原文标题：Your Guide to Ordinals and BRC-20s
作者：Delphi Creative, Marlon
Release date: 02.15.2024
Chapter 1: What are Ordinals and BRC-20
introduction
2023 is one of the most transformative years in Bitcoin's history. Prior to this, Bitcoin was known for its stagnant network, but with the inscriptions, Bitcoin entered an exciting technological revolution.
First up is Ordinals, the development of this new technology that has led to a whole new market, and people have quickly embraced and embraced Ordinals. Through digital collectibles, meta-protocols, and emerging Bitcoin token standards such as BRC-20, a thriving ecosystem is growing rapidly, with a market cap of more than $1.8 billion.
The once-rigid Bitcoin network is now a thing of the past, and it's full of exciting new elements. But what exactly are inscriptions, what is their value proposition?how do Ordinals and BRC-20 work?and most importantly, how do you involve yourself and reap everything you want in this ecosystem?
Jargon revealed
One of the most confusing parts of Crypto is the jargon (term), which is truly a maze of unfamiliar slang. To eliminate confusion, all crypto-native terms in this article are in italics and are immediately explained or defined in the glossary at the end of the article.
Chapter 2: A Deep Dive
Technical Overview
聪 (Satoshis)
Before we delve into Ordinals, we need to understand its foundations: Satoshis.
Satoshis, often abbreviated as "Sats", are the smallest denomination of BTC. One BTC is equivalent to 100 million Sats and vice versa, with 100 million Sats making up one BTC. The name is derived from the anonymous creator of Bitcoin, Satoshi Nakamoto. BTC has a maximum supply of 21 million hard caps, so the maximum supply of Sats is 2.1 trillion Sats.
What is the purpose of Stats?
Sats is the native currency of the Bitcoin network. Therefore they are used to pay transaction fees, and since their denomination is small, micropayments can be made.
Not all SATS are created equal!
In the course of Bitcoin's operation, there are several repetitive events that are generated by the key mechanisms that are hard-coded in the Bitcoin technology. These recurring events give us an easy way to classify Satoshis, i.e.: by its scarcity.
Ordinal Theory: Value Proposition
How do we track rare SATS?
This is where the Ordinal Theory, introduced by former Bitcoin Core contributor Casey Rodarmor, comes into play. At a high level, Ordinal theory is concerned with giving each Satoshi a unique identifier.
The theory proposes a numbering scheme for Satoshis, assigning a unique number to each Sat based on the order in which it is mined. In this way, tracking, transferring, and collecting SATs becomes a reality, opening up a whole new market for rarity-based transactions.
Inscription: Birth of the Ordinals
In 2021, Bitcoin completed a key upgrade called "Taproot", which aims to help the network scale. Casey Rodarmor pioneered a unique way to embed data on the Bitcoin blockchain, specifically on Satoshis, using some of taproot's features, and the inscription was born. The inscription on the Sat is now commonly referred to as Ordinal.
The easiest way to understand Ordinal is to imagine someone carving a work of art on a coin. The holder of the coin can still spend the coin if they want (buy a bowl of snail noodles), but the artwork will be engraved on the coin forever. The same goes for inscriptions, once someone binds data to a single SAT, they can spend that SAT to transmit the data associated with it.
With the advent of new capabilities to track and identify SATS using SATS theory, the craze for inscribed arbitrary data into SATS began, and a whole new ecosystem was born.
At the beginning of February 2023, the total number of inscriptions exceeded 60 million, demonstrating the strong momentum of the ecosystem's thriving development.
Any data engraved on Sats can include images, GIFs, videos, and even HTML code. The only limitation on the data is the Bitcoin block size limit (4MB). It is important to note that there is a fee for each inscription, just like any other transaction made on the Bitcoin network. The transaction fees paid to burn SATS usually vary depending on the file size, with larger files getting more expensive.
