From the stunning debut of Nostr in 2022 to the quiet rise of the Ordinals protocol and BRC-20 in 2023, Bitcoin has quietly expanded its influence beyond its status as digital gold and into the realm of Ethereum's ecosystem. The emergence of Ordinals signifies that the Bitcoin ecosystem has entered the eve of the Cambrian explosion.
01 Explosion of BTC Cambrian Ecology
From the stunning debut of Nostr in 2022 to the quiet rise of the Ordinals protocol and BRC-20 in 2023, Bitcoin has quietly expanded its influence beyond its status as digital gold and into the realm of Ethereum's ecosystem. The emergence of Ordinals signifies that the Bitcoin ecosystem has entered the eve of the Cambrian explosion.
As the king of global crypto consensus, Bitcoin has always enjoyed the reputation of digital gold, with its market value accounting for more than half of the cryptocurrency market. Although Bitcoin has always played the role of a "peer-to-peer electronic cash system," the diversified ecosystem of the cryptographic world is mostly based on smart contracts. Compared with Ethereum's "world computer" positioning, the lack of smart contract functionality in the Bitcoin network has limited its applications.
However, Bitcoin's innovation has never stopped. At the end of 2022, Casey Rodarmor, a core contributor to Bitcoin, created the Ordinals protocol, introducing the concepts of ordinals and inscriptions, which sparked the first wave of MEME mania in the Bitcoin network. Ordinals and inscriptions fueled the Bitcoin NFT craze, followed by the $ORDI token, which triggered the explosive growth of BRC-20. In just two months, the long-stable and monotonous Bitcoin ecosystem became colorful and diverse. Since 2021, BTC miners' transaction fees have exceeded block rewards for the first time, and without realizing it, the BTC ecosystem has undergone a fundamental transformation.
02 The History and development of Ordinals
Ordinals is divided into two parts: the Ordinals protocol and Inscription.
To understand the Ordinals protocol, we first need to understand the smallest unit of Bitcoin, which is the satoshi (sats for short). One bitcoin is equivalent to 100,000,000 sats.
The Ordinals protocol is essentially a numbering system. Ordinal NFTs use inscriptions to function. The protocol assigns a number (hence the name "ordinal") to each satoshi. Once a number has been assigned, the holder of that satoshi can write inscription data to it through a Bitcoin transaction. The inscription can be text, audio, image, code, or almost any form of data. Once the block is confirmed, an Ordinals NFT is permanently engraved on the Bitcoin blockchain. Each satoshi was originally interchangeable, but once it has been assigned an Ordinals number, it becomes cannot be replaced（Non-Fungible Token ）
03. The Dual Ecosystem of Ordinals: Part 1 - BTC NFTs
Here is a condensed version of the history of Ordinals NFTs:
● January 3, 2009 - The Bitcoin network is created by Satoshi Nakamoto
— It’s with a limit of 21 million Bitcoins.
— Each Bitcoin is made up of 100,000,000 satoshis/sats.
— In 2012, the early concept of NFTs appears on Bitcoin with the prototype of colored coins, laying the foundation for the emergence of NFTs.
— In 2014, Bitcoin Core enabled a function called OP_RETURN, allowing for extremely short (80 byte) messages and opening the door for further experimentation with BTC NFTs.
● 2009-2021: Cryptocurrencies grow to become a trillion-dollar asset class.
— Over 10,000 new cryptocurrencies emerge.
— Ethereum opens up the DeFi industry.
— In June 2017, CryptoPunks appear on Ethereum.
— 2021 becomes the year of the Ethereum NFT craze.
- In 2017, the Segwit upgrade allowed BTC blocks to store more witness data, expanding the 1MB block size limit of Bitcoin.
- In 2021, the Taproot upgrade was activated, removing data limits on Bitcoin blocks and allowing witness data to fill the entire block size, making it easier to store arbitrary data in Bitcoin transactions.
- In December 2022, Casey Rodarmor, the creator of Ordinals, had a breakthrough and invented the Ordinals numbering theory.
- On January 21, 2023, Ordinals was launched on the Bitcoin mainnet, and inscriptions were directly engraved on sats. Each inscription is tracked and transferred using the Ordinals numbering theory, giving every sats a unique ID（making them non-fungible）
2023 Bitcoin NFT mania begins
The introduction of Ordinals has changed the game and sparked the biggest debate among Bitcoin holders to date.
One unique advantage of BTC NFTs created using Ordinals is that the inscriptions are entirely on the Bitcoin blockchain and do not require referencing off-chain content, unlike Ethereum NFTs, which often index off-chain content through IPFS or AWS and are not fully decentralized.
As an example, let's look at CryptoPunks on BTC. Each NFT's sats, block, and inscription information can be viewed through ordinals, as shown in the following image:
04. The Dual Ecosystem of Ordinals Part 2 - BRC-20
Now that BTC NFT can be issued through Ordinals, then can tokens also be minted through Ordinals?
In March 8, 2023, DOMO (@domedata on Twitter) proposed using JSON data format for Ordinals inscriptions to enable token contract deployment, minting, and transfers.
the experimental Bitcoin homogenous token protocol, BRC-20, was created. The first token to be issued using the BRC-20 protocol was $ORDI, with a total supply of 21 million (in tribute to BTC), and anyone can mint it for free (only paying the transaction fee)， on a first-come first-served basis.
You are correct in noting that the name BRC-20 suggests a similarity to Ethereum's ERC-20 standard. The core functions of BRC-20 tokens are indeed similar to those of ERC-20 tokens, including token deployment, minting, and transfer. These functions are implemented using different JSON inscriptions within the BRC-20 standard.
