Introduction

In the early months of 2023 and earlier, some developers began to explore the BTC ecosystem, aiming to issue assets and deploy applications on BTC. The Ordinals protocol was one such explorer, allowing users to upload data such as images, text, and audio onto BTC—a process referred to as “inscription.” Initially applied by early participants for creating BTC NFTs, developers in March of this year started leveraging similar technology to design ERC-20 standard protocols on BTC. The basic principle involves “inscribing” data in transactions to permanently store it on the blockchain, resulting in inscriptions similar to tokens. This technology has gradually sparked experimentation within the BTC ecosystem. According to Coingecko, early inscriptions representing Ordi and Sats have become projects with a market capitalization (FDV) exceeding $1 billion each, yielding hundreds of times returns for early investors. Due to its substantial profits, people have also started inscribing assets outside of Bitcoin, giving rise to a widespread inscription ecosystem.

Overview

“Inscription” originally referred to inscriptions cast on bronze ritual vessels by ancient people to record the reasons for casting the vessel, commemorating individuals, or for sacrificial purposes. Later, it broadly referred to intentional records of the time, place, craftsman’s name, workshop name, etc., left on various objects.

In the blockchain world, inscriptions are similar. Participants “inscribe” the data they want to upload, and the on-chain information obtained is the inscription. Taking the Bitcoin chain as an example, during a transaction on the Bitcoin chain (such as a transfer), traders can input the desired text into specific fields. This text will be packaged along with the transaction by blockchain nodes, eventually becoming part of the chain. “Inscription” is the process of entering data during a transaction. However, to generate inscriptions recognized by the market, certain rules must be followed during “inscription.” These rules are defined by different inscription protocols. For example, in the popular Bitcoin inscription protocol, BRC-20 inscription Ordi, the inscription content is as shown below. Participants can only obtain Ordi inscriptions by adhering to this content during the inscription.

Information of Ordi Inscription (source: BRC-20 Doc)

On BRC-20, inscriptions are in a standardized JSON format text data. Each comma-separated entry represents a different protocol standard field. For example, “p” refers to the “protocol” used for inscription, and “tick” is its name. We will provide detailed explanations of each field later on.

History of Inscriptions

The utilization of Bitcoin block space for purposes beyond peer-to-peer financial transactions has a long history. As early as 2010, the BitcoinTalk.org forum discussed the idea of establishing a DNS system on top of Bitcoin, ultimately leading to the birth of Namecoin in 2013.

During this period, the term “Colored Coins“ gained widespread use. These protocols “tagged” or “colored” fields in the Bitcoin chain known as Unspent Transaction Outputs (UTXO). This “tagging” only required following the basic semantics of the script system and paying fees for miners to process transactions. There was virtually no limit to the data that could be stored in transactions. Early systems like Counterparty, launched in 2014, took advantage of this concept. The system initially forged tokens using scripts for multi-signature transactions, which were initially employed by “hackers.” Refer to “What are Bitcoin Inscriptions and Ordinals, and how do they work?” for more information.

After the era of Colored Coins, despite ongoing explorations for the development of the Bitcoin ecosystem, a series of trends, including ICOs, DeFi, NFTs, GameFi, exploded on EVM blockchains led by Ethereum. The public’s attention temporarily shifted away from Bitcoin, with only a few individuals persevering. Casey Rodarmor is one such individual. In December 2022, Casey introduced the Ordinals protocol. It assigns a unique sequence number to each satoshi and tracks them in transactions. Anyone can attach additional data, including text, images, and videos, using Ordinals. Casey’s initial vision was to enable people to store something eternal on the oldest and most robust consensus chain, Bitcoin. However, the majority of Ordinals protocol users employ it for creating NFTs.

On March 8, 2023, an anonymous developer named Domo introduced BRC-20 based on the Ordinals protocol. Similar to ERC-20, this protocol is positioned as an asset issuance protocol within the Bitcoin ecosystem. Initially, there were few market tools available, and participating in BRC-20 required running a Bitcoin full node, making it challenging for the average person to get involved.

