Fifteen charts: A review of the evolution of the Bitcoin inscription ecosystem from 0 to 1
In December 2022, Casey launched the Ordinals protocol, opening the Pandora's box of the Bitcoin ecosystem.Author: defioasis, Colin Wu
Editor: Colin Wu
(1) Ordinals Opens the Pandora's Box of the Bitcoin Ecosystem
(Data source: https://dune.com/dgtl_assets/bitcoin-ordinals-analysis)
In December 2022, Casey launched the Ordinals protocol, opening the Pandora's box of the Bitcoin ecosystem. The Ordinals protocol assigns a unique serial number to each satoshi, allowing any user to inscribe additional information on a satoshi, including text, images, videos, and 3D models. These inscriptions can be stored in Bitcoin wallets and tracked in Bitcoin transactions, possessing characteristics such as immutability and decentralization, just like Bitcoin. Casey positioned it as a way to preserve something eternal on Bitcoin, initially used for creating and storing NFT collectibles. Currently, the number of Bitcoin inscriptions has exceeded 57 million, contributing over $230 million in fees.
(2) Bitcoin Punks Lead the First Appearance of Ordinals
(Data source: https://geniidata.com/user/orddata/bitcoin-punks)
On February 9, 2023, the first NFT Bitcoin Punks, which used the Ordinals protocol to upload Ethereum's CryptoPunks bytes to the Bitcoin chain, sparked heated discussions on social media. At 15:24 on February 9, all 10,000 Bitcoin Punks were minted in less than two days after their creation. Initially, most people did not pay attention to Ordinals, seeing it merely as another replication of Punks on a different blockchain, until the inscription revolution brought by Ordinals became relevant to everyone.
(3) BRC-20 Ignites Bitcoin Ordinals
(Data source: https://dune.com/dgtl_assets/bitcoin-ordinals-analysis)
In March 2023, an anonymous developer named domo launched BRC-20 based on the Ordinals protocol. BRC-20 essentially serves as a specific JSON text file used for transactions. The JSON file is an Ordinal inscription with a unique number. Each JSON file corresponds to a specific BRC-20. BRC-20 can be seen as a standard for issuing Bitcoin altcoins, characterized by fair launches. After its launch, BRC-20 quickly ignited Bitcoin Ordinals, resulting in tens of thousands of inscribed tokens. Currently, about 95% of inscriptions on Bitcoin Ordinals are represented by BRC-20 as the main text type.
(4) OKX Shines in Inscription Layout
(Data source: https://dune.com/domo/ordinals-marketplaces)
As one of the earliest mainstream centralized exchanges to enter the inscription sector, OKX has leveraged not only the analysis and strategies of its research team but also the technological reserves built over the years with OKLink. The OKX Web3 Wallet, which can be considered one of the best product innovations in Crypto in 2023, relies heavily on the service data behind OKLink, with continuous improvements in backend service stability allowing the frontend product to closely meet user needs. Currently, the OKX Web3 Wallet has essentially become the first choice for inscription users, maintaining over 60% market share in inscription trading volume and user base, with market share reaching 80%-90% during November to December 2023. On December 16, when the market trading volume on the Bitcoin Ordinals chain reached a historic high of over $80 million, the OKX Web3 Wallet contributed nearly $74 million in trading volume.
(5) Sophon Sniper Bots Sweep BRC-20
(Data source: https://dune.com/queries/3381233)
From late September to mid-October 2023, BRC-20 faced one of its biggest crises since its inception, with on-chain minting numbers nearly dropping to zero, caused by a BRC-20 sniper bot named "Sophon" invented by an anonymous developer Rijndael. The Sophon bot utilized the BRC-20 "first come, first served" deployment mechanism and the public nature of most Bitcoin transactions to monitor BRC-20 deployments in Bitcoin transactions, then broadcast similar inscriptions for the same token code at higher fees, effectively replacing other BRC-20 deployment transactions, making its copied BRC-20 "official." Additionally, Sophon set each deployed token to 1, ensuring that each deployed token had a unique holder, causing on-chain minting activities to stagnate. Fortunately, Rijndael is not a hacker, and running Sophon incurs significant costs, leading to its eventual shutdown after a period of operation, with donations made to the open-source software opensats.
