When I first heard about BRC-20, it was like seeing that summer again

1. First hearing about Ordinals, BTC-NFT, and BRC-20

This part is a pile of concepts. Although it can be explained in a few words, I still want to connect each knowledge point from the perspective of principle. What are sats, ordinals, BTC-NFT, BRC-20? I am sure that the individual understandings will not leave a deep impression and make my head swollen. Let's connect the scattered concepts here with a thread.

1. sat

First, let's understand a concept, Sat: The smallest unit of Bitcoin is Satoshi, named after Satoshi Nakamoto, the anonymous founder of Bitcoin. 1 BTC = 100,000,000 Satoshi, which is the smallest divisible unit of Bitcoin, and transactions can be carried out in Satoshi.

We all know now that the Ordinals protocol is a system for numbering sats, based on the premise that each sat is unique. Each sat has a unique identifier, utxo (unspent transaction output), which consists of a transaction id and an output index, that is, each sat is generated in the order of mining time. Through utxo, the Bitcoin network can track the transaction history and ownership of each sat, ensuring the security and reliability of transactions, and also guaranteeing the uniqueness of sats.

From this, we know that sat is the smallest unit of Bitcoin that cannot be divided, and each sat is unique. Can we see the shadow of NFT here? In fact, sat itself can be regarded as a special NFT, with the characteristics of ERC-NFT such as uniqueness, irreplaceability, and on-chain records.

2. Ordinals = “numbering system + annotation system”

But what’s interesting is that the Ordinals protocol has made an extension on top of this “special NFT”. To put it simply, Ordinals is a “numbering system + annotation system”. First, each sat is given a number, and then different numbers are pointed to different content carriers to fill in the content, such as JPG, TXT, MP4, GIF, ZIP, etc., to generate corresponding Txt format inscriptions, picture format inscriptions, etc., but it only supports a maximum of 4M storage.

Does this process look like "annotating" a sat? Yes, the result of this process is called inscription, but it is still a bit obscure for Chinese translation. In English, it can be directly understood as "annotation", which is to give some derivative meaning to the satoshi. Through the Ordinals protocol, each satoshi has a unique ID, and derivative content is added, so the satoshi can be identified, transferred, and given meaning.

3. BTC-NFT and ERC-NFT are really different

The biggest difference from ERC-NFT is that BTC-NFT is actually stored on the chain. The block can be used to store some small, immutable data (≤4M), pay a certain transaction fee, and the stored data will be permanently saved on the blockchain. When creating an ETH-NFT, usually only the metadata of the NFT (similar to the title, author, release time, tags, etc. of an article) is stored on the blockchain, rather than the actual content data.

4. Deployment, casting and transfer of BRC-20

The implementation of the BRC-20 protocol is based on ordinal inscriptions, which are actually text-based inscriptions. In the BRC-20 protocol, ordinal inscriptions are used to store information about token contracts, including the name, symbol, total amount, decimal places, etc. of the token. This information is encoded and stored on the Bitcoin blockchain, thereby enabling the deployment and management of token contracts. By adding some text information to the information record column of Bitcoin transfers, the minting and transfer of tokens can be achieved. In fact, the deployment, minting, and transfer of BRC-20 are all the minting of a new inscription (Text format).

However, BRC20 tokens cannot interact with smart contracts and cannot perform any automated operations, such as automated transfers or automated dividends. This is actually the point where BRC-20 can form differentiated competition with ERC-20. Isn’t simplicity and higher security the foundation for the survival of Bitcoin?

#summary

In general, sat is the smallest unit of Bitcoin. The ordinarys protocol assigns a unique number and annotation to each satoshi, realizing the uniqueness, irreplaceability and on-chain recording of satoshis.

BTC-NFT refers to a non-fungible token stored on the Bitcoin blockchain that can store some small, immutable data, and the stored data will be permanently saved on the blockchain.

The BRC-20 token standard allows users to deploy and manage token contracts in the form of inscriptions on the Bitcoin network, thereby realizing the minting and transfer of tokens.

2. The path to explosive popularity, starting with Narrative Economics

Narrative Economics is a book written by Robert Shiller, the 2019 Nobel Prize winner in Economics and an American economist. The book argues that the rational actor and perfect information hypothesis are not applicable to all economic situations. It mainly explores the role and influence of narrative in economics and puts forward the concept of "narrative economics".

The author believes that narrative is an important factor that influences people's beliefs, values ​​and behavioral habits, which in turn affect the development and operation of the economy. The revelation of narrative economics to cryptocurrency is that the success of cryptocurrency depends not only on its technology and functions, but also on the power and influence of its narrative. It represents special values ​​and culture, and questions centralized finance and centralized society, which is also an indispensable part of the continuous cohesion of cryptocurrency consensus. Similarly, I have also selected in this book what kind of narrative is more likely to attract market attention, last longer and have a wider range.

