The Bitcoin NFT market has progressed significantly in the last few months, with the emergence of BRC-20, ORC-20, and SRC-20 tokens, along with Ordinals and Inscriptions. These are the specific areas of focus for this research.
Late summer 2021: Jack Dorsey the CEO of companies such as Twitter and Square, announced the development of the first DEX on the Bitcoin network. He later left Twitter to focus specifically on Square, the company responsible for developing that DEX.
November 2021: The Taproot update which allowed for the implementation of basic smart contracts on the Bitcoin network, was a significant development. For years, BTC had primarily functioned as a peer-to-peer payment system and served as a form of currency. However, things began to change. Over the next year and a half, several interesting projects emerged, promising the implementation of full-fledged smart contracts and Layer 2 solutions for Bitcoin. All of these projects were in their early stages and were not well understood, thus they did not receive the attention they deserved.
January 2023: Casey (rodarmor) released Inscriptions He had found a way to index every single sat (the smallest denomination of a Bitcoin) and track it throughout the Bitcoin network - Ordinal Theory.
Every bitcoin consists of 100,000,000 satoshis (sats). The Ordinals protocol is a system for numbering satoshis, giving each satoshi a serial number and tracking them across transactions. Ordinals allows users to make individual satoshis unique by attachingextra data to them. This process is known as “inscription”.
As Ordinal Theory allows the tracking and transfer of individual satoshis, it has opened the possibility of collecting them. Based on the total supply of Bitcoin, the following ranks have been prescribed to denote the rarity of different satoshis:
* A cycle represents the period between conjunctions, which occur when a halving and a difficulty adjustment coincide. In theory, this happens every 6 halvings, but the first conjunction is yet to occur (expected to occur in 2032).
Ordinals is a technology that enables the identification and tracking of individual satoshi. Inscription refers to attaching data to an individual satoshi and creating an NFT.
March 8th, 2023: domodata tweeted a thread theorizing a way to create a fungible token standard on top of the Ordinals protocol called BRC-20. It states that anybody can inscribe JSON onto Bitcoin via the Ordinals Protocol to "Deploy" a BRC-20 token and then anybody can mint it for free.
All BRC-20 tokens are free mints with no pre-mine. In this example token the "lim" (limit) was set to 1,000 and the "max" (max supply) was set to 21,000,000. So anybody can inscribe a mint JSON which works until 21,000,000 tokens are minted.
Once the token mints out, you can begin transferring your tokens. You do this by inscribing a transfer JSON of however many tokens you want. Your inscription NFT will then show up in your wallet and when you send it to another address, that address will receive the tokens.
There is no smart contract for these tokens, only a loose set of rules for the token to update its status, manage total supply and allow it to be transferred. Typically, the token creator has control over the minting process. If they possess enough Bitcoin to match the initially set supply, they can choose to mint all the tokens and subsequently resell them on the secondary market. Alternatively, the token creator can establish a BRC-20 standard that allows others to create new tokens within specific minting limits. The underlying principle of this minting approach, as opposed to ERC-20 tokens that may have low-cost pre-mines or issuance schedules favoring early or large holders, is that BRC-20 tokens require upfront submission of Bitcoin, and all operations are performed on the blockchain.
There is a cost associated with the number of satoshis you include, the number of inscription intervals available for you or early participants in the minting process, and, of course, the on-chain fees paid to miners.
Instead of project creators and pre-mine investors simply creating tokens and generating hype, BRC-20 tokens allow those in secondary markets to await new mintings and acquire their share of the token supply. Once the supply has been fully minted, anyone interested in acquiring tokens will need to purchase them from one of the early minters in the secondary market.
All of that stuff is going to get abstracted away by UIs shortly anyway. The key takeaway is that Bitcoin now has a fungible token standard that lets anyone deploy a unique ticker like $JVWC which will start a free mint.
The last thing to understand about both ordinals and BRC-20 is that the indexers assign every inscription or BRC-20 token a unique number based on the order of its creation. So, the first BRC-20 token is 1, the second one is 2, etc. The market seems to value this order a lot.