(6) ORDI Listed on Major Exchanges OKX and Binance
(Data source: https://coinmarketcap.com/currencies/ordi/)
As the first inscribed token of BRC-20, ORDI experienced a fair launch that initially required only gas for minting, skyrocketing to over $90, achieving tens of thousands of times in growth within less than a year. During this process, BRC-20, led by ORDI, and the underlying Ordinals protocol gradually gained recognition among more users. In May and November 2023, ORDI was listed on the two major exchanges OKX and Binance, completing a tenfold increase within a month after being listed on Binance. Subsequently, SATS also landed on Binance and OKX. The listings of ORDI and SATS on major exchanges demonstrated the exchanges' positive attitude towards inscribed assets and raised expectations for more inscribed tokens to be listed.
(7) Inscription Activities Conduct "Stress Tests" on Major Public Chains
(Data source: Chain Explorer)
From mid-November to December 2023, the abundance of inscription funds began to overflow from Bitcoin to various EVM public chains, rapidly spreading the FOMO sentiment for the first inscribed asset to major public chains, even causing testnets to become targets of pursuit. More than a dozen public chains suddenly experienced millions or even tens of millions of transactions on certain days, causing some public chains to crash.
(8) Inscription Narrative Expected to Become a New Potential Growth Point for Bitcoin Miners' Income
(Data source: https://studio.glassnode.com/metrics?a=BTC\&category=\&m=fees.VolumeSum\&s=1672531200\&u=1706198399\&zoom=)
Driven by inscription activities, on December 16, 2023, Bitcoin's transaction fees in USD reached $23.69 million, setting a new historical high. Unlike the previous two peaks occurring during bull markets in a four-year cycle, 2023 is not considered a bull market, which has made miners realize the enormous potential of inscriptions in promoting Bitcoin network transaction fees. Especially with the halving approaching, if the demand for inscriptions remains sustainable, it could significantly improve miners' economic income.
(9) External Crisis: Bitcoin Core Developer Luke Dashjr Calls for Inscription Ban
(Data source: https://github.com/bitcoin/bitcoin/pull/28408)
In September 2023, Bitcoin Core developer Luke Dashjr submitted PR #28408 to the Bitcoin Core Github, proposing to update "datacarriersize" to filter transactions carrying new script data like "inscriptions." On December 6, 2023, Luke criticized on social media, claiming that "inscriptions" were exploiting vulnerabilities in Bitcoin Core to spam the blockchain and hoped to ultimately fix the vulnerability before the release of v27 in 2024. Luke categorized the popular inscriptions as vulnerabilities in Bitcoin and was determined to fix them, becoming the biggest external crisis faced by protocols like Ordinals and other Bitcoin inscriptions at that time.
The issue of whether to keep or remove inscriptions surrounding PR #28408 sparked intense discussions among Bitcoin developers on Bitcoin Core Github for a month, with hundreds of comments. At the same time, various factions representing miners, developers, communities, and users engaged in heated debates on social media. However, due to significant differences in opinions, it was difficult to reach a conclusion. Bitcoin Core core maintainer achow101 believed that the PR was clearly controversial and ultimately closed it on January 5, 2024. Thus, the external crisis of the Bitcoin inscription protocol temporarily came to an end. During this period, although the inscribed asset represented by ORDI was affected in the short term, it still rose nearly 35% overall, reaching a historical high.
(10) Internal Crisis: BRC-20 Creator domo and Major Indexer UniSat's Consensus Discrepancy
BRC-20 is based on the Ordinals protocol but is not a native part of it. When the Ordinals protocol faces upgrades, BRC-20 will encounter the issue of whether its index should follow the upgrade of the Ordinals protocol. The index is essentially a consensus carrier. To maintain the stability of the index, domo froze BRC-20 at version ord v 0.9 in November 2023. However, as the Ordinals protocol developed, earlier issues such as the inability to recognize cursed inscriptions were resolved, bringing many new features, which posed a significant dilemma for BRC-20 frozen at ord v 0.9.
On January 3, 2024, UniSat, which holds the largest market index consensus, chose to have BRC-20 follow the Ordinals Jubilee upgrade, which contradicted the original intention of BRC-20 creator domo, who criticized UniSat for forking BRC-20. The "stability faction" led by BestinSlot and domo and the "upgrade faction" represented by UniSat and Ordinals Wallet formed two opposing forces on the BRC-20 issue, with one side being the creator and the other the largest index consensus, leading to an unprecedented internal crisis for BRC-20. Although there were disagreements, both sides had good intentions regarding BRC-20. Through friendly communication, an agreement was reached two days later on January 5, where domo and UniSat agreed that BRC-20 would follow the Ordinals upgrade. OKX and Binance also supported BRC-20's adherence to the Ordinals protocol upgrade. Although the crisis was resolved in a short time, it highlighted the challenges of consensus fragmentation faced by assets derived from the Ordinals protocol in their early development.
