Bitcoin’s Next Big Wave: Ordinals, Inscriptions, and BRC-20 Tokens
How Ordinals and Inscriptions are Revolutionizing the Bitcoin Ecosystem
Casey Rodarmor introduced us to “Ordinal Theory”, a unique approach that assigns numbers to individual “sats” (the smallest unit of Bitcoin) using an off-chain technique that utilizes a First-In-First-Out algorithm. These labelled sats, known as “Ordinals”, can be monitored by any Bitcoin full node running Rodarmor’s open-source software, ORD. What’s interesting is the perceived value that can be attributed to Ordinals based on their assigned number, with round number serials often seen as more desirable. This brings to mind the charm of fiat currency notes bearing special serial numbers like 000001 or 999999, which collectors covet.
On the other hand, “Inscriptions” provide a method to append any arbitrary data to the Bitcoin blockchain. This is done using the witness data section, a feature introduced in the 2017 SegWit upgrade and expanded in the 2021 Taproot upgrade. Using Ordinal Theory, this data can be tied to a particular sat, creating a digital artefact that can be tracked and transferred. This can be likened to a banknote embellished with artwork by a renowned artist.
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Inscriptions open the door to adding diverse types of data, including images, audio, video, and text. Initially, JPEG images were the popular choice for Inscriptions on Ordinals. Prime examples include Bitcoin Rocks, Ordinal Punks, TwelveFold by Yuga Labs, BTC DeGods, and Taproot Wizards by Udi Wertheimer. These inscribed artworks have been snapped up eagerly, with individual pieces changing hands for tens of thousands of dollars.
BRC-20s, a type of fungible token standard, represent a newer development that leverages Inscriptions. Launched on March 10, 2023, by domodata, BRC-20s have now become the primary driver of Ordinal activity.
Despite sharing a similar name with the widely known ERC-20 tokens, BRC-20s have a more narrow scope. Unlike ERC-20 tokens, which can be programmed (for instance, holders of Lido’s stETH automatically receive daily yield generated by Lido’s validators), BRC-20s lack such flexibility. BRC-20s are more comparable to meme coin versions of ERC-20s, with their primary attributes being the ticker, total supply, and creator.