Original source: LK Venture
Author: Gavin
Bitcoin Ordinals write the information completely on the Bitcoin chain, just like a tattoo, it becomes a part of Bitcoin.
Good crops can only be cultivated on fertile land. Bitcoin has been running successfully for 14 years and is now the 10th largest asset in the world by market cap, behind Nvidia.
LK Venture believes that Bitcoin has changed many people. It allows us to look at the world from a new perspective and let us think about "what is value?" Even if some people question Bitcoin, they cannot hide the fact that Bitcoin Has become a mature and widely recognized asset.
Data source: Global ranking, https://companiesmarketcap.com/
While Bitcoin is changing us, it is also changing, and innovations around Bitcoin are constantly emerging: Bitcoin Layer 2 solutions, Ordinals protocol, BRC-20, Nostr protocol, etc. These innovations can provide Bitcoin with faster and more convenient transaction methods, and also provide Bitcoin with greater possibilities and imagination.
Some people will question these innovations, but why didn't Bitcoin grow amid doubts? Let's put aside our stereotypes for a while and first understand these new concepts around Bitcoin, which is also the original intention of this article. Repeat the first sentence at the beginning, an investment concept worth thinking about: Only on fertile land can good crops be cultivated.
Note: With regard to innovations in the Bitcoin field, we are well aware that relevant content and opinions still need to be further improved. We warmly welcome your comments and suggestions, and sincerely invite all friends to participate in the discussion.
1. Ordinals Protocol——Bitcoin "Satoshi" Era Has Officially Arrived
Since Ethereum was designed from the beginning to support smart contracts and decentralized applications, it has a natural advantage in the field of NFT. Based on the ERC-721 standard of Ethereum, developers can easily create, issue and trade NFT.
At this point you may be thinking, why can’t Bitcoin, which has the strongest consensus, issue NFT? The original intention of Bitcoin is to become a digital currency for peer-to-peer transactions, so its network focuses more on security, stability and simplicity, which leads to its relatively limited functions in smart contract and dApp development.
That doesn't mean the Bitcoin network can't support NFTs, or even issue "tokens." And that brings us to Ordinals, a protocol created by former Bitcoin developer Casey Rodarmor.
1. The beginnings of Ordinals: Bitcoin NFT
In January 2023, Bitcoin Core contributor Casey Rodarmor released the Ordinals protocol. The emergence of the Ordinals protocol has rekindled the discussion on Bitcoin NFT. How does the Ordinals protocol make NFT possible on Bitcoin?
The total amount of Bitcoin is 21 million, and its smallest unit is sats (Satoshi), 1 BTC=100 million sats.
The Ordinals protocol proposes an innovative design based on "Satoshi", allowing various information to be embedded in "Satoshi" - such as pictures, texts, videos, etc. ("inscription", also called inscriptions), and the uploaded inscriptions and Specific "Satoshi" are connected ("ordinal"), and this process is called inscribe, which is similar to the minting (mint) of Ethereum NFT. What ended up being a Satoshi carrying the inscription, the so-called Bitcoin NFT.
When each Satoshi has a unique mark and number, the corresponding content is also unique, making Satoshi change from the role of only a pricing unit to an NFT unit.
The number of Ordinals inscriptions has exceeded 1.6 million
As of April 23, 2023, the number of Ordinals inscriptions has exceeded 1.6 million, which also means that the NFT of the Bitcoin ecosystem cannot disappear.
What value does Ordinals NFT bring?
●Permanently on the chain. Bitcoin Ordinals NFT is completely written on the Bitcoin chain, just like a tattoo, it has become a part of Bitcoin forever. It is very meaningful to store the things you like permanently on the Bitcoin chain;
●It will not return to zero. Ordinals NFT will not return to zero, its base value is one sats (Satoshi);
●Historical value. The total amount of Bitcoin is limited, and the total number of inscriptions that can be engraved is also limited. As time goes by, early inscriptions become more precious due to their historical status. In the field of NFT, uniqueness and scarcity will give higher value to works, and earlier Bitcoin NFT inscriptions may become more and more precious.
Although the Ordinals protocol has only been around for three months, it has already spawned many ecological projects built around its infrastructure, including wallets, trading markets, and tools. Leading exchanges such as OKX and Binance have also begun to join the ranks of supporting the Ordinals ecology.
Some Interesting Ordinals NFTs
1) Twelve Fold
TwelveFold, a Bitcoin NFT project by Yuga Labs, is a collection of 300 unique pieces of generative art.
2) Bitcoin Punks
Bitcoin Punks is the first project to successfully upload original Ethereum CryptoPunks to the Bitcoin blockchain using Ordinals, all assets have been minted by collectors for free.
