. With more innovations and improvements, the Bitcoin network is expected to usher in a more prosperous ecosystem.