After the introduction of BRC-20, an active developer in the community named Beny launched the BRC-20 delegate tool LooksOrdinal in March, deployed TRAC (a BRC-20 Token) in May, introduced an OrdFi-focused improved version of BRC-20 called Tap Protocol in August, and issued an improved version of Pipe protocol for Runes in October.

In September, another developer introduced a new Bitcoin token protocol, Atomicals Protocol. In the early hours of September 21, someone issued the first token, ATOM, on the Atomicals protocol, and it was minted in approximately 5 hours. Mining ATOM required using a computer CPU and configuring the local environment.

Less than a week after the release of Atomicals, on September 26, Casey announced a new idea on social media: creating a homogenized token protocol based on Bitcoin called Runes Protocol.

Later on, more and more developers joined the construction of inscriptions, expanding their focus beyond the Bitcoin ecosystem. Subsequently, various inscriptions protocols emerged, targeting ecosystems beyond Bitcoin. These include:

• Ethscriptions and iERC20, Ethereum inscription protocols (representing inscriptions as $eths and $Ethi, respectively)
• PRC-20, a Polygon network inscription protocol (representing inscriptions as POLS)
• SPL-20, a Solana network inscription protocol (representing inscriptions as sols)
• ASC-20, an Avalanche network inscription protocol (representing inscriptions as acst)
• BSC-20, a Binance Smart Chain (BSC) inscription protocol (representing inscriptions as bnbs)

As these inscriptions gained popularity in the market, many of them surged to hundreds or even thousands of times their minting cost. The “get-rich-quick effect” triggered widespread FOMO (fear of missing out) in the market, prompting many developers to deploy related inscription protocols on various major blockchains. Infrastructure supporting the storage and trading of inscribed assets, such as Unisat, Xverse, and Gate Wallet, emerged, providing ordinary users with increasingly more opportunities to participate.

Principles of Inscription Technology

Many inscription issuance protocols, such as BRC-20, Atomicals Protocol, Runes, and Pipe, share similar underlying principles. Let’s take BRC-20 as an example to delve into the technical foundation of inscriptions.

In the whitepaper authored by developer Domo, inscriptions are defined by three fundamental operations: Deploy, Mint, and Transfer. These three operations fall under a field named “op,” where “Deploy” represents the deployment activity, “Mint” signifies the minting activity. In addition to “op,” several other fields form the specification of BRC-20:

Source: Brc-20 Documentation

• “p”: Protocol type. A crucial keyword that must be included, defining that the operation is based on the BRC-20 protocol. This helps other systems recognize and process BRC-20 events.
• “op”: Event type. Another critical keyword that must be included, defining the type of event, whether it’s a deployment (“Deploy”), minting (“Mint”), or transfer (“Transfer”). In this context, the content of “op” as “transfer” indicates that the event type is a transfer.
• “tick”: BRC-20 Token identifier. Another essential keyword that must be included, defining the name of the BRC-20 Token, composed of four letters. In this case, the content of “tick” as “ordi” signifies that the BRC-20 Token being transferred is $ordi.
• “amt”: The quantity of BRC-20 Tokens being transferred. A necessary keyword that must be included, defining how many BRC-20 Tokens will be transferred.
• “max”: Maximum supply. A required keyword that defines the maximum supply of the BRC-20 Token.
• “lim”: Maximum number of BRC-20 Tokens a single inscription can hold. An optional keyword that defines the maximum number of BRC-20 Tokens a user can obtain by minting a single inscription. If set to 1000, for example, a single inscription can obtain a maximum of 1000 BRC-20 Tokens.
• “dec”: Decimal precision. An optional keyword that defines the decimal precision of the BRC-20 Token, with a default setting of 18.
• “to”: Transfer destination. An optional keyword that defines the address of the recipient for the transfer. If left empty, the default recipient address is assumed to be correct. Currently, this keyword is primarily used for Dune dashboard data tracking tests.
• “fee”: Transfer fee. An optional keyword that defines the amount of the transfer fee. Presently, this keyword is used for data tracking tests on the Dune dashboard (in the absence of Taproot data).