3) Taproot Wizards
Why is Taproot Wizards getting so much attention? It is said to be the largest block in the history of Bitcoin, with a capacity of a staggering 4MB, which is 4 times higher than the usual 1MB limit.
4) Pixel pepes
"Pepe the Frog" is the most disseminated meme on the Internet. Pixel Pepes is airdropped from the Ordinals Wallet, and is composed of the most active KOLs and ecological developers in the ecosystem.
2. Exploration of the Ordinals: BRC-20
LK Venture believes that the composability of the digital world has brought many interesting experiments to the industry. Two months after the release of the Ordinals protocol, Twitter user @domodata proposed another Token standard on Bitcoin — the BRC-20 standard — on the Ordinals protocol.
Mint and transfer function of brc-20, source: https://domo-2.gitbook.io/brc-20-experiment/
BRC-20 leverages 𝗢𝗿𝗱𝗶𝗻𝗮𝗹 𝗶𝗻𝘀𝗰𝗿𝗶𝗽𝘁𝗶𝗼𝗻𝘀 of JSON data to deploy token contracts, mint tokens, and transfer tokens. You can think of the BRC-20 standard as an application NFT of Ordinals, which is equivalent to a check. BRC-20 does not have a smart contract.
The first BRC-20 token "Ordi" deployed by @domodata, source: https://domo-2.gitbook.io/brc-20-experiment/
Within 24 hours of brc-20 launch, more than 30,000 𝗢𝗿𝗱𝗶𝗻𝗮𝗹 𝗶𝗻𝘀𝗰𝗿𝗶𝗽𝘁𝗶𝗼𝗻𝘀 were minted. @domodata also deployed the first BRC-20 token — $ordi, with a total of 21 million. Everyone can mint for free. In less than 2 days, $ordi was all mint.
While @domodata stated multiple times that brc-20 and $ordi are just experiments and have no value, some people are still trading $ordi and minting more BRC-20 tokens. There are currently 3,466 BRC-20 tokens with a total market capitalization of close to $20 million.
The arrival of the "Satoshi" pricing era
Is it really necessary to issue coins on bitcoin ordinals? BRC-20 does not have a smart contract, and the inscription can be used as a ledger, but it is difficult to produce an efficient and stable system with an immutable ledger. And "writing" on the Bitcoin chain takes up very precious resources-this not only includes paying a certain amount of Satoshi as a miner's fee, but also includes the time cost spent waiting for the transaction to be confirmed.
BRC-20 is built on top of Ordinals, creating instability on top of instability makes it very fragile. Since BRC-20 does not continue to use Bitcoin UTXO, it is easy to cause problems in transactions. Recently, after Unisat launched the BRC-20 trading market, it was attacked by related transactions and suspended the market.
BRC-20 is still an experiment, why would some people participate in it? In addition to the very FOMO speculative attributes, if you deploy some tokens with Mint, you will find that the release of brc-20 tokens seems to have achieved the original idea of the encryption industry-everyone can simply issue tokens, and the greatest value lies in its value in Bitcoin. currency. It takes a part of Satoshi, and these brc20 tokens are like a clone of Bitcoin, and Bitcoin gives it value.
More importantly, in the view of LK Venture, we have seen the arrival of the "Satoshi" denomination era, and all NFTs on the Ordinals NFT trading platform have begun to be denominated in Bitcoin. After Unisat launches BRC20-related tokens, it will be directly denominated in sats (Satoshi). Seeing the micro-knowledge, the era of "Cong" pricing has officially arrived.
summary
Regardless of the success of the Ordinals protocol and brc-20, its emergence allows us to see new possibilities for Bitcoin, which makes the Bitcoin ecosystem more diverse and vibrant. Most importantly, they transformed the smallest unit of Bitcoin, sats (Satoshi), from a concept to a practical unit.
2. Lightning Network - Let Bitcoin "Satoshi" flow
Bitcoin has been plagued by problems such as slow transaction speed, high handling fees, and difficult expansion. These problems have also restricted Bitcoin's performance and wide application scenarios.
How to solve these problems? Many developers are trying to build a so-called Layer 2 network on top of Bitcoin. The Bitcoin two-tier network (Layer 2) is a technical solution built on top of the Bitcoin main chain (Layer 1). By running protocols or platforms on top of the base layer, the two-tier network can make full use of the Bitcoin main chain The security and decentralization features, while providing a more efficient trading experience.
There are many second-tier solutions for Bitcoin. Among the second-tier solutions of Bitcoin, Lightning Network and side chains (such as Liquid Network) are mainstream, and Lightning Network is currently the most widely used. Next, let's talk about the Lightning Network.
What is the Lightning Network?