NFTs vs. Ordinals NFT 与 Ordinals
Ordinals with images of inscriptions are similar to NFTs on Ethereum. As a result, people started calling them Bitcoin NFTs. Despite the similarities between the two, there are 4 distinct differences between Ordinals and NFTs:
- Sorting: Ordinals are inscribed on the Sat, and the Sats are numbered in the order in which they were mined. So unlike NFTs, each Sat has a true sorting.
- Limitations: As mentioned earlier, there is a bottleneck when burning inscriptions on Sats, that is, Bitcoin blocks are limited to 4MB in size, so it limits the amount of data that can be burned on all Sats per block. However, in theory, smart contract-based NFTs do not have significant data capacity limitations.
- On-chain: Ordinals are stored entirely on-chain, which means that the inscriptions on Sats exist forever on the distributed ledger and are immutable. The metadata of NFTs is usually stored on a centralized server, which means that if the server goes down, the path of the NFT will be lost and it will not be able to point to the correct data source.
- Concurrency: Sat can allow multiple different files to be burned. Since the inscription can be arbitrary data, unique digital products can be created. For example, a SAT can be burned with HTML code that points to different files on the same sat, allowing features such as internal hyperlinks to make the embedded SAT have similar characteristics to a traditional web page.
Mempool
Before interacting with an Ordinals-enabled application, it's crucial to understand the Bitcoin mempool.
Bitcoin transactions are not added directly to the Bitcoin blockchain. Instead, transactions first enter a queue, known as a mempool. All valid transactions are located in this waiting area, which is then validated and packed into a block, a process that takes about 10 minutes. When the chain is busy, a large number of transactions enter the mempool, making it difficult for miners to process them quickly, which leads to congestion and longer transaction times. As a direct result, transaction fees have increased.
Bitcoin miners receive transaction fees as a reward for validating and adding transactions to the blockchain. Users can choose the transaction fee for each transaction, which means, to encourage miners to prioritize their transactions, users can increase the transaction fee. The higher the fee provided to miners, the greater the incentive and, as a result, the higher the priority of that transaction in the mempool.
Below is a screenshot of the Mempool browser.
Here you can view several metrics, such as the current gas fee, block height, and average block time. The mempool block explorer also projects a visual of the Bitcoin blockchain, with pending blocks being orange and confirmed blocks being blue-violet gradients. In the top right corner, you can enter any transaction ID or wallet address to get more details, such as where the transaction is in the queue or the tokens held at a specific address. Overall, the mempool is an important tool for tracking transactions when interacting with applications.
BRC-20: New token standard
Shortly after the emergence of Ordinals, a Twitter guy named redphone kicked out a new token standard for the first time. Domo put this idea into practice and designed a new token standard: BRC-20. The BRC-20 inscription quickly gained popularity and began to dominate the transactions associated with the Ordinals.
BRC-20 is an Ordinals engraved with JSON data that can create and transfer tokens. It includes three token functions: deploy, mint, and transfer. Ownership of the token is evidenced by the latest transfer receipts, which are read by wallets and other applications in practice, and assign the BRC-20 balance to the address that owns the transfer receipt.
The BRC-20 token contract originally created by Domo is . Initially, the minting fee for each batch was in US dollars. Recently, ORDI's market cap exceeded $1.4 billion, while the token is currently trading at $67.72! This means that if someone minted a batch of the original 5 ORDI for $1,000, it would now be worth more than $67,000.
Interested in learning more about the intricacies of the BRC-20 token? Check out these deep dives from Delphi Digital:
- BRC-20: Past, Present and Future
- Delphi's Authoritative Bitcoin Report
Chapter 3: How to get started
This section will cover how to create and use Bitcoin wallets, as well as the pros and cons of each wallet for interacting with inscriptions, so skip this section if you're already an expert in this area.
How to create a Bitcoin wallet that supports Ordinals
The first task is to create and fund a Bitcoin wallet. Bitcoin wallets will store your Sats and Ordinals, as well as interact with various applications.