With NFTs and memecoins, it certainly seems like Web3 has arrived on Bitcoin. If this is indeed the case, then we have a lot of catching up to do. The bull case is that if a mature Web3 chain has a 1:1 ratio of fungible tokens to the native currency (like on ETH), then buckle up.
The ORC-20 standard is an open standard aimed at enhancing the BRC-20 functionality on the Bitcoin network. Its goal is to maintain compatibility with BRC-20 while improving adaptability, scalability, and security. By leveraging the foundation of Ordinals and the BRC-20 token standard, the ORC-20 protocol aims to drive the adoption of Ordinals as digital artifacts capable of carrying diverse data types on the Bitcoin network. It facilitates the creation of new ORC-20 tokens and enables the migration of existing BRC-20 tokens.
Recognizing the existing limitations of the BRC-20 standard, such as the risk of double-spending and restricted naming space, the proposed ORC-20 protocol introduces several enhancements.
Second, it is possible to upgrade, so the maximum number of tokens per supply or mint can be modified even after deployment. This gives them the opportunity to implement various tokenomics, such as mimicking Bitcoin halving, giving community rewards, etc.
Thirdly, the UTXO model is introduced. The UTXO model is a model used in theBitcoin network and has the advantage of being robust against double-spending attacks.
The ORC-20 transaction model is built upon Bitcoin's UTXO model, ensuring compatibility and alignment with the principles of UTXO. When initiating a transfer, the sender specifies the amount to be received by the recipient and designates the remaining balance to be returned to themselves, streamlining the transfer process.
In the UTXO model, the previous inscribed balance becomes invalid once a transaction is finalized, adhering to the UTXO principles. In ORC-20 tokens, each "sends" event can incorporate a nonce, which serves as a unique identifier for the transaction. This feature enables the sender to cancel a partial transaction if necessary. By specifying the nonce, the sender gains the ability to reverse and undo a transaction that has not been fully processed.
The UTXO (Unspent Transaction Output) technology is a fundamental concept underlying the Bitcoin protocol. It is used to track and manage the state of funds in the network. In simple terms, it refers to the remaining cryptocurrency you receive from each transaction.
In your Bitcoin wallet, you see a balance, for example, 10 BTC. Although it appears as a single balance in the interface, it actually consists of multiple UTXOs. So, you might have four UTXOs of 2.5 BTC each or ten UTXOs of 1 BTC each—there is no difference. Let's say you need to spend 4 BTC, but your wallet has several UTXOs, such as 2 BTC, 5 BTC, and 3 BTC. You cannot divide UTXOs immediately. One UTXO of 5 BTC is spent from your wallet, and the network generates two new outputs: one of 4 BTC (sent to the recipient) and another of 1 BTC (sent back to your wallet).
Prospective investors considering ORC-20 tokens should be aware that ORC-20 is an experimental initiative, and the value and utility of tokens created using this standard are not guaranteed. Although ORC-20 has the potential to enhance token standards on the Bitcoin network, it has faced criticism for its complexity and lack of substantial advantages over existing standards.
There is already a new and improved format for Bitcoin NFTs called STAMPS, which addresses some of the limitations of BRC-20 and ORC-20. However, enthusiasts are not stopping there and are now developing a new token format built on top of STAMPS. This format is known as SRC-20.
Mikeinspace has created a new protocol on Bitcoin which allows for direct storage of data (including text and images) in the blockchain using UTXO. It's been gaining popularity for over a month now.
SRC-20 is a cutting-edge specification modeled after BRC-20 and does not work like traditional Counterparty assets. The main visual difference between SRC and BRC is that the former has an image in addition to the code.
The SRC-20 token standard is the equivalent of ERC-1155 on the Bitcoin network.With SRC-20, you can create any kind of token!
As such, the NFTs on Bitcoin aren't just NFTs. Instead, they are called STAMPS. STAMPS stands for Secure Tradeable Art Maintained Permanently Securely.
Bitcoin stamps differ from ordinals and inscriptions. All three involve adding information to a transaction but serve different purposes and have unique characteristics:
The Bitcoin Dev mailing list has been generating some buzz lately. Mike has been sharing some compelling information about this topic.