Lightning Network (Lightning Network) is one of Bitcoin's Layer 2 solutions. It is mainly used in Bitcoin payment scenarios. It can help users save costs and improve efficiency.
The same point-to-point payment, why does the lightning network complete the payment at a lower cost and faster speed? Because the Lightning Network puts the transaction link off-chain, only the final transaction result is confirmed on the Bitcoin main chain.
Advantages of the Lightning Network
●Small transactions are more convenient
Through the Lightning Network, users can use the smallest unit of Bitcoin "Satoshi" to pay, which also meets the needs of daily sporadic consumption.
Data source: https://bitinfocharts.com/comparison/bitcoin-transactionfees.html
●Reduce transaction costs
At present, the transaction fee of Bitcoin is about US$2. At the peak of the market in 2021, the fee once exceeded US$60. If you use the Lightning Network, the handling fee for $100 is about 1 cent, which is very cost-effective for daily micropayments.
● Speed up transaction processing
Currently, the Bitcoin network can process up to 7 transactions per second. Network congestion may cause delays in transaction confirmation and affect user payment experience. Theoretically, the lightning network can reach the processing speed of millions of transactions per second.
Development of Lightning Network
The technology of the Lightning Network is gradually maturing, and payment and social giants are also promoting the popularity of the Lightning Network. As of April 25, 2023, the Lightning Network has a total of 16,000 nodes, nearly 75,000 payment channels, and channel funds of about 5,379 bitcoins (about 152 million US dollars).
Let's look at the current usage scenarios of the Lightning Network:
●Social platform payment tipping
A lot of people use the Lightning Network because of the Nostr protocol, and the Damus application built on top of it, because it supports Lightning Network payments and tipping.
●Cross-border remittance
In January 2023, the digital payment platform Strike announced a partnership with Send Globally to enable Lightning Network remittances between users in the United States and the Philippines. With Send Globally, U.S. dollars can be converted into bitcoins, sent via the Lightning Network to a third-party partner in the recipient’s country, converted to local currency, and sent directly to the recipient’s account.
●Merchant payment
Strike has partnered with Shopify, Blackhawk Network, and NCR to build a bitcoin payment system that allows merchants to quickly receive U.S. dollars after customers pay in cryptocurrencies. Merchants currently supporting the payment system include McDonald's, CVS, Walgreens, Whole Foods, and Walmart.
The Lightning Network has been working hard to fulfill Bitcoin's original intention - to be a peer-to-peer electronic cash system. In addition to large-value transactions, "Satoshi" in small-value transactions can also flow very conveniently through the Lightning Network.
Although the Lightning Network is facing many challenges on the road to popularization, as the technology gradually matures and the usage scenarios continue to enrich, the Lightning Network will definitely become Bitcoin's right-hand man.
epilogue
LK Venture believes that no matter you are a developer or a speculator, as long as you participate in Bitcoin, you will promote the prosperity and development of the Bitcoin community and Bitcoin itself.
Whether it is the Ordinals protocol, the BRC-20 experiment, or the second-layer solutions such as the Lightning Network, these have expanded the application range of the Bitcoin network, and can use "Satoshi" and "Satoshi" to denominate, reducing the psychological pressure of entrants and Use Threshold. There is nothing wrong with the open development and multi-faceted attempts of the Bitcoin network. With the wealth effect and the increase in the number of users, the competition among ecological products will gradually promote the overall improvement.
At this stage, many projects around Bitcoin are still in a state of chaos, and the quality levels are uneven. The only thing you need to pay attention to is: Be sure to protect your Bitcoin.
｜About LK Venture:
Linekong Interactive (08267.HK) is an encryption investment and research institution focusing on the Web3 field, formerly known as Consensus Lab (Consensus Lab), which focuses on investing in cutting-edge infrastructure, trading platforms, technical protocols and financial tools. Polkadot, Filecoin, Casperlabs, Coin98 and more than a hundred projects from North America, Asia, Europe and other countries and regions.
｜Reference materials:
1. What Are Bitcoin Ordinals? https://trustmachines.co/learn/what-are-bitcoin-ordinals-inscriptions/
2. Ordinal Theory Overview
https://docs.ordinals.com/overview.html
3.brc-20 experiment.
https://domo-2.gitbook.io/brc-20-experiment/
4. Insights From the 4th Largest Lightning Network Node
https://river.com/learn/files/river-lightning-report.pdf
｜Disclaimer:
The information and materials introduced in this article are all from public channels, and the company does not make any guarantees for their accuracy and completeness. All descriptions or forecasts involving the future are forward-looking statements, and any suggestions and opinions are for reference only, and do not constitute investment advice or hints to anyone. The strategies that the company may adopt may be the same, opposite or have nothing to do with the strategies that readers speculate based on this article.