(11) The Diversification of Inscription Asset Types in the Ordinals Ecosystem Cannot Be Ignored
(Data source: https://dune.com/dgtl_assets/bitcoin-ordinals-analysis)
Although text types led by BRC-20 dominate the inscription types, other types of inscribed assets have never ceased to develop, and accurate positioning still allows for a niche development space. From Bitcoin Punks to Bitcoin Frogs to NodeMonkes, image-type assets represented by NFTs maintain a stable development trend, returning to the essence of NFT collectibles with their fully on-chain and immutable characteristics; 3D model-type assets represented by BRC-420 Blue Box showcase the imagination of building a metaverse on Bitcoin, with the number of model inscription assets reaching a historical high of 61,000 on January 23, 2024; building applications on Bitcoin has become a reality.
(12) The Runes Protocol Proposed by the Founder of Ordinals is Highly Anticipated
(Data source: https://geniidata.com/user/jonsnft/degen)
Due to the adverse effects of the significant increase in UTXOs brought by BRC-20, Casey, the founder of the Ordinals protocol, publicly criticized BRC-20 on social media on September 25, 2023, and proposed a new tokenization standard protocol called Runes as an alternative to BRC-20. Runes balances are recorded and stored by UTXOs, with a single UTXO capable of containing an arbitrary number of runes. Compared to BRC-20, UTXO-based Runes align more closely with Bitcoin's native characteristics, reducing the harm caused by UTXO set expansion and lowering the risk of consensus fragmentation due to reliance on external indexing.
The "official" Runes protocol mainnet proposed by Casey is scheduled to launch during the next Bitcoin halving, but the vision of Runes has already been realized in some grassroots protocols, such as Rune Alpha, which deployed the COOK rune token; PIPE Protocol launched by inscription labor model Benny, which produced PIPE and other rune tokens; and RSIC's new mining gameplay, where the mining output is a certain rune token after the Runes protocol goes live.
(13) The Atomicals Protocol Based on the UTXO Model Shows Potential
(Data source: https://dune.com/0xmatsu0x/atomicals-vs-ordinals)
In September 2023, Arthur launched the Atomicals protocol, an improvement to Ordinals based on the Bitcoin UTXO model, after months of refinement. It features a GPU Bitwork mining mechanism and natively defines three asset types: NFT, ARC-20, and Realm, with ARC-20 being a colored satoshi token standard, where each ARC-20 token is backed by 1 satoshi. Being more aligned with Bitcoin's original ecology, Atomicals is also seen by the community as having the potential to succeed Ordinals and initiate a new round of inscription ecological prosperity. Named after the basic unit of matter, Atomicals has formed a physical MEME culture led by ATOM, with most other ARC-20 tokens also named after physical terms. On January 1 and January 21, 2024, the minting activities of QUARK and SOPHON pushed Atomicals to exceed Ordinals in daily minting/deployment numbers.
(14) Airdrops for Bitcoin Degen Players May Become the Norm, RSIC's First High-Value Airdrop
(Data source: https://dune.com/keyinotc/rsic-airdrop)
On January 22, 2024, RSIC airdropped to 9,270 addresses, including active Ordinals addresses and blue-chip BTC NFT holders. The total supply of RSIC is 21,000, with the current floor price exceeding 0.036 BTC (approximately $1,500). This marks the first high-value airdrop for an inscribed project, and future airdrops to active Bitcoin players may become increasingly common.
(15) Exploring Bitcoin's Scalability Path, BTC L2 Experiences a Surge
(Data source: https://bitvm.gitbook.io/cn/btc-layer2/overview/detail)
According to statistics from the BitVM Chinese community, there are currently over 30 publicly available BTC L2s, which can be categorized into sidechains, off-chain computations, Rollups, data availability, state channels, client validation, and others. Among them, sidechains include BEVM, MAP Protocol, and Merlin Chain; Rollups include QED Protocol, BitVM, and Bison; data availability includes Veda and Nubit; state channels include OmniBOLT and Lightning Network; client validation includes RGB; and others include Bool Network, Dovi, and Bitfinity Network. It is expected that more than 100 BTC L2s may emerge in this cycle.
In just one year of inscription development, various protocols and assets have emerged, but for the vast majority of early protocols, the infrastructure regarding indexing and data is still not well-established, and my own data mining capabilities for certain protocols are insufficient, so I apologize for not being able to mention all of them.
References:
https://mp.weixin.qq.com/s/vIfc_CUKsQlCXBgkaF2VdA