It turned out that Bitcoin enthusiasts had been ready for both DeFi and NFTs all along, for many years, but they were waiting for the opportunity to transfer their BTC into NFTs and other tokens without leaving the native network. As a result, builders and major players quickly entered the BTC space. Dense infrastructure development began as a result.
On March 21st, Magiceden added support for Bitcoin Ordinal NFTs.
On May 8th, Binance announced that their NFT Marketplace will support Bitcoin NFT s.
Overall, the market has taken a very positive view of Bitcoin NFT innovations, and many projects have started developing their collections or integrating Bitcoin NFTs.
Over the course of its existence, the Inscription technology has seen the creation of numerous collections. Some of these collections have performed exceptionally well and are still considered top-tier, while others have only enjoyed a brief period of hype before fading away.
Ordinal Punks is an exclusive collection of only 100 Bitcoin NFTs that pays tribute to CryptoPunks. The NFTs were created through a generative PFP collection of 192×192 pixel images, which were produced using an open-source algorithm by the pseudonymous Web3 creator FlowStay.
100 Ordinal Punks were minted within the first 650 inscriptions on Bitcoin, paying homage to CryptoPunks. They were created with the PunksNotDead open-source algorithm.
10,000 unique frog collectibles were minted directly on the Bitcoin Blockchain. The collection launched at the beginning of March, and the minting process was free.
This is an NFT collection consisting of 535 NFTs from the creators of Degods and Y00ts. The mint price was 0.333 BTC.
Ordi - the first token created on BRC20. It is also one of the most popular in this market. Ordi utilizes Ordinals - hence the name. Thanks to the Ordinals protocol, any information can be recorded in the smallest unit of Bitcoin - satoshi. In fact, you can even store audio or video in satoshis. Considering that there are 2.1 quadrillion of these units, the possibilities are limitless.
Interestingly, Ordi was initially created as a joke project. With the revolutionary technologies involved, its joking status quickly turned into a more serious one. Today, it is considered the benchmark for the capabilities of the BTC network.
VMPX is the second-largest token in terms of market capitalization, launched in early May. It has over 9,000 holders and a market capitalization of $15,000,000.
MEME is the second oldest and fifth largest cryptocurrency in the Bitcoin BRC standard. Its unique feature is a small supply limit. There are only 99,999 MEME tokens in existence. Immediately after being minted, MEME gained 2,000 holders.
Pepe took third place in terms of market capitalization among BRC tokens. You have probably heard of this coin inspired by the Pepe frog. It is a relatively new coin that was launched in April 2023.
Important note:Pepe on Ordinals should not be confused with Pepe on Ethereum.
All successful BRC-20 tokens were launched during the early stages of this market. Initially, they were perceived as jokes, and no one expected anything serious. However, these projects managed to capture the attention of the community due to their deep understanding of meme culture and the high demand, coupled with the scarcity of projects being developed on the BRC-20 standard.
Currently, there is no convenient service that allows for tracking project capitalization, token prices, and offers a user-friendly interface. At the moment, stampsrc.github.io is the most convenient solution.
Kevin is the first token launched using the SRC-20 standard and is a leader in the SRC-20 segment. It is equivalent to ORDI in the BRC-20 standard in terms of popularity and attention.
The project is being developed by the Stamps team and is the second project to be launched on the SRC-20 standard.
Indeed, the SRC-20 market is still relatively young and evolving. However, many market leaders and major platforms have shown interest in SRC-20 technology and are integrating it into their products and services. The announcement of SRС-20 integration on the Binance NFT marketplace is a significant event, as Binance is one of the largest cryptocurrency exchanges in the world. The integration of SRС-20 on their platform can attract more attention to this standard and increase its popularity among users. Such announcements from major players and market leaders confirm the significance and potential of SRC-20 technology in the context of digital assets and NFTs.
However, it is worth noting that the development and success of the SRC-20 market will depend on the adoption and utilization of this technology by the community and project developers.
