How the Ordinals "inscriptions" affected the BTC ecosystem

In 2023, the center of attention of the entire cryptocurrency world was Bitcoin (BTC). This was largely due to the hype around spot ETFs. However, the Ordinals protocol overlays and BRC-20 tokens have also attracted a lot of attention.

Binance Research specialists in a new report have figured out how “inscriptions” and BRC-20 influenced the ecosystem of the first cryptocurrency.

Opinions continue to differ regarding «inscriptions» and the BRC-20

The Ordinals protocol, which laid the foundation for BRC-20 tokens, appeared in March last year. The project allows you to “enter” various data, including videos and photos, into Satoshi, the smallest unit of Bitcoin.. Recently, even a tweet from Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), was archived in the captions.

The innovative idea quickly attracted the attention of the crypto community, but it was short-lived. The sharp surge in activity began to decline by the summer. However, it resumed by the end of 2023.

For more information about which BRC-20 tokens to pay attention to this year, read our material.

There are many points of view regarding “inscriptions” and BRC-20 tokens. Some believe that they overload the network and thereby increase fees. Others see new opportunities in technology. In particular, they emphasize that inscriptions can reduce security budgets and facilitate the development of second-layer (L2) solutions for the major cryptocurrency ecosystem..

Impact on the BTC ecosystem

After the launch of the Ordinals protocol, a huge number of memcoins suddenly appeared in the Bitcoin blockchain. Coupled with the overall market recovery, the wave of meme coin creation has led to a surge in speculative activity on the BTC network.

The volume of inscription minting has increased steadily throughout 2023. Already in April, the number of such tokens exceeded 1 million, and by the end of the year reached 50 million. Currently, the total number of BRC-20 in the Bitcoin blockchain is 59 million.

Minting volume of “inscriptions” by month. Source: Binance Research

Ordinals-related activity has brought the number of transactions in the BTC mempool to an all-time high. The changes also affected the average block size and transaction fees..

Graph of the number of transactions in the BTC mempool. Source: Binance Research

However, the «inscriptions» and BRC-20 had the greatest impact on motivation among developers. Last year, a huge number of new programmers came to the Bitcoin network. In this regard, many BTC-based projects are updated faster, and more and more innovative ideas are appearing in the community of the first cryptocurrency.

“We may see a completely different Bitcoin ecosystem in the coming years.. Some might argue that these changes are contrary to the purpose of BTC.. However, continued innovation is critical to creating new, interesting use cases that can drive widespread adoption,” the analysts noted.

Small but actively developing ecosystem

While the Ordinals landscape is still in its infancy. However, the protocol has given rise to various projects in the decentralized finance (DeFi) stack, non-fungible tokens (NFTs), and even lending..

What the entire Ordinals ecosystem looks like now. Source: Binance Research

Binance Research analysts identified the following most notable projects in the inscription ecosystem:

bitSmiley is an infrastructure protocol for the BTC network that combines three critical elements of DeFi: stablecoins, lending and derivatives. The project is about to launch its “stable” coin, bitUSD, based on bitRC-20, an improved version of BRC-20. The asset will become a store of value, a medium of exchange, and a unit of account in the Bitcoin ecosystem. Liquidium is a peer-to-peer Bitcoin lending protocol that allows the use of “inscriptions” and BRC-20 tokens as collateral. Portal is a cross-chain liquidity solution focused on BTC. With the help of the project, users can transfer BRC-20 to other blockchains.

Previously, the Binance crypto exchange launched a marketplace for trading “inscriptions” and BRC-20 tokens. OKX also added support for four Ordinals standards.

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