The most important point here is that your wallet must integrate a separate address for Ordinals, or have the ability to freeze burned Sats. As mentioned earlier, Sats is the native currency of the Bitcoin network and is used to pay transaction fees. Ordinals simply burns the Sats of the data, which brings the risk that you may inadvertently use your precious Ordinal Sats to pay for transaction fees.
Therefore, it is highly recommended to use a wallet that supports two addresses or is capable of freezing SATS in case you lose your STAS with the inscription on it.
There are two decent wallets that support this feature, Unisat and Xverse. Unisat offers better application interoperability, while Xverse is more focused on user experience. The choice is yours!In the tutorial below, we used the Xverse wallet.
Install your Bitcoin wallet
Visit the Xverse webpage. Xverse Wallet is available as a mobile app or browser extension. In order to better interact with the application in the future, it is recommended to use a browser extension. To install the browser extension, click Download and add the extension to Chrome.
Create your Bitcoin wallet
Once installed, click on the icon under the browser extension and click on "Create Wallet". Each new wallet generates a unique seed phrase, which usually consists of 12 words.
This is your wallet private key, and if you lose your wallet, it's the only way to help you recover it, so be sure to keep it safe! In general, it is advisable to write down the seed phrase physically (e.g., on a small notebook) rather than store it electronically (e.g., in a computer document or mobile phone photo album) to avoid unauthorized access due to compromised equipment.
Once you've backed up your seed phrase, select the correct word to confirm that your seed phrase is saved. Finally, create a password. Use it every time you want to access the wallet from a browser extension.
Meet your Bitcoin wallet for the first time
Your wallet shows your token balance and can send, receive, swap, and buy tokens through it. In Settings, you can access your seed phrase and change the display currency. Currently, my token balance is all zero.
When clicking "Send" or "Receive", your wallet will display three different Bitcoin addresses, similar to bank account numbers, which must be provided when sending or receiving funds. This is where the user-friendliness of Xverse comes in handy.
The first address is your BTC address and should always be used to fund your wallet. Your BTC is stored here and used to pay transaction fees. Never use this address to manually receive Ordinals or BRC-20 tokens to avoid paying transaction fees with ordinal Sats.
The second address is only available for Ordinals and BRC-20 tokens. When deploying and minting inscriptions, Xverse automatically ensures that Ordinals and BRC-20 tokens are sent to this address. However, if you're performing a peer-to-peer transaction (direct receiving), make sure to provide this address to receive Ordinals and BRC-20.
The third address is Stacks NFT and SIP-10 tokens, which is beyond the scope of this guide and will not be repeated.
Fund your wallet
There are a few different ways you can fund your wallet:
- Buy BTC directly from your wallet: By clicking the "Buy" button, you can buy BTC directly through third-party providers like Moonpay or Transak. These portals allow you to buy Bitcoin with a debit or credit card. Please note that the use of third parties carries additional potential risks.
- Send BTC from centralized exchanges: If you use centralized exchanges like Coinbase and Robinhood, you can fund your wallet directly from your exchange account. Even if you don't already have an exchange account, creating one may help avoid the additional risks that come with using other funding options. When sending BTC, please provide your Bitcoin wallet address (first address). Transactions usually take about 10 minutes to be confirmed.
- Cross-chain bridges: If you're a crypto native and already have a wallet on a network like Ethereum, you can cross BTC from your existing wallet to your Bitcoin wallet. Please note that this approach may introduce some security risks, counterparty risks, and smart contract risks. Research carefully before using these apps!
If you want to interact with any of the apps listed below, we recommend that you try it first with a small amount of money until you are fully proficient in the process.