Keywords: easy to understand, new words and new stories, emotional resonance, widespread controversy, narrative constellations, multi-dimensional connections, celebrity attention, etc.

1. Controversy creates consensus, while serious prejudice leaves behind information cocoons

Controversial narratives tend to grab people's attention and stimulate the thinking of industry participants. As a result, stakeholders will fight for their likes and dislikes from all angles, which is in turn a disguised way to popularize a concept to the public and increase the spread and influence of a narrative. Controversy will make people think critically about these narratives, explore the values ​​and prejudices in them, and the stronger the opposing voices, the more cohesive the group that praises one side will be. In other words, it can be found that controversy is an indispensable part of strengthening consensus.

Cryptocurrency was also born out of controversy. Strong and vital consensus all started from the tip of a ripple. Bitcoin has been declared dead or predicted to fail more than 300 times, due to price fluctuations, technical problems, policy supervision, competitors, ETH The dao event, ETC hard fork, parity $280 million freeze event, congestion and gas wars, etc. On the contrary, their consensus is stronger in controversy. A smooth consensus will never last. Great praise will bring endless backlash. EOS hit $3 in three waves, and the ICP ecosystem became stagnant.

The non-controversial consensus is doomed to be pronounced dead as soon as it appears. This is a form of flattery.

The current controversial points of BRC20 are nothing more than the following:

First, a lot of "garbage" was stuffed into the full node, which made Bitcoin lose its purity, and the blocks became more bloated, causing a sharp increase in the cost of on-chain storage and transfer;

Second, the permanent storage of inscriptions on the chain means that the redundancy of the ledger over time increases, which leads to higher operating costs for full nodes and requires more powerful mining equipment. Mining centralization seems to be an inevitable problem.

Third, as mentioned above, sats themselves are a type of NFT that can be sorted by rarity. With the help of Ordinals, these rare satoshis can be identified and circulated, and no longer have a unified value, which may cause confusion in the basic unit of Bitcoin.

Fourth, it has poor scalability and does not support smart contracts. It can only produce some minimalist games, and it is difficult to form a strong ecosystem similar to the Ethereum network.

Are these disputes justified? Of course, and they are very meaningful. This means a clash between the old and new consensuses of Bitcoin. If the new consensus replaces the old consensus, the value transfer cannot be continued but is falsified, which is an inevitable blow to the foundation of Bitcoin.

However, for speculative games, the controversy has two meanings.

First, controversy means that a narrative has vitality and is difficult to disprove until the last moment. During this period, there will be bubble value. Li Xiaolai said it well, the consensus of fools is also a consensus. Moreover, once the narrative of BRC20 is successful, the result will be transformed into the "consensus of smart people";

Secondly, controversy means the early stage of consensus building. Investment opportunities never come from a very good situation. When there are differences in the market, there will be cognitive biases, which are potential buying opportunities. Risks and returns always have two sides. The arrival of certainty is also the end of the speculative game.

2. BRC20 is actually a story

Narrative economics emphasizes the importance of the role and influence of stories in the economy. Stories can inspire people's emotions, resonate with people, and thus influence people's beliefs, values, and behavioral habits. In cryptocurrency, an interesting and eye-catching story is often more likely to attract people's attention and interest, and thus easier to spread. A cryptocurrency story can attract investors' attention through vivid scenes, interesting characters, and plots, resonate and resonate emotionally, making it easier for the audience to accept and remember; in addition, stories can also be widely spread on social media through traditional word-of-mouth, allowing more people to understand and share, thereby expanding their influence.

First of all, what stories does the rise of BRC20 remind people of? Stories about Bitcoin itself, such as the Bitcoin pizza incident, where a programmer bought two pizzas with Bitcoin in 2010, and today, the value of these 10,000 Bitcoins has exceeded $400 million, becoming the most expensive pizza in Bitcoin history; there are also various stories behind it, such as DeFi, NFT, meme...experience or miss the overnight wealth, all of which are the best stories.

Stories are the carriers of larger narratives and a safe haven for investors to hold on to their positions with comfort.

Many investors have missed these stories, so potential buyers of BRC-20/NFT will put themselves in the situation of missing out on "getting rich quick" in the past and grab attention at the first time. Ordinals itself is composed of multiple elements (BTC, NFT, meme, etc.), so it is actually telling a story of "getting rich quick complex". I can make up for your regret of not participating in BTC, NFT, Doge, and ENS early.

In short, whatever you have ever missed, I have it all.

