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JAN 27, 2024

Fifteen Charts Reviewing the Development of Bitcoin Inscriptions from 0 to 1 over a Year

by 吴说猫弟, WuBlockchain

Author: defioasis
(1) Ordinals Opens the Pandora's Box of the Bitcoin Ecosystem
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 a Bitcoin wallet and tracked in Bitcoin transactions, possessing characteristics like immutability and decentralization, similar to Bitcoin itself. Casey's positioning for it was to preserve something eternal and unchanging 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 Leads Ordinals' First Appearance
On February 9, 2023, the first Bitcoin NFT using the Ordinals protocol, named Bitcoin Punks, which uploaded the Ethereum CryptoPunks bytes to the Bitcoin blockchain, sparked widespread discussion on social media. At 15:24 on February 9, all 10,000 Bitcoin Punks were minted in less than two days of their creation. Initially, most people didn't pay much attention to Ordinals, considering it just another replication of Punks on a different blockchain, until the inscription revolution brought by Ordinals became closely related to everyone.
(3) BRC-20 Ignites Bitcoin Ordinals
In March 2023, an anonymous developer named domo launched BRC-20 based on the Ordinals protocol. BRC-20 is essentially used in transactions as a specific type of JSON text file. This JSON file is an Ordinal inscription, each with a unique number. Each JSON file corresponds to a specific BRC-20. BRC-20 can be seen as a standard for issuing Bitcoin memecoins, characterized by its fair launch. After its introduction, BRC-20 quickly ignited the Bitcoin Ordinals and led to the creation of tens of thousands of inscription tokens. Currently, about 95% of the inscriptions on Bitcoin Ordinals are text types, mainly represented by BRC-20.
(4) OKX Shines in Inscription Layout
As one of the earliest mainstream centralized exchanges to enter the inscription sector, OKX's long-standing technical reservoir built by OKLink played an absolute advantage, in addition to the strategies and analyses of its research team. The experience of the OKX Web3 Wallet, which could be called the best product innovation in Crypto for 2023, heavily relies on the backend service data provided by OKLink. The continuous improvement in backend service stability allows the front-end product to highly meet user needs. Currently, OKX Web3 Wallet has become the preferred choice for inscription users, with its market share in inscription volume and users consistently exceeding 60%, and at one point maintaining 80%-90% during November-December 2023. On December 16, 2023, when the Bitcoin Ordinals on-chain market volume reached a historic high of over $80 million, OKX Web3 Wallet contributed nearly $74 million in volume.
(5) Sophon Sniper Bot Sweeps Across BRC-20
Between late September and mid-to-late October 2023, BRC-20 faced one of its biggest crises since inception, with the number of on-chain mints dropping nearly to zero, caused by a BRC-20 sniper bot named "Sophon" invented by an anonymous developer, Rijndael. The Sophon bot exploited the "first-come, first-served" deployment mechanism of BRC-20 and the public nature of most Bitcoin transactions, monitoring BRC-20 deployments in Bitcoin transactions and then broadcasting similar inscriptions for the same token code at a higher fee rate. This allowed it to replace other BRC-20 deployment transactions, making its duplicated BRC-20 the "official" one. Additionally, Sophon set each token it deployed to 1, ensuring that each deployed token had only one unique holder, bringing on-chain minting activities to a halt. Fortunately, Rijndael was not a hacker, and running Sophon required substantial fees. After operating for some time, it was ultimately shut down and donated to the open-source software opensats.
(6) ORDI Listed on Leading Exchanges OKX and Binance
As the first inscription token of BRC-20, ORDI went from a fair launch requiring only Gas for minting to exceeding $90, experiencing a tens of thousands-fold increase in less than a year. During this period, BRC-20, led by ORDI, as well as the underlying Ordinals protocol, gradually gained recognition among a broader user base. In May and November of 2023, ORDI was listed on two leading exchanges, OKX and Binance, respectively, and saw a tenfold increase in value within a month of its listing on Binance. Subsequently, SATS also landed on Binance and OKX. The listing of ORDI and SATS on top exchanges demonstrated the exchanges' positive stance towards inscription assets and raised expectations for more inscription tokens to be listed.