【Reference】

Participating in BRC-20 requires selecting different fields to complete operations. For example, for a BRC-20 token named “Gate,” during deployment, one should choose “p” as “brc-20,” “op” as “deploy,” and “tick” as “Gate.” The values for “max” and “lim” can be set to appropriate data. For instance, setting “max” to 100 million and “lim” to 10,000 means that it can be minted a maximum of 10,000 times (100 million total divided by 10,000 tokens per mint). When inputting this information, it needs to be formatted into a standard JSON format, as shown below:
{

“p”: “brc-20”,

“op”: “deploy”,

“tick”: “Gate”,

“max”: “100000000”,

“lim”: “10000”

}

This JSON format needs to be written into a specific field of the Bitcoin transaction. To illustrate, let’s take the example of the well-known inscription “ordi.” The genesis transaction when it was initially deployed was b61b0172d95e266c18aea0c624db987e971a5d6d4ebc2aaed85da4642d635735. We can query the transaction details on the Bitcoin browser Blockchain.com. The results are as shown in the following image:

In the witness field of the transaction, a hexadecimal string was written (the blue background part in the above image). When we use a converter to transform these hexadecimal strings into English characters, we can discover:

To inscribe, one needs to input the format that adheres to the protocol specifications into the fields of the transaction. After the transaction is packaged into on-chain data, the inscription is officially “engraved.” An inscription can be deployed multiple times, but only the first deployment is recognized by the on-chain indexer. Subsequent deployments become “counterfeits” that pollute the ledger but can still be minted max/lim times. Using the earlier example of the inscription “Gate,” it can be minted a maximum of 10,000 times. Any attempts beyond this limit are considered invalid minting. However, transfers can be performed an unlimited number of times.

• The “Deploy” field requirements and format are as shown in the following image:

• The “Mint” field requirements and format are as shown in the following image:

• The “Transfer” field requirements and format are as shown in the following image:

There are two notable points to consider. First, during minting, due to the total amount and the limit on the quantity per mint, the “first come, first served” principle is followed. Taking the previous example of the inscription “Gate,” the first 10,000 “engravings” recorded in the blocks are considered valid inscriptions because the maximum minting limit is 10,000 times. Any attempts beyond this limit are considered invalid inscriptions.

Secondly, during the minting process, the simultaneous minting by multiple individuals can lead to minting failures, resulting in increased costs.

Note: The case of the inscription “Gate” mentioned in this text is used for illustrative purposes and does not provide any investment advice. Additionally, the existing “Gate” inscription has no affiliation with this text or Gate.io.

How to Inscribe - Case Study

In the previous section, detailed technical principles were explained. However, for the average person, it can be challenging to manually input JSON text conforming to the BRC-20 specifications into transactions. Therefore, early participants in the inscription process were mainly professionals, including miners and blockchain scientists. With the growing popularity of the inscription market, more infrastructure and tools have emerged, allowing ordinary individuals to participate through user-friendly UIs. Today, we will use the well-known Unisat website as an example to demonstrate how to mint BRC-20 inscriptions. These operations are generally applicable on other blockchains.

Download and Install a Wallet

Minting BRC-20 inscriptions requires installing a wallet and storing a certain amount of Gas Fee (in BTC on the Bitcoin chain). Popular choices for wallets include Unisat, Xverse, and Gate Web3 Wallet. \
(Please download from their official websites, and be cautious to avoid scam websites.)

Enter the Inscription interface

Enter Unisat’s Inscribe page, choose BRC-20, and there will be three operation options: Mint, Deploy, and Transfer.

Minting an inscription is commonly referred to as “inscribing” or“minting.” This process involves creating inscriptions based on the ones that have already been deployed by others. When minting inscriptions, you need to specify the name of the inscription and the quantity to be minted. However, due to a maximum limit on minting, it is crucial to check whether the inscription has reached its minting limit. If all the available minting slots are filled, further minting attempts will be unsuccessful. Otherwise, you can proceed with minting multiple times.

Deploy Inscription

If there is a deployment requirement, you can directly click on “Deploy” to enter the deployment interface. Enter the desired inscription name (Tick), total supply of inscriptions (Total Supply), and the quantity to be minted per time (Limit Per Mint).

Transfer Inscriptions

When you wish to transfer inscriptions to another address, you can use the transfer function and simply enter the name and quantity.

