Ordinals and BTC DeFi – Present and Future

introduction

How we got here, what to do on Bitcoin now, and what the future holds.

They claim NFTs on Bitcoin are impossible.

They say it’s impossible to do DeFi on Bitcoin.

As it turns out, they were wrong.

BTCFi is a zero-to-one innovation that I am very excited about (and invested in).

However, BTCFi’s marketing is poor as most of the BEST content is either not in English or is highly technical. It’s a challenge for me to keep up. However, things move very quickly and are full of opportunities.

In this post, I want to take my time and explain how we got here, introduce the protocols you can use today, share some tips for getting started, and discuss next steps.

In the future, I will delve into Bitcoin L2 and more.

This is a rewarding experience as the airdrop has been rolled out for early users.

Welcome to the world of Bitcoin.

Why I’m bullish on BTCFi

Until recently, Ordinals and BRC20 didn’t meet all three of my criteria for a thriving ecosystem. This is the framework I use to evaluate ecosystems and tokens.

Three Pillars of a Thriving Crypto Ecosystem

How do you choose which tokens to invest in? How did you do your research? Are you just looking for alpha on X? With so many coins and narratives to consider, how do you evaluate which coins have the potential to outperform Bitcoin? In my opinion, the success of any crypto ecosystem is driven by three key factorsRead more

Ordinals and BRC20 interest me because of its 1) innovation and 2) strong storytelling capabilities.

However, BRC20 tokens inflated too quickly without any flywheel effect to curb inflation. BRC20 is freely minted in a “fair release” but without any diversity or use case support. Like meme coins. This may dilute user attention and funds entering the ecosystem. This is how the ICO ERC20 boom of 2017-18 ended.

But things have changed since then.

• First, the ORDI token has solidified itself as the first meme coin on Bitcoin to be listed on a major exchange.

• Second, truly native dApps launched on Bitcoin (not L2) that are available to some extent and have native tokens.

• Third, CEXs like OKX and Binance are investing heavily in Inscription by launching their own Inscription services, markets, and listing BTCFi assets.

• Fourth, airdrops have arrived in Bitcoin, rewarding users for holding specific assets.

• Finally, a new fungible token standard will be launched on the Bitcoin halving block to challenge the dominance of BRC20.

Now, BTCFi is a rapidly growing crypto category with a core community that appears to be dominated by non-Western users! This may explain the lack of interest in Crypto Twitter.

The combined market cap of all BRC20s comes to $2.8 billion, which is enough to grab attention, but low enough to capture a 100x upside in the early going.

Additionally, Ordinals is a lifeline to Bitcoin security as $306 million in Bitcoin fees have been paid to miners.

Note the large increase in inscription tx in March and how they will appear again in late 2023.

Sales of the top Ordinals NFT series are also high. “Genesis Cat” by Taproot Wizards sold for $254,000 at Sotheby’s auction. The current base price is $13,000. Among the top 20 NFTs with lowest price, 3 are Bitcoin NFTs. Soon many more will join the ranks.

But why would anyone pay so much? Let’s take a brief look back at where it all started.

how it all started

@0xSea shared this history in Chinese on Twitter. Here is the complete translation of WuBlockchain.

But here’s an important brief story.

It started with the Ordinals protocol introduced by Casey Rodarmor in December 2022, which enables each satoshi of Bitcoin (the smallest unit of BTC) to carry unique data, including NFTs.

1 Bitcoin = 100 million satoshis.

Ordinals NFT is not your Ethereum NFT with a link to off-chain storage. Ordinal JPEG is forever engraved on satoshi. I think Ordinals NFT can be the ultimate choice for exclusive collections and PFPs.

Think about it: a satoshi with a JPEG engraved on it is probably worth more than its market price. Based on this alone, the entire Bitcoin chain is worth more than the total market cap of Bitcoin. (Same goes for other chains, but makes me sound smart).

However, this innovation was not discovered until March 8, 2023, when an anonymous developer “domo” launched the BRC-20 token.

