Ordinals and BRC20: An Analysis of Market Development Prospects in 2024

The working principle of Ordinal technology is key foundational knowledge. In the Bitcoin system, 1 Satoshi is the smallest unit, equivalent to one hundred millionth of a Bitcoin. Ordinal technology assigns a unique serial number to each Satoshi, enabling it to be tracked and traded through inscriptions.

Ordinals allow data, such as images, text, or videos, to be inscribed on a single satoshi. Once the transaction is confirmed, this data will be permanently stored on the Bitcoin blockchain. This feature makes each satoshi a unique and non-fungible unit.

The advantage of Ordinals NFTs lies in their creation directly on the Bitcoin main chain. Since their launch in January 2023, the inscription activity has shown explosive growth, and the Bitcoin NFT market has thrived as a result.

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

It is worth noting that while BRC-20 is a form of ordinal inscription, not all ordinals are BRC-20 tokens. Standard ordinals can inscribe any information, while BRC-20 tokens always contain JSON data in a specific format. This distinction makes BRC-20 tokens fungible, unlike standard ordinals.

According to market data, the total market capitalization of BRC-20 has reached approximately $3.4 billion, growing 3.4 times in 7 months. Among them, ORDI, as the first minted BRC-20 token, has become a leading token in the market alongside SATS.

The advantages of BRC-20 include:

• Expanded the concept of Bitcoin as "digital gold" and realized tokenization.
• Inherits the high security of the Bitcoin PoW system
• Operates entirely on-chain, without the need for an additional file system
• You can leverage the large user base of the Bitcoin network.
• Compatible with existing Bitcoin infrastructure

However, BRC-20 also faces some challenges:

• Limited by the transaction processing capacity of the Bitcoin network, which may result in high fees and delays.
• Compared to ERC-20, smart contract functionality is limited.
• There are difficulties in interoperability with other blockchain networks.
• As an emerging technology, it is still in the experimental stage, with limited support tools.

BRC-20 is redefining the Bitcoin ecosystem by introducing fungibility. With the development of Bitcoin Layer 2 solutions, 2024 may witness the emergence of more DeFi projects centered around BRC-20. Although BRC-20 is still in its early stages, its development trajectory is reminiscent of Ethereum's early growth. The growing interest from users, project teams, developers, and investors in BRC-20 highlights the potential of this technology.