Ordinals and BRC20: Exploring Innovations on the Bitcoin Blockchain

Ordinal and BRC20 tokens are two important innovations on the Bitcoin Blockchain. To understand BRC-20 tokens, it is first necessary to understand how ordinals work. In the Bitcoin network, 1 Satoshi is the smallest currency unit, and 100 million Satoshis equal 1 Bitcoin.

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

The uniqueness of Ordinals NFTs lies in their creation directly on the Bitcoin main chain. Since their launch in January 2023, the inscription activity has shown explosive growth, driving the prosperity of the Bitcoin NFT market.

In March 2023, an innovative token standard BRC-20 was born. This is an experimental fungible token (FT) standard on the Bitcoin blockchain. Unlike Ethereum's ERC-20, BRC-20 does not rely on smart contracts, but instead uses ordinal inscription technology. Users can deploy, mint, and transfer BRC-20 tokens by directly writing JSON data into satoshis.

It is worth noting that although BRC-20 is a type of ordinal inscription, not all ordinals are BRC-20 tokens. Ordinary ordinals can inscribe any information, while BRC-20 tokens always contain JSON data in a specific format, which makes them fungible.

According to market data, the total market capitalization of BRC-20 has reached approximately $3.4 billion, growing 3.4 times in 7 months. Among them, ORDI (the first minted BRC-20 token) and SATS are the leading tokens in the market.

The advantages of BRC-20 include:

• Provides Bitcoin with tokenization features beyond "digital gold"
• Inherits the high security of the Bitcoin PoW system.
• Completely operates on-chain, no additional file system required.
• Able to attract the large user base of the Bitcoin network
• Compatible with existing Bitcoin infrastructure

However, BRC-20 also faces some challenges:

• Scalability issues may arise due to limitations of the Bitcoin network.
• The smart contract feature is limited, making it difficult to implement complex operations.
• There are barriers to interoperability with other blockchain networks.
• As an emerging technology, it is still in the experimental stage and carries certain risks.

The emergence of BRC-20 has brought new possibilities to the Bitcoin ecosystem. With the development of Bitcoin Layer 2 solutions, 2024 may see a surge of DeFi projects centered around BRC-20. Although BRC-20 is still in its early stages, its development trajectory is reminiscent of Ethereum's early growth. The increasing interest in BRC-20 from users, project teams, developers, and investors highlights the immense potential of this technology.