(7) Inscription Activities Conduct "Stress Tests" on Major Chains
(Source: Chain Explorer)
From mid-November to December 2023, the abundance of funds in inscriptions began to spill over from Bitcoin to various major EVM chains. The FOMO sentiment towards the first inscription asset rapidly spread across these blockchains, even extending to testnets. Over ten public blockchains experienced sudden surges in transactions, ranging from millions to tens of millions in a single day, at times causing some of these chains to crash.
(8) Inscription Narratives Poised to Become a New Potential Growth Area for Bitcoin Miner Revenue
Driven by inscription activities, on December 16, 2023, Bitcoin's transaction fees in US dollars reached a record high of $23.69 million. Unlike the previous peaks during the four-year cycle's bull markets, 2023 is not considered a bull market year, which has led miners to recognize the immense potential of inscriptions in boosting Bitcoin network transaction fees. Especially with the approaching halving, when rewards will be cut in half, a sustained demand for inscriptions could significantly improve the economic income of miners.
(9) External Crisis: Bitcoin Core Developer Luke Dashjr Calls for the Disabling of Inscriptions
In September 2023, Bitcoin Core client developer Luke Dashjr submitted PR #28408 to the Bitcoin Core Github, proposing an update to "datacarriersize" to filter out transactions carrying new types of script data like "inscriptions." On December 6, 2023, Luke criticized on social media that "inscriptions" were exploiting a loophole in Bitcoin Core to conduct spam attacks on the blockchain and hoped to fix this issue before the release of v27 in 2024. Luke's categorization of the booming inscriptions as a vulnerability in Bitcoin and his determination to fix it posed the biggest external crisis for Bitcoin inscription protocols like Ordinals at the time.
Around the issue of whether to keep or remove inscriptions as discussed in PR #28408, intense debates took place over a month on Bitcoin Core Github, with hundreds of comments from major Bitcoin developers. At the same time, on social media, various parties representing miners, developers, the community, and users engaged in heated arguments. However, due to significant differences in opinions, it was difficult to reach a consensus. Bitcoin Core's lead maintainer, achow101, deemed the PR highly controversial and eventually closed it on January 5, 2024, temporarily resolving the external crisis surrounding Bitcoin inscription protocols. During this period, although the inscription asset ORDI was briefly affected, it still rose by nearly 35% overall and reached a new all-time high.
(10) Internal Crisis: Consensus Divergence Between BRC-20 Creator Domo and Largest Indexer UniSat
BRC-20, based on the Ordinals protocol yet not natively part of it, always faced the dilemma of whether to follow Ordinals protocol upgrades. Indexing essentially serves as a carrier of consensus. To maintain stable indexing, Domo froze BRC-20 on the ord v0.9 version in November 2023. However, as the Ordinals protocol evolved, fixing earlier issues like unrecognizable cursed inscriptions and introducing new features, BRC-20, frozen on ord v0.9, faced significant decisions.
On January 3, 2024, UniSat, holding the largest market consensus on indexing, chose to follow the Ordinals Jubilee upgrade for BRC-20, contradicting the original intention of BRC-20 creator Domo. Domo criticized UniSat for forking BRC-20. The "stabilization faction" led by BestinSlot and Domo from the Layer 1 Foundation, and the "upgrade faction" including UniSat and Ordinals Wallet, formed two opposing forces over the BRC-20 issue — one side being the creators, and the other being the largest consensus on indexing, leading to an unprecedented internal crisis for BRC-20. Despite their differences, both sides had good intentions for BRC-20. After friendly communications, Domo and UniSat reached an agreement on January 5, two days later, agreeing that BRC-20 would follow the Ordinals upgrade. OKX and Binance also supported the BRC-20 following the Ordinals protocol upgrade. Although the crisis was resolved in a short time, it highlighted the potential for consensus division in assets derived from the Ordinals protocol, especially in their early stages of development.