Unlike traditional token standards, which are usually governed by smart contracts on the EVM chain, BRC-20 is essentially a JSON script file stored on the Bitcoin network. This means they can be viewed as metadata attached to Bitcoin transactions, creating Fungible-Tokens on Bitcoin via the Ordinals protocol. Although based on Bitcoin, BRC-20 tokens do not adopt Bitcoin's UTXO model, but an account model similar to Ethereum.
BRC-20 token transactions accounted for a large proportion of Ordinals transactions, exceeding 90%. The active transaction volume of BRC-20 has had a considerable impact on the entire BTC network. On May 7, the proportion of BRC-20 transaction fees reached a record high in the history of BTC miners’ fees, an astonishing 61%. Higher fees are beneficial to miners' income and overall network security, but will undoubtedly bring a greater burden to users who need to use the BTC network on a daily basis.
The Difference Between BRC-20 and ERC-20
Both BRC-20 and ERC-20 are token standards, but they are implemented differently. BRC-20 is implemented based on ordinal and inscription technology, taking advantage of the security and stability of the Bitcoin network. However, due to the lack of functionality and flexibility of smart contracts, the scope of application of BRC-20 is relatively narrow. In contrast, ERC-20 is a token standard based on smart contract technology, which has richer functions and flexibility.
Security is another significant advantage of BRC-20 tokens. The security of the Bitcoin network is proven, and since there is no risk of smart contract vulnerabilities, BRC-20 security and tamper-proof features are ensured.
Since BRC-20 does not have a contract owner or any potential backdoors, and there is a quantity limit for each casting, BRC-20 has realized no project party control for the first time, and completely relies on community consensus to initiate and cast, allowing the public, project parties, investors Wait until all participants are on the same starting line first time
In addition, a BRC-20 token contains at least 546 Satoshi built-in, so it is impossible to return to zero. From this point of view, it is more valuable than ERC-20 costless tokens. Therefore, we can hold BRC-20 tokens Have an inclusive mindset and observe the innovations that may arise from its development.
05. BTC Ecological Development
Ordinals and BRC-20 are the starting point of the Cambrian explosion of the BTC ecology, which ignited the revival and prosperity of the BTC ecology from users, exchanges, developers, miners, industry consensus, and security applications.
Any new attempt will cause controversy and bring new thinking. Through Ordinals and BRC-20, we can see that there are many possibilities for the new narrative of BTC. Therefore, in the next few months, ecological projects will have considerable big development.
New Standard, Ordinals NFT Marketplace & BRC-20 Exchange
At present, some exchanges and wallets have joined the discussion of BTC-based alternative token standards. Include data structures that replace JSON to reduce block space consumption. The Ordinals protocol, or more, needs better tools for indexing and managing these tokens. All these require industry developers and leaders to participate in the discussion.
Ordinals needed a new user-friendly marketplace. A dedicated BTC NFT market is coming, and it may be like Ethereum's OpenSea; new infrastructure such as better-used BRC-20 DEX, liquidity agreement, and pledge agreement will appear, and other CEX markets will gradually open their doors.
New Collections, New Brands
At present, the NFTs of CryptoPunk and BAYC have been transferred to Ordinals, but the best BTC-First NFT collection has not yet been decided. We will see more innovative portfolios, new brands, and new digital art born in BTC Ordinals
Attract More Investors
At present, the launch of BRC-20 and other tokens is more fueled by the secondary market, and the interest of investment institutions to participate is not high at present. The main reason is that there are still too many controversies about the emergence of token standards such as BRC-20. However, the innovation brought by the Ordinals protocol is also a new attempt at the future ecological development of BTC. The revival of BTC will reshape investors' stereotypes about the BTC ecology.
BTC's L2 expansion may usher in a second spring
The BTC Layer 2 network will flood many new developers, such as Lightning Network, Liquid, RSK, Stacks and other projects. BTC L2 is one of the best ways to solve the current network congestion, and the BTC ecosystem is still in the early stage of prosperity.
06. Embracing the BTC NFT Ecosystem
NFT, as crypto token that represent unique digital or physical assets, have unique and non-fungible characteristics on the blockchain. The introduction of the Ordinals protocol has disrupted the dominance of Ethereum-based NFTs, as it does not require any centralized or trusted parties to participate, nor does it rely on any Layer 2 or sidechain solutions. It follows the rules and security of the Bitcoin network itself, making it a more robust and decentralized NFT protocol.
In a way, the Ordinals protocol is itself a revolutionary BTC NFT protocol. In contrast to Ethereum, BTC's fungible-token standard BRC-20 is built on top of the Ordinals protocol（non-fungible token protocol）.
Currently, BTC NFTs are rapidly developing and growing, and some common Ordinals NFTs include:
YieldDAO has been keeping up with the latest developments in the Ordinals protocol and BRC-20. We believe that the Ordinals protocol has brought a larger ecosystem to Bitcoin, while also ushering in a new era of NFTs. We are actively planning to expand DragonCapsule MetaIP into the Bitcoin ecosystem.
Currently, YieldDAO plans to issue DragonCapsule NFTs with serial numbers #9201 to #10000 (consisting of 799 Dark Skull Dragons and one Century Egg) by migrating them from Ethereum to the Bitcoin ecosystem via cross-chain technology. This will make DragonCapsule the first cross-chain IP Brand NFT collection on the Ethereum and Bitcoin ecosystems.YieldDAO and DragonCapsule have become a community that is constantly improving, friendly, helpful, and interactive. The plan is to launch the cross-chain upgrade & extension of DragonCapsule on Bitcoin in early June, while simultaneously opening up a governance vote for the issuance of DragonCapsule's BRC-20 ordinal memes. Embracing the Bitcoin ecosystem is a milestone decision for DragonCapsule and Hopefully this will be an fun journey