Ordinals and BRC20: Exploring New Frontiers of the Bitcoin Ecosystem

The Bitcoin ecosystem is undergoing a transformation. To understand this transformation better, we first need to comprehend how ordinals work. In the Bitcoin network, 1 Satoshi is the smallest unit of measurement, equivalent to one hundred millionth of a Bitcoin.

Ordinal technology assigns a unique serial number to each satoshi, allowing it to be tracked and traded. This innovation enables users to inscribe various data, such as images, text, or videos, on a single satoshi. Once a transaction is confirmed, this data is permanently stored on the Bitcoin blockchain, making each satoshi a unique, non-fungible digital asset.

Since the launch of ordinal technology in January 2023, the inscription activity has shown explosive growth, driving the robust development of the Bitcoin NFT market. The main advantage of ordinal NFTs is that they are created directly on the Bitcoin main chain, without relying on other platforms.

In March 2023, a new token standard BRC-20 emerged. This is an experimental standard for implementing fungible tokens on the Bitcoin blockchain. Unlike Ethereum's ERC-20, BRC-20 does not rely on smart contracts but utilizes ordinal inscription technology. By directly writing JSON data into satoshis, users can deploy, mint, and transfer BRC-20 tokens.

It is worth noting that while BRC-20 is a type of ordinal inscription, not all ordinals are BRC-20 tokens. Ordinary ordinals can inscribe any information, while BRC-20 is specifically designed to inscribe JSON data, making the tokens fungible.

According to market data, the total market capitalization of BRC-20 has increased 3.4 times in just 7 months, reaching approximately $3.4 billion. Among them, ORDI, as the first minted BRC-20 token, along with SATS and others, has become a leading token in the market.

The advantages of BRC-20 include:

• Provides Bitcoin with new features beyond "digital gold"
• Inherits the strong security of Bitcoin
• Completely based on on-chain operations, no additional storage system required.
• Can attract a large user base of Bitcoin
• Highly compatible with the existing Bitcoin ecosystem

However, BRC-20 also faces some challenges:

• Due to the limited transaction processing capacity of the Bitcoin network, it may lead to increased fees and transaction delays.
• Compared to ERC-20, the smart contract functionality is relatively limited.
• There are difficulties in interoperability with other blockchain networks.
• As a new technology, it is still in the experimental stage, with limited support tools.

Nevertheless, BRC-20 has become an important innovation in the Bitcoin ecosystem by introducing fungibility. With the development of Bitcoin's second-layer network, we may see more decentralized finance projects based on BRC-20 emerging in 2024. Although BRC-20 is still in its early stages, its development trajectory is reminiscent of Ethereum's growth journey. The increasing interest from users, project parties, developers, and investors in BRC-20 undoubtedly highlights the immense potential of this technology.