Secondly, from a practical point of view, Ordinals is actually telling the story of issuing assets on the BTC chain. This story itself is enough to attract some old OGs. Some people are surprised when they first hear it. BTC? … Admittedly, ERC/BTC-20 are fundamentally different, and it is difficult to evolve a homogeneous ecosystem. However, even if all of them are memes, who can say that the Ethereum ecosystem memes are more authentic? Although Bitcoin has less value support than Ethereum, the origin of the crypto consensus narrative originated from it. Therefore, the emerging meme/classic NFT is more "justified" on the Bitcoin chain.

Similarly, we cannot underestimate the value of meme. As the origin and cornerstone of encryption, the current global cryptocurrency market value is about 1.2 trillion, and the total market value of the meme sector is about 18.7 billion, accounting for about 16%. The current total market value of BRC20 is less than a pitiful 140 million.

3. The spread of narrative constellations, not isolated events

The "narrative constellation" in narrative economics refers to a system composed of multiple interrelated narratives, which form a complete narrative framework, making the whole story more full and three-dimensional, and having the charm of multi-dimensional communication. Narrative constellations are more influential than isolated single narratives, which are manifested in that they include more audiences, last longer, and have more diverse stakeholders.

Let’s take a look at how the narrative of BRC-20/BTC-NFT diverges from Ordinals and whether it can form a huge narrative constellation. Based on Ordinals, two sets of narratives that empower BTC are derived, NFT and 20. As for BTC-NFT, on the one hand, it can replicate the Ethereum NFT narrative on Bitcoin, squeezing out the share of the ERC-NFT trading market . Are there any kings, princes, generals, and ministers? It seems strange to say this with Bitcoin...

On the other hand, BTC-NFT is actually a differentiated competition to ETH-NFT. The main feature is the security of a full node maintenance and permanent on-chain, which is the true inheritance of Bitcoin security and legitimacy. As for BRC-20, as mentioned above, 20 is actually telling the story of issuing assets on the BTC chain, and the coin on it is sat. As a BTC unit of account, sat has the lowest value guarantee. BTC will not return to zero, and 20 will never return to zero. The practical value is that sat can act as gas, and the collection value leads to the disguised locking of BTC's circulation.

It can be seen that the richness of BRC20 assets will continue to increase. Currently, only the inscription of 4-digit name tokens is open, and there will be three-digit, two-letter rare characters 20 (ORC is already doing this). Isn’t this the logic of ENS domain name speculation? In addition, it is said that some project parties have begun to issue NFT assets on LTC, which confirms the sustainability of Ordinals’ narrative. Thinking further, will there be a special mechanism DEX based on BRC20, an IDO launch platform, or even a lending platform... Wow, the industrial chain is here. In this way, BRC20 is no longer an isolated single narrative.

Narrative economics also emphasizes the celebrity effect. As an irrational behavior, people tend to blindly follow celebrities instead of making decisions based on their own judgment and analysis. The emergence of social media has made the celebrity effect more intense. From the perspective of stakeholders, we wonder whether BRC20 can attract widespread attention from crypto celebrities, that is, the "manipulators behind the scenes", and thus form a narrative constellation.

I was quite touched by a passage that teacher 0xTodd said, that is, where does the biggest profit of the crypto industry come from? The "head" and "tail" of crypto. The head is the issuance of assets, which directly creates assets, such as ZK/Arb, Atpos/SUI, and BTC/ETH miners; the tail is the transaction of assets, which redistributes assets, such as Binance, OK. The closer to the head and tail, the more excess returns you get. Then, the biggest stakeholders (potential celebrities) have already made it clear, namely the third-party miners, exchanges, and project parties.

First, the miners: small ball control big ball

Ordinal pushes up the demand for block space, allowing miners to obtain higher income and make up for the marginal reduction in benefits brought by the Bitcoin halving effect. Most miners pursue profits as their first goal. Looking back at the Bitcoin fork craze in 2017 and 2018, it was ostensibly a community disagreement. They held high the banner of justice and "improved" Bitcoin, but in fact, it was not to take the initiative in mining and gain more benefits. Therefore, most miners will spare no effort to promote the development of BTC-NFT/BRC-20 and other xRC. Miners who used to rely on mining rewards will gradually transition to gas fees to support miners. The BRC-20 wave is actually "small ball controlling big ball". The lower control cost can keep the gas fee at a high level. Can this craze catch up with the various hard forks in 2017? I think it will.

