An Overview of Ordinals Technology, Ecology, and Data

Author: Louis Wang, Biteye Core Contributor

Editor: Crush, Biteye Core Contributor

01 Innovation of the Bitcoin Network

As digital gold, Bitcoin's market capitalization accounts for more than half of the cryptocurrency market. Although Bitcoin has always played the role of a "peer-to-peer electronic cash system," the current excitement in the crypto world is largely based on smart contracts. Compared to "world computers" like Ethereum, the Bitcoin network lacks smart contract functionality, thus limiting its applications.

However, Bitcoin's innovation has never ceased, with the emergence of technologies such as the Lightning Network and Stacks. At the end of last year, Bitcoin core contributor Casey Rodarmor created the Ordinals protocol, introducing the concepts of ordinals and inscriptions, giving birth to the first NFTs on the Bitcoin network.

By combining the upgrades of Segwit (2017) and Taproot (2021) that utilize the Bitcoin network, Ordinals enables the recording of arbitrary data (images, videos, text, etc.) on the Bitcoin blockchain, making the creation of digital artworks or NFTs possible.

Since then, the minting volume of Bitcoin NFTs has skyrocketed, and people are increasingly paying attention to the new possibilities of the Bitcoin network. More projects like Yuga Labs and Magic Eden have also joined this ecosystem, and new builders are constructing the future of Bitcoin.

Bitcoin seems to have entered an era of rejuvenation.

The first BTC NFT on Ordinals

02 The Intuitive Question

We are very familiar with NFTs on Ethereum, but how can NFTs be issued on the Bitcoin network, which lacks smart contracts?

Rodarmor's solution is simple: inscribe NFTs on BTC.

The total supply of Bitcoin is 21 million coins, and the smallest indivisible unit is sat (satoshi), where 1 BTC = 100 million satoshis.

Rodarmor proposed the theory of ordinals, where ordinals are numbered starting from 0 based on the order in which satoshis are mined. For example, the ordinal of the first satoshi in the first block is 0, the second satoshi is 1, and the last satoshi is 4,999,999,999, giving each satoshi an ID attribute.

In this way, each satoshi is artificially assigned a serial number between 0 and 2,100,000,000,000,000, and then linked to other information such as images, text, videos, and code, endowing each satoshi with the characteristics of being indivisible, non-fungible, and traceable.

This effectively gives Bitcoin the native ability to create NFTs.

These unique satoshis can be "inscribed" with any content, such as text, images, videos, etc., creating "inscriptions." Inscriptions represent the metadata concept in Bitcoin NFTs, stored on-chain in Taproot scripts.

For example, the data format for "Hello, world!" is shown in the figure below:

https://docs.ordinals.com/inscriptions.html

Since inscriptions are on-chain, they cannot reference off-chain content, unlike Ethereum NFTs that index off-chain content through IPFS or AWS, thus truly achieving decentralized NFTs.

Taking the CryptoPunk on BTC as an example, the information of each NFT's satoshi, block, inscription, etc., can be viewed through ordinals, as shown in the figure below:

https://ordinals.com/inscription/ea57c0ae99af317ef24c3812f0f804010c27a9f14c9dd9106eac7cb05eb3b038i0

03 What is Brc20?

Since NFTs can be issued through Ordinals, can tokens also be minted through Ordinals?

Thus, on March 8, 2023, domo proposed using the JSON data format of Ordinals inscriptions to deploy token contracts, mint coins, and transfer them.

The experimental Bitcoin network fungible token protocol BRC-20 emerged, along with the issuance of the first BRC-20 token - $ordi, with a total supply of 21 million (in homage to BTC), available on a first-come, first-served basis, allowing anyone to mint for free.

https://domo-2.gitbook.io/brc-20-experiment/

From the name, we can guess that this corresponds to the ERC-20 fungible token standard. Its core functions include: deploying tokens, minting tokens, and transferring tokens. These three functions correspond to different inscriptions.

https://domo-2.gitbook.io/brc-20-experiment/

Deploying Tokens

Taking token deployment as an example, you only need to modify the text in the txt file according to the format below.

• First, change "ordi" to the name of the token;
• Then modify the maximum supply of the token, changing "max:21000000" to the desired quantity, for example, "max:9999";
• Finally, change the maximum quantity allowed for each transaction in the minting of others' tokens as needed, for example, changing "lim:1000" to "lim:11," etc.

