BRC20-Swap Test Launch: A New Chapter in Liquidity for the Ordinals Ecosystem

The trading mechanism of Ordinals ecological assets mainly relies on the order selling model, which has made liquidity a key concern for this ecosystem. To improve this situation, a platform that integrates engraving, trading market, and wallet functions announced the upcoming launch of brc20-swap in July 2023, and officially started testing on October 30.

This article will delve into the development history, product model, and future prospects of brc20-swap.

The Development History of brc20-swap

On September 20, 2023, the platform issued brc20-swap Early Access invitation inscriptions to 620 addresses that met specific criteria. These criteria include:

1. Active users who trade at least 1 BTC in the platform market between July 16 and September 20.
2. Active users who have accumulated at least 500 points through the platform's inscription within the same period.
3. Platform OG PASS holders (snapshot taken at block height 808559).

On October 10, 2023, the official announcement was made regarding the timeline and details for the launch of the brc20-swap mainnet. They distributed a commemorative inscription called brc20-swap Prime Access for free to community users, allowing holders to participate in early testing of the product. These inscriptions were distributed through official social channels and user lotteries, with a total of 654 available. Currently, the lowest price in the secondary market is 0.0067 BTC.

In terms of settlement and transaction synchronization, these tasks are handled by the sorter. Regarding transaction fees, brc20-swap adopts a standard similar to that of a well-known DEX, charging all trading users a service fee of 0.3%. About 1/6 (0.05%) is collected by the platform, and the remaining 5/6 (0.25%) is allocated to the liquidity providers of each trading pair. It is worth noting that brc20-swap uses the brc20 asset "sats" as the transaction fee.

On October 30, 2023, the official announcement revealed the 14 assets initially supported by brc20-swap. The selection criteria were that the assets had to have at least 15 days of trading activity on the platform market in the past 30 days, and the median trading volume in the past 30 days had to be non-zero. After this news was released, the related assets experienced a significant increase due to positive expectations.

Product Model

The functionality of brc20-swap is divided into three parts: trading, liquidity pool, and data overview, similar to the decentralized exchange format on EVM chains. Before trading, users need to recharge assets into the brc20-swap module by "inscribe TRANSFER"; the recharge confirmation requires 3 block times.

The product is implemented through modular expansion, with each module existing independently of brc20-swap. The advantages of this model include:

1. Permissionless Development: Developing new modules for brc-20 requires no permission.
2. Isolated execution: A problem in a single module will not affect the operation of the core protocol and other modules.
3. Consensus Upgrade: When the majority of indexers recognize and implement the indexing of a specific module, that module can be upgraded from a black module to a white module, becoming a part of the brc-20 protocol.

However, this expansion model of the black module also has its drawbacks, such as users being unable to freely withdraw assets. The platform improves this issue by designing a dynamically adjustable form that allows withdrawals when others' deposited assets exceed the amount of assets withdrawn. This approach avoids the arbitrary issuance model on the EVM chain, but it also somewhat limits the liquidity and convenience of the assets.

When the behavior of the black module is understood and accepted by users, and gradually recognized by more indexers, the product will transition from the black module to the white module, achieving a consensus upgrade. At that time, users will be able to freely deposit and withdraw assets.

In addition, since the brc20 protocol and the entire Ordinals ecosystem are still in the early stages, the platform currently occupies a significant influence in the ecosystem, providing the protocol with complete indexing services such as transaction and balance inquiries. This modular operational architecture allows more service providers to participate, helping to achieve the decentralization of indexing.

Future Outlook

Ordinals ecosystem users often report insufficient Liquidity, making it difficult for large funds to enter. brc20-swap, as the first native trading platform in the ecosystem, utilizes the brc20 protocol as the underlying asset base, aiming to continuously optimize Liquidity and expand the capacity for incoming funds, which is an important advancement for the entire ecosystem.

The platform officially announced that it will donate 2% of the brc20-swap transaction fees to the foundation involved in the development of the brc20 protocol, in order to promote further development and standard optimization of the protocol. At the same time, the platform plans to open source the complete explanation and verification source code of the brc20-swap to facilitate support for early indexers.

These measures demonstrate the platform's commitment to a win-win approach rather than monopolizing ecological benefits. Considering the relatively short development cycle of the Ordinals ecosystem, it requires joint efforts from all parties within the ecosystem to expand market size and achieve mutual benefits.