BRC-20 tokens use JSON data (text-based data format) engraved on satoshi. They are not perfect and are more like tradable NFTs than fungible tokens. For example, you need to “engrave” (via an on-chain transaction on BTC) before you can sell or transfer those tokens.

Regardless, the launch of BRC-20 attracted attention and speculation, although Casey criticized the protocol for straying from his original vision and confusing the Ordinals space.

Around the same time, another anonymous developer, Beny, launched multiple projects to introduce a complex governance model in the Ordinals ecosystem. This was my first attempt at creating a unified ecosystem with the flywheel effect I was looking for.

These include the TRAC Token, Tap Protocol, and Pipe Protocol, each of which are interconnected and extend the original concepts of Ordinals and BRC-20.

TRAC Token: Governance token for the ecosystem, including TAP and PIPE protocols.

TAP protocol: supports swap, liquidity pool, airdrop and Bitcoin staking.

PIPE Protocol: A UTXO-based protocol for tokens and NFTs on Bitcoin, inspired by the RUNES protocol (under development).

To address the limitations of Ordinals, another anonymous developer launched Atomics and the ARC20 token. Atomics uses Bitcoin’s UTXO model to mint tokens, where 1 token = 1 sat.

Simply put, 1000 ORDI BRC20 tokens can be engraved on 1 sat. This is why you need to “split” BRC20 tokens onto more sats before you can sell them. But one Atomics ARC-20 is always equal to 1sat.

You can trade ARC-20 on the Unisat market using your Unisat wallet.

Casey doesn’t seem to like the addition of protocols like BRC-20, and he proposed Runes, a new token protocol based on Bitcoin’s UTXO technology (the same as Atomics) that aims to incorporate a more “orthodox” approach into Bitcoin’s token issuance.

The Runes Protocol aims to bring more transaction fee revenue, developers, and users to Bitcoin while maintaining the integrity of the blockchain.

But Rune’s protocol hasn’t been developed yet, and the community is already speculating about what will happen during the first Bitcoin halving block in April.

More information on this speculation can be found at the end of the blog post.

As you can see, the Bitcoin ecosystem is vast and constantly growing with multiple Bitcoin asset standards. Not all the DeFi applications mentioned above are truly native Bitcoin dApps, so in this article, let’s explore the truly native Bitcoin ecosystem.

Building on Bitcoin requires specific knowledge that only a few protocols enable. In this tweet from Wazz, all the protocols mentioned are ERC20 tokens. As a lot of fake Bitcoins or BTC L2s continue to be launched, they will claim to be on Bitcoin even though they are not.

Let’s start exploring the world of Bitcoin.

Xverse/Unisat, OKX Web3: Bitcoin wallet

My three wallets. Xverse is my main choice, but some sites don’t support it.

When you download from here and install it on your PC or mobile device, you will notice that it provides you with three addresses:

1) Bitcoin Address: This is a funding wallet used to purchase Ordinals.

2)Ordinals and BRC20 Wallet: Here you receive and store Ordinals.

3) Optional Stacks L2 wallet.

If you plan to trade Atomic ARC-20 tokens, Unisat(it’s heredownload) is very useful.

I use Xverse and Unisat wallets.

OKX Web3 wallet is cool and can transfer BTC between your nested SegWit, Taproot and native SegWit Bitcoin addresses. If you don’t know what this means right now, don’t worry.

Asigna.btc - Multi-signature wallet

If you want to make your life more complex (and more secure), you can use Ledger to create multisigs for Ordinals, BRC20, TAP and Bitcoin.

ClickhereCheck.

Saturn - Trade rare sats

Saturn is Satoshi’s first non-custodial peer-to-peer order.

You can exchange a single satoshi for another satoshi. But, dear, why should I do this? !

You see, each satoshi can be unique or “rare” depending on how prominent it is.

Rare satoshis attract the interest of collectors due to their unique characteristics and historical significance, and are classified by degree of rarity.

This obsession is a growing niche, with enthusiasts (or degens) keen to acquire sats that have a unique story or value beyond just monetary value.