Purchase Inscriptions

If some of the inscriptions are already 100% minted, you can enter the Unisat Marketplace, a dedicated marketplace, to choose and purchase the desired inscription names.

Besides these basic operations, Unisat also provides a dedicated panel for Brc-20 token inscriptions. Users can check the completion status, the number of holders, and the number of transactions for the inscriptions.

Inscription Strategies — Several Possible Ways to Make Money

The current inscription market is still in a somewhat “FOMO” phase, and users still have some opportunities to participate:

1. Participate in New Chain Inscriptions: Not all blockchains currently host inscriptions. Participating in early inscription projects comes with significant risks, but the potential returns can be substantial. \

2. Gas Fee Profit Method: You can mint inscriptions when Gas Fees are low. As Gas Fees increase, later minters may choose to directly purchase inscriptions that others have already minted to save costs. While this method has limited returns, the maximum loss is only the minting cost.

3. Pay attention to the inscription infrastructure project that does not issue tokens \
   Some inscription infrastructure projects gained significant attention and revenue during the inscription market boom. However, not all of these projects issued their own tokens. Users can participate in interactions and activities to gain future rights, such as airdrops and token sale eligibility.

4. Various opportunities in the secondary market for leading inscriptions

Inscriptions like ordi and sats are already listed on major exchanges, including Gate.io. Buying at a low price during market downturns and selling when the prices rise can be a good opportunity, but it’s essential to be mindful of risks in the secondary market.

Trend Predictions

Clearly, inscription technology itself has certain advantages. For example, it involves writing into blockchain transactions, making it uncontrollable by any single entity. Once an inscription is deployed, others can directly mint it to obtain inscriptions as well, without any sequential order. This mechanism of “fair distribution” is highly decentralized, with transactions directly recorded on the blockchain, inheriting the immutability characteristic of blockchain.

However, during the inscription process, data and information are uploaded to transactions, and these must be included in the block when it is packaged. This poses a significant cost, especially for some Bitcoin miners, particularly those running full nodes (nodes that record all block information). Luke, a developer of the Bitcoin Core full node client, has openly criticized inscriptions on social media for continuously transmitting junk information over the network. It is suggested to upgrade the relevant technology to address this vulnerability.

As a decentralized economic system, Bitcoin is a vast ecosystem supported by a broad community. Before inscriptions emerged, colored coins had appeared in the ecosystem. Infrastructure like Stacks and the Lightning Network was also established on Bitcoin. Each technology has its pros and cons. From an ecosystem perspective, any technology that can promote the prosperity of Bitcoin has the potential for acceptance and development. On the contrary, speculators driving excessive “FOMO” and the surge of meaningless meme coin prices might be the cancer of the Bitcoin ecosystem.

The inscription ecosystem has developed a wide user base and a foundation of ecosystem applications. Ongoing developments include projects like Runes, Bitcoin scaling solutions, and inscription games, indicating that the inscription ecosystem is poised for further growth in the future.

Conclusion

In the exploration of inscription, we have witnessed the evolution of technology, the prosperity of the market, and the limitless possibilities of innovation. From the early days of colored coins to today’s BRC-20, Atomicals, Runes, and other protocols, inscription technology not only proves its own value but also opens a new chapter in the digital world. These protocols enrich traditional blockchains like Bitcoin with vibrant content, while also unlocking opportunities in emerging fields such as decentralized finance (DeFi) and non-fungible tokens (NFTs).

The story of inscription is not just a tale of technology; it is a story of innovation, consensus, and the power of community. It embodies the core values of decentralization: openness, transparency, and immutability. Whether you are an ordinary user or a developer, you can find your place in this emerging ecosystem and contribute to its growth.

However, every technological revolution comes with challenges, and the development of inscription is no exception. It has sparked discussions about network congestion, storage costs, and ecosystem balance. These challenges require continuous scrutiny and improvement of technology to ensure that inscription not only brings prosperity to the market but also delivers long-term sustainable value to the entire community.

In conclusion, we look forward to the future development of inscription technology. Whether through further technological innovation, new application scenarios, or broader community participation, inscription will play an increasingly important role in the digital world. Let us witness and participate in this exciting era together.