(11) The Diversified Ecosystem of Ordinals Inscription Assets Cannot Be Ignored
Despite the dominance of text-based inscriptions led by BRC-20, the development of other types of inscription assets has never ceased, with precise positioning still offering room for niche growth. From Bitcoin Punks to Bitcoin Frogs to NodeMonkes, image-based assets represented by NFTs have maintained a steady growth, with their entirely on-chain and immutable nature returning to the essence of NFT collectibles; 3D model assets represented by BRC-420 Blue Box have showcased the imagination in building the metaverse on Bitcoin, with a record high of 61,000 model inscription assets minted on January 23, 2024; building applications on Bitcoin has become a reality.
(12) The Runes Protocol Proposed by the Founder of Ordinals Draws Anticipation
Frustrated with the adverse effects of BRC-20 leading to a massive increase in UTXOs, 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, Runes, as an alternative to BRC-20. In Runes, the balance is recorded and preserved by UTXOs, and a single UTXO can contain any number of Runes. Compared to BRC-20, the UTXO-based Runes align more closely with Bitcoin's native characteristics, reducing the harm caused by UTXO set bloating and lowering the risk of consensus divergence due to reliance on external indexing.
The "official version" of the Runes protocol, launched by Casey, is scheduled to go live with the next Bitcoin halving. However, the vision of Runes has already been realized in some grassroots protocols, such as Rune Alpha, which deployed the COOK rune token; and the PIPE Protocol, introduced by inscription "model worker" Benny, gave birth to tokens like PIPE rune token; RSIC introduces a new mining gameplay, where the mining output will be a certain type of rune token that will be launched with the future Runes protocol.
(13) The UTXO-Based Atomicals Protocol Demonstrates Potential
In September 2023, Arthur launched the Atomicals protocol after months of development, an improvement for Ordinals based on Bitcoin's UTXO model. Atomicals features a GPU Bitwork mining mechanism and natively defines three types of assets: NFT, ARC-20, and Realm. ARC-20 is a colored satoshi token standard, with each ARC-20 token backed by 1 satoshi. Closer to Bitcoin's native ecosystem, Atomicals is considered by the community to have the potential to take over from Ordinals in sparking a new round of inscription ecosystem prosperity. Named after the basic unit of matter, 'atom', the Atomicals protocol has formed a physical MEME culture led by ATOM, with most other ARC-20 tokens also named after physical terms. On January 1 and 21, 2024, the minting activities of QUARK and SOPHON propelled Atomicals to surpass Ordinals in terms of daily minting/deployment numbers.
(14) Airdrops to Bitcoin Degen Players May Become the Norm, RSIC's First High-Value Airdrop
On January 22, 2024, RSIC airdropped to a total of 9.27k addresses, including active Ordinals addresses and blue-chip BTC NFT holders. With a total supply of 21,000 RSIC, the current floor price exceeds 0.036 BTC (about $1,500). This marks the first time an inscription project has used high-value airdrops for a cold start, airdrops to active Bitcoin players may become increasingly common in the future.
(15) Exploration of Bitcoin's Scaling Path, BTC L2 Sees Explosive Growth
According to statistics from the BitVM Chinese community, there are currently over 30 publicly known BTC L2 solutions, which can be further categorized into sidechains, off-chain computation, Rollups, data availability, state channels, client verification, and others. Among these, sidechains include BEVM, MAP Protocol, and Merlin Chain; Rollups include QED Protocol, BitVM, and Bison; data availability solutions include Veda and Nubit; state channels include OmniBOLT and Lightning Network; client verification includes RGB, and others include Bool Network, Dovi, and Bitfinity Network. It is expected that this cycle may see the emergence of over 100 BTC L2 solutions.
Within just one year of the development of inscriptions, a plethora of protocols and assets have emerged. However, for the vast majority of early protocols, the infrastructure in terms of indexing and data is still underdeveloped, and my ability to mine data for some protocols is limited. Therefore, not all of them could be mentioned, for which I apologize.
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