Rare or exotic sat:

•Myth: The first sat of the genesis block.

•Epic: The first sat of each halving epoch.

•Pizza: Since 2010, sat has been involved in the famous pizza transaction.

•Hitman: sat was involved in Ross Ulbricht’s deal to hire a hitman.

•Silk Road: On June 27, 2014, U.S. Marshals seized and auctioned these sats from Silk Road.

For example, a black rare sat sold for $165,000 (3.9 BTC), becoming the highest price ever paid for a rare sat.

Or Pizza Sats bundled with each Pizza Ninja Ordinal NFT.

As you read this, did you feel a strange sense of meme coin potential?

Saturn airdropped $RUG tokens to the Ordinals NFT community and early Saturn users last week. RUG is built on the new “Rings Token Standard”. Its main feature is the ability to distribute tokens on the BTC chain for free.

As you can see, the standards for fungible tokens are broad and varied.

Xverse Wallet has a great guide on how to start trading.

Check out the guide here.

Ordiswap - The name says it all.

It’s like Uniswap but for BRC20 tokens. You can swap, add liquidity and bridge BRC20

As you can see, liquidity is very low ($94k) and trading volume is almost non-existent. I wanted to say go for the mining airdrop, but ORDS tokens are already out.

They don’t support Xverse yet, so you’ll need Unisat or OKX Web3 wallet.

To be honest, my txs failed while testing, but V2 is coming with multiple improvements.

Omnisat - DEX

You can try it for free as it is currently on testnet. I will try since airdrop is possible. Just like Omniswap, you can swap BRC-20 and provide liquidity.

How to try it out:

1. Set up your Xverse or Unisat wallet as testnet.

2. Come hereOmnisatpage.

3. Click “Get Testnet BTC”. Try it a few times until it works.

4. Exchange some BTC for BRC20 tokens.

5. Provide some liquidity.

BitSmiley - Bitcoin’s MakerDAO

bitSmiley allows the minting of an over-collateralized stablecoin: bitUSD (based on its bitRC-20 standard). Invested by OKX Ventures.

This is the first Bitcoin-native stablecoin. Since payments in BTC are highly volatile, they were ambitious and used stablecoins instead.

But that’s not all. They will also launch:

•bitLending: Bitcoin’s native peer-to-peer lending protocol.

• Credit Default Swap (CDS) This requires bundling similar loans and assessing credit defaults based on default rates.

The protocol isn’t live yet, but speculation about the token is happening via two NFTs

• bit Disc Gold: Limited to 100 NFTs, exclusive discounts available. Invitation only.

• bit Disc Black: Early access to bitSmiley and token airdrops. The key missing point is that a percentage of the total token supply will be airdropped to Disc holders.

NFTs can be purchased on OKX Marketplace or MagicEden.

Liquidium - Ordinal Lending Venue

Liquidium is also easy to understand. If you hold expensive Ordinals, you can borrow Bitcoin. Or borrow “expensive” NFTs to short them.

The lending mechanism is supported by Partially Signed Bitcoin Transactions (PSBT) and Discrete Log Contracts (DLC). I share it to sound smart but don’t know the details of how it works lol.

Liquidium has raised $1.25 million in pre-seed funding, a sign of growing venture capital interest in the space.

You can go to their website viaLinkSubmit a waitlist to join.

Bitmap and Bitmap Technology - Metaverse and L2

You must be on Magic Eden, or evenBitcoin ExplorerI have seen the Ordinals below.

309915.bitmap - Bitcoin block transactions are recorded on a personal satoshi bitmap, allowing the geospatial digital real estate of a Bitcoin block to be claimed by recording the block number.

Bitmap converts Bitcoin’s blockchain data into spatial land. So, it turns them into a virtual land, much like the sandbox does on Ethereum. These bitmaps trade for $275 each, but the bitmaps may be “rare sats” costing >0.5 Bitcoin. This is a good one on XPostto explain it.

The creator of Bitmap isblockamoto。

Other teams can then build on this foundation. Bitmap technology, for example, allows you to put your JPEGs on a map, but Bitmap technology is much more than that.

