Erik Weijers, a month ago
The daily number of inscriptions made through Ordinals protocol on Bitcoin has exploded in recent weeks. In early April, text began overtaking images as the main content type: the scripts for tokens minted of the new token type BRC-20. In recent days, the Bitcoin blockchain is being congested by this new type of transactions. And that’s not necessarily a bad thing.
A coder called Domo discovered in March that Ordinal inscriptions could be used to create fungible tokens on Bitcoin, much like the ERC-20 token on Ethereum. For example, Chainlink is an ERC20-token. This means there is no separate Chainlink blockchain. Instead, LINK tokens ‘ride on top’ of Ethereum. The same principle for the new tokens on Bitcoin.
The coder called the token standard on Bitcoin BRC-20. In the first few weeks, a flood of BRC20-tokens was created, basically all meme coins. Here’s a list. Today, the combined market cap of more than 8,800 BRC-20 tokens was $137 million, compared to $17.5 million a week ago.
BRC20-tokens inherit the properties of the safest blockchain and they offer the possibility of being traded on-chain, without relying on (risky) external exchanges. But the tokens have limitations. A difference between BRC-20 and ERC-20 is that the BRC-20 token can’t interact with smart contracts, which makes it less powerful. Instead, it’s a way to store a script file in Bitcoin and use it to attribute tokens to individual satoshis and allow these to be transferred between users. This explains why text is now the dominant file type on the Ordinals protocol: the files contain the scripts.
A quick reminder. The Ordinals protocol was launched in January 2023. It allows people to track individual satoshi’s by assigning them a serial number. Then came the added possibility of inscribing satoshi’s with content, such as an image or music files, or other types of data. This has created for the first time the possibility of Bitcoin-native digital artifacts, or Bitcoin NFTs.
The flood of inscriptions has pushed up the number of Bitcoin transactions, which neared record-highs. As mentioned in yesterday’s article about the health of the Bitcoin network a year prior to halving, it could make Bitcoin more sustainable.
Ordinals have opened the door to activity on Bitcoin in more ways. Another example is the the Sats Name (.sats) standard, resembling Ethereum Name Service. On Lightning, things are happening too. Stablecoins on Bitcoin’s Lightning Network is an example.
While the BRC20-token is probably just a fad, it’s interesting to see these new experiments on the Bitcoin blockchain, which had been quite boring for a few years.
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