Chapter 4: Ordinals and BRC-20 Ecological Guidelines
Although the Ordinals ecosystem is still relatively young, there are several apps that support the trading of Ordinals and BRC-20 tokens. Here's a list of some apps worth checking out:
OKX, Unisat, and Magic Eden: Ordinals marketplaces
The Ordinal market facilitates the purchase, sale, and exchange of Ordinal and BRC-20. With these platforms, you can effortlessly sell your Ordinals and BRC-20s tokens and scour a variety of collectibles. Additionally, these marketplaces frequently allow users to deploy, mint, and transfer inscriptions.
If you use size and volume as a criterion, the top three markets are OKX, Unisat, and Magic Eden. While OKX currently leads the race, it restricts certain features to users who only use the native OKX wallet. Unisat and Magic Eden, on the other hand, offer a more user-friendly experience.
Quick referrals
Although you can trade Bitcoin NFTs on these marketplaces, Ordinals Market and Ord.io cover a wider range of NFT collections and are a great tool for tracking trend collections over the past 24 hours, 30 days, 90 days, and more.
Ordinals Bots: Deploy, mint, and transfer Ordinals
One of the easiest ways to create inscriptions and deploy any type of Ordinal is with the OrdinalsBot app. With the integrated API, users can generate inscription orders in bulk, which is especially handy when creating entire collections. Payments for API services can be made using the Lightning Network or directly on Bitcoin.
It supports all types of inscriptions, with additional features including burning to a specific Satoshi type, such as burning only on uncommon sats.
Magisat: Rare Sats 市场
Magisat is a marketplace dedicated to trading Rare Sats. You can trade, buy, and sell Satoshis, covering any rare and strange Sats, such as pizza Satoshis. A very typical case of the Pizza Satoshis Bitcoin community, related to the pizza incident in 2010 (a programmer bought 2 pizzas for 10,000 BTC, which claimed to be the first time that BTC could be used as real money to buy physical goods). Additionally, Magisat lets you scan any Sats in your wallet to see their rarity.
Ordinalhub: An aggregator and analytics tool for Ordinals
Ordinalhub is an aggregator, a tool that aggregates Ordinals from different markets into a single platform and offers features such as trends, recent sales, and floor price displays. It simplifies trading by helping users find the best deals, as often BRC20 tokens and collectibles vary in price on different platforms.
Liquidium:Ordinals 借贷平台
Liquidium is one of the first Ordinals applications to support decentralized finance, or DeFi for short. The protocol allows peer-to-peer lending of Bitcoin using the Ordinals inscription as collateral. Currently, the first tier of the lending market includes NodeMonkes, Bitcoin Frogs, and RSIC.
Alex Go：领先的 DeFi
With a total trading volume of over $800 million and a TVL of $122 million, AlexGo is one of the leading protocols for DeFi on Stacks on Bitcoin L2. It provides support for Ordinals through four applications:
- AMM DEX: A native decentralized exchange using automated market maker AMM to facilitate trading between various Bitcoin ecosystem assets.
- B20: A native trading application that supports trading BRC-20 tokens using an order book.
- Kickstart: Launchpad for various projects, including Ordinals and BRC-20.
- Connect: An asset bridge that supports Bitcoin, BRC-20, and EVM-compatible networks.
Chapter 5: Ecological Development Highlights
Recursive inscriptions
One of the earliest breakthrough developments in the field of inscriptions was the introduction of recursion. Recursive inscriptions first gained attention in June 2023, and the total number of recursive inscriptions has recently surpassed 350,000.
In a nutshell, recursive inscriptions allow new inscriptions to invoke and reference data from existing inscriptions. It may sound boring, but the implications are profound!
First, recursion provides a practical way to circumvent the Bitcoin block's 4 MB limit. By splitting the data into multiple inscriptions that reference each other and are in different blocks, it allows us to easily upload large files to the Bitcoin network. Two other significant benefits of recursion are increased storage efficiency and reduced transaction costs.
On top of that, recursion is the origin of a plethora of developer tools. With recursion, the codebase is able to be built with inscriptions. As a result, Ordinals has truly reached the next level of optimization. For example, we can now use recursion to create high-quality NFT sets on Bitcoin, thanks to which recursion allows creators to leverage existing inscription libraries and thus aggregate the inscribed traits of collectibles to streamline the process of creating thousands of unique NFTs without having to create thousands of NFT sets individually as before.