This completes the token deployment.

https://domo-2.gitbook.io/brc-20-experiment/

Minting Tokens

If someone wants to mint the token you just issued, modify it according to the format below, and then mint it as an inscription.

Change "tick:ordi" to the symbol of the token you want to mint, and change the minting quantity "amt:1" to the desired amount, but it cannot exceed the maximum limit set during the token deployment.

https://domo-2.gitbook.io/brc-20-experiment/

Transferring Tokens

Mint the inscription according to the format below, changing "ordi" to the symbol of the token you want to send, with "amt" corresponding to the quantity to be sent, which cannot exceed your account balance. The "to" and "fee" fields are optional.

https://domo-2.gitbook.io/brc-20-experiment/

Clearly, these BRC-20 tokens are far less practical than ERC-20 tokens; they are merely a way to store script files in Bitcoin and use that file to assign token meaning to satoshis, allowing them to be transferred from one user to another.

04 Data Interpretation

However, the market sentiment for BRC-20 is evidently very high. According to data from the brc-20 website, over 14,000 BRC-20 tokens have been deployed, with a total market capitalization exceeding $800 million. Among them, $ordi ranks first with a market cap of $530 million, accounting for 65% of the total BRC-20 market cap. (Data as of May 8, 2023, 16:27)

https://brc-20.io/

The trading volume of BRC-20 tokens has surged, especially with the rapid price increase led by $ordi, activating the entire BRC-20 market. Currently, the total number of BRC-20 transactions has approached 3.5 million, with total fees exceeding 382 BTC.

https://dune.com/cryptokoryo/brc20

The number of transactions has skyrocketed from less than 10,000 per day in mid-April to an average of around 200,000 per day recently, increasing 20 times in just half a month. On May 1 alone, the daily transaction count reached nearly 370,000, maintaining a high point of around 320,000 transactions per day in the last two days.

https://dune.com/cryptokoryo/brc20

In Ordinal transactions, BRC-20 token transactions account for a significant proportion, exceeding 90%. Moreover, the active trading volume of BRC-20 has had a considerable impact on the entire BTC network, with over 50% of transactions on the BTC network in recent days being BRC-20 token transactions.

https://dune.com/cryptokoryo/brc20

The miner fees generated by a large number of BRC-20 token transactions recently accounted for nearly 30% of the entire BTC network. On May 7, the proportion of BRC-20 fees reached a historical high of an astonishing 61%. Higher fees benefit miner income and overall network security, but they undoubtedly pose a significant challenge for users who need to use the BTC network daily.

https://dune.com/cryptokoryo/brc20

05 Opportunities and Risks

Opportunities

As the largest cryptocurrency by market capitalization, Bitcoin, through Ordinals, has opened a new door for the Bitcoin ecosystem. Even a mere 1% inflow of Bitcoin funds into its ecosystem could unlock a space with a very high ceiling for imagination.

NFTs on the BTC network, or BRC-20 tokens, are fundamentally different from the NFTs and FTs we are familiar with under the ERC standard.

Its advantage lies in the fact that inscriptions are directly stored on the Bitcoin L1 chain. Compared to many metadata stored on IPFS, Arweave, or even centralized Web2 server platforms in ERC standard NFTs, NFTs or inscription tokens on the BTC network are more decentralized, and inscriptions are also immutable, adding a meaning that is even more enduring than diamonds.

Since inscriptions are engraved on individual satoshis using ordinal theory, each satoshi is classified into different rarity levels based on its number. Another hot topic of BRC-20 is the search for those rare satoshis, which is very appealing to collectors, such as those collecting inscriptions numbered below 100k or the first inscription after the block halving.

https://docs.ordinals.com/overview.html

The wave of the entire BTC token sector is stirred up by Ordinals, which can be referred to as the BTC Ordinals ecosystem. Grayscale expresses optimism about the application prospects of the BTC network triggered by this; leading exchanges like Binance and OKX have shown strong interest and are eager to try; Wang Feng has expressed extreme optimism about BRC-20 inscription tokens and plans to integrate BRC20 into Element for easier trading; OpenSea will also integrate BRC-20…

https://twitter.com/binance

However, in reality, the participation threshold of the Ordinals ecosystem is relatively high, and most people are still very unfamiliar with the Bitcoin network, so the actual number of participants is not as many as discussed. Taking some outstanding leading tokens as examples:

