Ordinals and BRC20: Market Outlook for 2024

Before discussing BRC-20 tokens, it’s crucial to understand how ordinals work. Essentially, 1 Satoshi is the smallest unit of Bitcoin, and 100 million Satoshis equals 1 Bitcoin.

Ordinal technology assigns a unique serial number to each satoshi, allowing it to be tracked and traded through inscriptions. Each satoshi can be engraved with data, such as images, text, or videos. This data is permanently stored on the Bitcoin blockchain once the transaction is confirmed, making each satoshi unique and irreplaceable.

The advantage of Ordinals NFTs is that they are created directly on the Bitcoin blockchain. Since their launch in January 2023, the inscription activity has significantly increased, and the Bitcoin NFT market has flourished as a result.

In March 2023, a developer laid the groundwork for a new token standard called BRC-20. This is an experimental fungible token (FT) standard on the Bitcoin blockchain. Unlike the ERC-20 standard, which relies on smart contracts, BRC-20 utilizes ordinal inscriptions to achieve token deployment, minting, and transfer by directly writing JSON data into satoshis.

Although BRC-20 is a type of ordinal inscription, not all ordinals are BRC-20 tokens. Standard ordinals can be inscribed with any information, while BRC-20 tokens are specifically inscribed with JSON data, making them fungible.

According to market data, the current market value of BRC-20 is approximately 3.4 billion USD, growing 3.4 times in 7 months. Major tokens include ORDI (the first minted BRC-20 token) and SATS, among others.

The advantages of BRC-20 include:

• Enhanced the tokenization capabilities of Bitcoin
• Inheriting the high security of the Bitcoin PoW system
• Fully on-chain, no additional file systems required
• Can attract a large user base of the Bitcoin network
• Compatible with existing Bitcoin infrastructure

However, BRC-20 also faces some challenges:

• The limitations of the Bitcoin network may lead to scalability issues.
• The smart contract functionality is relatively limited.
• There are challenges in interoperability with other blockchain networks.
• As an emerging technology, it is still in the experimental stage and carries certain risks.

BRC-20 introduces fungibility, bringing new possibilities to the Bitcoin ecosystem. With the development of the Bitcoin L2 ecosystem, more DeFi projects centered around BRC-20 may emerge in 2024. Although BRC-20 is still in its early stages, its development trajectory is somewhat similar to that of Ethereum’s early days. The growing interest from users, projects, developers, and investors in BRC-20 highlights the potential of this technology.