Alternative Token Standards
With only three functions (deploy, mint, and transfer), the BRC-20 token is not only limited in functionality, but also static in development. As a result, new experimental token standards have emerged and aspire to be an improved version of BRC-20. Here's a quick look at the two current alternatives:
CRBC-20
The CRBC-20 token standard, called Cybord, takes advantage of the fact that inscriptions can directly store arbitrary data. As a result, the cost of inscriptions is greatly reduced, and the indexing process is greatly simplified, making the CRBC-20 a cheaper and faster alternative to the BRC-20.
ORC-20.
Like the CRBC-20, the ORC-20 addresses the limitations of the BRC-20 and focuses on enhancing safety and flexibility. Unlike BRC-20, ORC-20 supports a wider range of data formats, allows for transaction reversal, and is backwards compatible with BRC-20. In addition, the ORC-20 saves on transaction fees and costs less by running reusable inscriptions.
Chapter 6: The Road Ahead
Key takeaways:
At the beginning of 2023, Bitcoin underwent significant developments centered on inscriptions, creating immutable digital assets: Ordinals and BRC-20s tokens. Although the nascent Ordinal is not yet mature enough, it now has a market cap of over $1.7 billion, and there is no doubt that it has revolutionized Bitcoin by giving users the ability to store all kinds of data on Sat.
The ecosystem currently includes centralized and decentralized exchanges, marketplaces, popular token standards, and protocols based on their technology. Since it was in its early stages, speculation and enthusiasm among Ordinals supporters were on the rise as new token standards emerged, and even DeFi applications began to experiment with the financialization of Ordinals.
In addition, the recent approval of the spot Bitcoin ETF marks a milestone in institutional adoption. Despite the controversy over the long-term effects, the Ordinals and BRC-20 ecosystems are poised to benefit from Bitcoin's widespread adoption and growing demand.
Future outlook
Despite the booming ecosystem, skepticism has not stopped, with some Bitcoin enthusiast groups advocating for developers to eliminate the Ordinal technology and its related elements. Although this criticism is multifaceted, it stems from the shortcomings of the technology itself and the impact on the Bitcoin network, so they even see the inscription as a system vulnerability.
It is beyond the scope of this guide to elaborate on this discussion. However, it is important to acknowledge that the Ordinals and BRC-20 transactions have led to an explosion in demand for Bitcoin block space, which could negatively impact Bitcoin's network health. Unreasonably high transaction fees and long confirmation times due to crowded mempools are just one of the negative consequences. Inscriptions, on the other hand, are an important source of income for miners to protect their networks. The upcoming Bitcoin halving, which will occur around late April 2024, will further shake up the debate when miners' block rewards are halved.
While the future of Ordinals and BRC-20 may remain uncertain, there is still a lot of enthusiasm surrounding their ecosystems. Hopefully, this guide will not only pique your interest but also encourage you to explore the Ordinals world of Bitcoin further. To keep your curiosity alive and point you to potential avenues to research it, here are two upcoming trends to keep an eye on:
Trac Network: The pioneer of decentralized indexing
For Ordinals to work, the Ordinals index is required. It's critical to understand that Ordinal and BRC-20 transactions are done via off-chain indexing of on-chain data without technical complexity, allowing the entire network to identify, track, and sort Ordinals, which means indexing is critical infrastructure.
To exchange inscriptions between two parties, both entities must run the same index. Currently, the vast majority of projects are using ord indexers to solve compatibility issues, which makes this important piece of infrastructure very centralized. Reliance on a single indexer poses serious technical risks, so some protocols are struggling to build viable competitors. One of them is Trac Network.
