As the price of Bitcoin continues to rise, especially in Asian markets, the popularity of the BRC-20 token and its Ordinals has increased significantly over the past six months. This article will delve into the concept of BRC-20, the formation of Ordinals, and their impact on the Bitcoin ecosystem.
What is BRC-20?
BRC-20 can be considered Bitcoin’s version of ERC-20 tokens. It was introduced in March 2023 by an anonymous developer named Domo and is based on Bitcoin's SegWit soft fork (2017) and Taproot upgrade (November 2021) technology. Although BRC-20 has many similarities with ERC-20, it is still in the proposal stage and is not yet widely traded on decentralized exchanges. Trading is mainly concentrated on centralized exchanges such as Binance, OKX and Bybit .
Creation and function of Ordinals: Ordinals are created by engraving a number on the smallest unit of Bitcoin, Satoshi (sat). This Ordinal number and its associated data are embedded in the “Attestation Signature” field of a Bitcoin transaction, confirming ownership of the funds and ensuring they are not double-spended. Ordinals is not only an NFT protocol on the Bitcoin network, it gives each homogeneous Satoshi a unique identity, making it a unique "NFT", thereby increasing the value of transactions and collections.
Since the launch of Ordinals in December 2022, approximately 7.8 million NFTs and tokens have been minted as of May 18, 2023, opening new doors to the Bitcoin ecosystem. These NFTs are stored on the Bitcoin blockchain, and their metadata cannot be changed once published and verified, making them closer to "real" NFTs.
The evolution and characteristics of BRC-20
The idea of BRC-20 is to create fungible tokens (FTs) by filling in information in a uniform format on satoshis. Simply put, BRC-20 can be considered a variant of Ordinals NFT. Different from the picture inscription on NFT, BRC-20 tokens are marked with text data in a unified JSON format. Although BRC-20 tokens cannot interact with smart contracts or perform automated operations, their minting and trading bring new vitality to the Bitcoin ecosystem.
$ORDI is the first token issued under the BRC-20 standard, launched on March 9, 2023, with a maximum mintage of 1,000 tokens, for a total of 21,000,000 tokens. In the early days of the issuance, users only had to pay mining fees to obtain tokens, and all $ORDI tokens were minted in less than 18 hours.
As of May 22, 2023, the lowest price of $ORDI on the secondary market was $11.48, and the total minted amount was approximately 8.5 million, resulting in a mining fee of 1,458 Bitcoins. According to ordspace.org, as of May 19, 2023, there were more than 18,000 BRC-20 token projects with a total market value of approximately US$420 million.
BRC-20’s impact on the Bitcoin ecosystem
The rise of BRC-20 has had a significant impact on Bitcoin’s mining fees and transactions. Since minting and transferring BRC-20 tokens requires more blockchain space, this complex mechanism design leads to competition for block space, which may cause users seeking quick confirmations to face higher transaction fees. According to Glassnode data, miner revenue from transaction fees peaked at 42.595% and is rising again due to $ORDI and the new BRC-20 minting.
Advantages and Disadvantages of BRC-20 and Ordinals
Advantages
Fairness: Unlike ERC-20 tokens, BRC-20 cannot interact with smart contracts, which means that the issuance of tokens is not controlled by project teams and venture capital institutions, ensuring the fairness of the ecosystem.
Value support: The value of BRC-20 is supported by Bitcoin, which reduces the risk of the token returning to zero.
Miner Benefits: The minting and trading of BRC-20 significantly increases transaction fees, creating considerable profits for miners.
Market Sentiment: The BRC-20 standard and the new narrative of the Bitcoin ecosystem tend to attract market sentiment and capital inflows, attracting the attention of leading institutions such as Yuga Labs and CryptoPunks.
Disadvantages: Functional limitations: BRC-20 tokens cannot interact with smart contracts and lack destruction and locking functions.
Market volatility: Although BRC-20 has huge market potential, its trading volume and price fluctuations are still large, and investors need to be cautious.
future outlook
As the Bitcoin ecosystem continues to develop, BRC-20 and Ordinals will likely become an important part of digital asset transactions in the future. According to a Galaxy Digital report, the market size of Bitcoin NFTs is expected to reach $4.5 billion by 2025. The market infrastructure supporting Bitcoin NFT will gradually improve in the second quarter of 2023, which is expected to promote the emergence of more innovative projects.
In this era of opportunities, the rise of BRC-20 tokens not only injects new vitality into the Bitcoin ecosystem, but also provides investors with new investment opportunities. As the market matures and technology continues to develop, BRC-20 will likely occupy an important position in the future digital asset market.
In short: the emergence of BRC-20 tokens has brought new possibilities to the Bitcoin network and promoted the diversification and innovation of digital assets. As its ecosystem continues to improve, more investors and developers may devote themselves to this emerging field in the future to jointly promote the further development of Bitcoin.