• $ordi - Market cap of $210 million, the name is derived from the first four letters of the ordinals protocol, the first token of the brc20 protocol, with 7381 holders.
• $nals - Market cap of $18 million, the name is derived from the last four letters of the ordinals protocol, with 1767 holders.
• $insc - Market cap of $4 million, the name comes from the first four letters of the word inscription, with 936 holders.
• $pusy - Market cap of $900,000, the name comes from pussy, reportedly promoted by @XEN_Crypto, with 605 holders.
• $piza - Market cap of $10 million, the name comes from the story of buying a pizza for 10,000 bitcoins (the Bitcoin Pizza Day on May 22 is approaching), with 1045 holders.
• $pepe - Market cap of $16 million, named after the meme coin, also the fourth BRC-20 token to be deployed, with 3418 holders.
• $hash - Market cap of $2.4 million, the name comes from Bitcoin's hash algorithm, with 634 holders.

Among all BRC-20 tokens, only 22 inscription tokens have more than a thousand holders, and considering the overlap among holders, the total number of participants in the BRC20 market may only be around 10,000. Because the number of hands trading is not large, it is easier to drive up prices, and the price of $ordi has already multiplied by more than ten times in a week.

https://unisat.io/brc20

Risks

As an investment, liquidity exit issues need to be considered. The infrastructure of the BRC-20 ecosystem is weak, with no liquid exchanges to ensure the security of token transactions, and there are still many flaws.

Due to the absence of smart contracts, the potential financial application value of these FTs/NFTs is greatly limited. However, a new wave is attracting a large number of developers to enter. UniSat has announced open-source code, which means that a lot of foundational tools are on the way, and with the integration of exchanges like OpenSea, trading will also become smoother.

On the other hand, BRC-20 tokens currently lack practical application value, somewhat resembling writing numbers on a blank piece of paper as checks. As more projects emerge, creating application scenarios for BRC-20 tokens will add more value to inscription tokens, such as the Ordinals native GameFi project OrdzGames, which will distribute rewards using BRC-20.

https://www.ordz.games/

Although BRC-20 is experimental, it opens up a new world for the Bitcoin ecosystem, holding great potential, just like when Crypto Punk first emerged, and people did not understand it. However, its risks are also significant, requiring more developers, more infrastructure, and applications; otherwise, once the FOMO sentiment passes, it can easily be stranded on the shores of liquidity.

In summary, the BTC ecosystem represented by BRC-20, or the Ordinals ecosystem, is a high-risk, high-reward opportunity, and BRC is not a true standard, leaving much room for future expansion. Below are relevant tool websites for everyone to keep an eye on.

Appendix: Essential Tool Websites for Navigating the Brc-20 Ecosystem

1) Brc-20 Documentation:

https://domo-2.gitbook.io/brc-20-experiment/

2) Brc-20 Minting Websites:

https://unisat.io/inscribe

https://vip.idclub.xyz/brc20

https://looksordinal.com/

https://raritygarden.inscribetheplanet.com/

3) Ordinals Inscription Cost Calculator:

https://hub.cryptocell.guru/ordinalsturbo/

4) Brc-20 Token Price Query:

https://ordspace.org/brc20

https://brc-20.io/ ( This website's prices are manually updated and often not real-time )

5) Check Account Balance:

https://scan.brc-20.io/index?address=

6) Brc-20 Token Holders Query:

https://unisat.io/brc20

7) View BTC Block and Gas Situation:

https://mempool.space/zh/

8) Brc-20 Trading Market:

https://unisat.io/market

https://ordinalswallet.com/brc20

References [1] https://domo-2.gitbook.io/brc-20-experiment/ [2] https://followin.io/zh-Hans/feed/4162212 [3] https://twitter.com/domodata [4] https://mirror.xyz/fomoplz.eth [5] https://dune.com/cryptokoryo/brc20 [6] https://dune.com/cryptokoryo/brc20 [7] https://twitter.com/tomwanhh/status/1653311136048246784

[8] https://twitter.com/DeFiTeddy2020/status/1655116830598647809