Trac Network's core product is Trac Core, and its value proposition is decentralized, open-source indexers. It achieves the goal of decentralization by introducing governance tokens. This means that TRAC holders are able to influence the direction and manage the development of Trac Core by voting on key development projects.
It is currently trading at $4.65 and has a market cap of $9.7 million, but so far, the decentralized indexer has not yet been fully released.
有关更多信息，请查看 《Many Words On Trac Network》。
Rune: Fungible token protocol
Ordinal Theory's creator, Casey Rodarmor, is developing a fungible token protocol with an expected release date of April. This new fungible Bitcoin token protocol, known as Rune, is based on the Ordinals technology stack and aims to solve many of the problems of the current BRC-20 token standard. For example, tokens created using the Rune protocol will not require off-chain infrastructure, eliminating many points of contention against BRC-20.
Since it was built by the same people who came up with the Ordinal Theory, speculation about the Ordinal official token issuance is all over the community. Such a token standard could have real potential to replace BRC-20.
Aaron summarizes Casey Rodarmor's latest podcast on Rune here, a gold mine for alpha.
glossary
- Aggregator: An aggregator integrates products, activities, data, information, and more on various markets and exchanges and brings them together on a single platform. By using an aggregator, users can effectively determine the optimal price.
- Automated Market Makers (AMMs): AMMs are algorithms that facilitate decentralized trading of digital assets. In a nutshell, AMMs automatically exchange assets through the use of liquidity pools, which are smart contracts containing two or more cryptocurrencies.
- Bitcoin Halving: Bitcoin halving is a key mechanism built into the design of Bitcoin Core. Approximately every four years, the block reward is halved to control Bitcoin's supply, scarcity, and inflation. Miners secure the network by solving complex mathematical equations, and incentivize absenteeism through block rewards to validate and maintain the state of the Bitcoin network. After each halving, miners' rewards are halved.
- BRC-20: BRC-20 is a token standard whose purpose is to generate and manage fungible tokens in the Bitcoin blockchain. It utilizes the Ordinals protocol for data inscription and is a type of Ordina.
- Bridging & Bridges: Bridges in crypto are applications that allow users to exchange assets between two different networks. Therefore, bridging refers to the transfer of assets across networks.
- Decentralized Finance (DeFi): Decentralized finance refers to applications that use blockchain technology to provide financial services without the need for middlemen. DeFi allows you to trade assets, earn interest, borrow and lend, and much more without the need for third-party intermediaries.
- EVM-compatible: EVM stands for the Ethereum Virtual Machine, which is the computing engine of the Ethereum network. It controls the state of the network and enables smart contracts to run. EVM compatibility refers to the ability of a network or protocol to write and deploy code that is compatible with the EVM.
- Floor Price: The floor price is the lowest market price of an asset, which means the cheapest price at which a good can be purchased.
- Governance Token: A governance token is a utility token that grants holders to participate in project decision-making. It is often necessary to vote on governance proposals that affect the trajectory of the project.
- L2: L2 is an abbreviation for Layer 2 and refers to a network built on top of Layer 1, such as the Layer 2 network of the Bitcoin network. In general, L2 networks exist to introduce features that enhance and extend the underlying blockchain, such as reducing transaction fees.
- Ordinals: Ordinals are specific Sats with arbitrary data engraved on Bitcoin. Data can include text, images, videos, GIFs, audio, and even code.
- Satoshis (Sats for short): Satoshis, often abbreviated as Sats, are the smallest denomination of BTC. One BTC is equivalent to 100 million Sats. The name is derived from Satoshi Nakamoto, the anonymous creator of Bitcoin. SATS is used to pay transaction fees and enables micropayments. Bitcoin has a maximum supply hard cap of 21 million, so the maximum supply of SATS is 2.1 trillion SATs.
- TVL: TVL stands for Total Value Locked and is a commonly used metric in cryptocurrencies to define the total value of a digital asset locked in an application.
Special thanks to Redphone and Gutz for their valuable feedback and contributions to this report.