Bitmap game

Bitmap Tech invented the BRC420 token, introducing a complex, monetizable asset format to the Metaverse in the Ordinals ecosystem, supporting 2D and 3D inscriptions. Even the game itself. It allows creators to set usage rights and royalties.

The first BRC420 cast by the team was called the “Blue Box” and sold for $33,000 each! This is a bet that it will become the new ORDI of BRC20. But there’s another explanation for the high prices.

Bitmap is launching Zk-rollup L2 on Bitcoin Merlin Chain and is conducting a liquidity mining/airdrop campaign for 20% of all tokens.

You can stake native BTC, BRC20 tokens, these Bitmap Ordinals and “Blue Boxes” to earn points. ETH/stablecoins from Ethereum and Arbitrum are also supported.

At first, I was skeptical because you can’t withdraw money until April, and I was skeptical about Manta’s similar plans. But OKX ventures announced its investment, and TVL grew to $530 million in just one day! DYOR and@merlinchaincrypto/merlins-seal-the-biggest-fair-launch-of-layer2-5614001b2582">it’s hereRead details.

Merlin Chain

The Bitcoin L2 narrative is evolving rapidly, but there are many people who want to be L2, and things are more complicated than I thought.

I will be discussing Bitcoin L2 more in future articles, so be sure to subscribe.

Now, let’s talk about the next big meta-narrative in BTCFi – speculation and airdrops related to the Runes Protocol.

Runes Protocol – Bitcoin’s Next Big Thing

existthis interview(Recommended viewing), Casey (creator of Ordinals theory) said: “Runes are trying to bring speculation, gambling, and fun into Bitcoin.” So, fun times are coming.

The protocol will go live on the first Bitcoin halving block sometime in April. But speculation has already begun.

These mysterious RSIC NFTs landed in the wallets of Ordinal collectors. They quickly jumped 10x before dropping to $32k as degens speculated that this would become the first ever Rune token.

The game here is to hold them and “mine” Rune Tokens. existthis cheat sheetCheck how it works.

In an interview on February 8, Casey mentioned the possibility of engraving the first 10 Rune tokens himself. This announcement caused RSIC price to drop significantly.

More importantly, the Ordinal community expressed dissatisfaction with RSIC due to the RISC team retaining 10% of the token supply and unclear airdrop standards.

In response, one influencer, Leonidas, spearheaded an airdrop of Runestone tokens, distributing them to over 100,000 wallets held by individuals with 3+ serial numbers.

In response, one Ordfluencer Leonidas spearheaded an airdrop of Runestone tokens, distributing them to over 100,000 wallets holding at least 3 Ordinal.

Currently, it is unclear which protocol will emerge as the top coin. But Casey’s plan for an initial 10 Rune tokens has dampened some of the hype…

So why am I writing this!

First, Rune’s protocol will reignite the BTCFi hype during the Bitcoin halving. I hope you have the bare minimum understanding of what’s going on!

Second, there is finally a reward system for holding specific assets. BRC20 is used to mine Merlin Chain L2 tokens or receive many upcoming airdrops.

Finally, the complexity of OrdFi/BTCFi provides many opportunities for those willing to learn! Crypto Twitter started late in this regard. CT is predominantly English speaking, absolutely chaotic, and the narrative is dominated by Chinese/Japanese, will they fall for the Westerners this time? And Koreans, where are you?

I tell the truth. The Bitcoin DeFi ecosystem is in its early stages, full of bugs, and not easy to use. But the opportunity is here.

My advice is to get a Bitcoin wallet, consider checking out Ordinal NFTs on Magic Eden, try a native BTC dApp (Omnisat on the testnet is free!), maybe get some Merlin Chain L2 tokens, but most importantly , try to keep up with updates to the Rune protocol.

I believe the first 10 Runes tokens will be printed. In the future, I will be covering Bitcoin L2, so be sure to subscribe.

Disclaimer：

1. This article is reprinted from [MarsBit]. All copyrights belong to the original author [Kate]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.