Second, exchanges: traffic first

The exchange only considers two points when listing coins: the long-term value to the industry and the increase in transaction volume. Can BRC20 carry more transaction volume? The answer is yes. The history of the rise of DAO can capture clues. PeopleDAO peaked with an average daily transaction volume of 200 million US dollars. Later, it also brought various value DAOs to the industry. Investment, tool, and community DAOs emerged in an endless stream, which also have long-term value to the industry. At present, OKX mobile wallet has launched BTC NFT. If nothing unexpected happens, OK should be the first platform to launch BRC20 spot trading. By the way, OK should have the technical strength to support 20 transactions, unified accounts, web3 wallets, and chain-based Sky Eyes. The products are all good. Binance has also published articles to popularize Ordinals related content, and it should be a matter of time before it is listed. In order to capture the transaction volume of the hot sectors, the exchange will promote new assets, and it is on the way.

Third, project parties: the main force of asset creation

The Ordinals hackathon is coming soon, which will attract a large number of developers and practitioners. Where there is talent, there is money. Yugalabs twelvefold was released in March, with the highest auction price of 7.1159 BTC, and it was upgraded in pixels at the end of April. More well-known brands will endorse Ordinals in the future.

In short, BRC-20 has many potential stakeholders, including not only the wool circle, NFT circle, local dog circle, mining circle, spot circle, etc., but also almost covers the entire cryptocurrency population. There are 10,000 Hamlets in the eyes of 10,000 people. Different stakeholders will have different narratives when looking at BRC20, thus forming: a sustainable narrative constellation.

4. A new narrative that returns to the original intention and differentiated competition with ETH

First, ETH-NFT is “incomplete” in some ways.

Inscription truly inherits the security of Bitcoin. This security does not require side chains or bridges to ensure. Inscription is permanently on the chain like Bitcoin and has the same security and decentralization.

Second, the new narrative is superimposed on the old Bitcoin narrative, and everything becomes interesting.

With the development of the cryptocurrency circle, the sensitivity to information has increased, and speculation on new rather than old has become the norm. Although the halving background cannot actually cause a significant change in the marginal supply, it may be able to bring new vitality after adding some new variables such as BTC-NFT, BRC-20, and Lightning Network. In July 22, I wrote an article "Is the correlation between Bitcoin and US stocks a piece of paper?" At that time, I mentioned that "the various narrative lines shown by Bitcoin are constantly transforming... digital gold, speculative attributes, commodity attributes, securities attributes, safe-haven assets, etc.... multi-dimensional narratives are the best medicine to fight the Bitcoin bear market." Today, we see a new narrative that Bitcoin can carry-ordinals.

In fact, cryptocurrency has only taken a long detour, but is now returning to its original purpose - payment and asset issuance.

The Lightning Network was launched in 2017, but it has not been widely adopted. The number of channels and the amount of funds have stagnated in the past year. The popularity of Ordianls may "unintentionally plant willows and make them into shades", activating the application scenarios of the Lightning Network. The casting and transfer of a large number of inscriptions will inevitably lead to block congestion and high GAS fees. From a technical feasibility point of view, sats can be traded on the Lightning Network. To put it simply, inscription is a special Bitcoin transaction. Ordinals acts as an intermediary for asset issuance, the Lightning Network is responsible for the low-cost transfer of inscriptions, and the BTC main network collects transactions for settlement. On this basis, many new "fireworks" can be created, and we look forward to it.

From this point we can see that many people are talking about whether the ecosystem on BTC is comparable to the ecosystem on ETH?

In fact, this is a question that cannot be compared equally. The starting points of the two are different, just like Alibaba's Alipay and Microsoft's Windows. Can they be compared in the same industry? The end of the Bitcoin ecosystem is definitely not the starting point of Ethereum. The two compete in a differentiated way. Bitcoin is a digital currency that is mainly used for payment and value exchange, while Ethereum is a smart contract platform that can support more application scenarios and functions. Therefore, Bitcoin will build an ecosystem different from Ethereum. This is not competition, but a way to fill the gap in the original intention of cryptocurrency.

5. Easy to understand, 0.1 education cost

Narrative economics mentions the concept that simple and clear narratives are easy to spread. This is because when people receive information, they are more likely to understand and remember simple and clear narratives rather than complex and difficult information. A narrative that can resonate with people's emotions is often the starting point for making investment decisions in cryptocurrencies, and it is also the starting point for digging down information and investing in value. The top-ranked cryptocurrencies are all wonderful narratives that can be summarized in one sentence. BTC is inflation-resistant gold, ETH is an ecosystem that carries applications, LINK is a bridge that connects off-chain information, and UNI can trade on the chain without CEX... Admittedly, their underlying layers may be complex, with sophisticated designs and ingenious ideas, but in the end they can all be summarized in one sentence to tell investors - I am simple, but I am awesome.

As the name BRC-20 suggests, the education cost is almost only 0.1.

When you see BRC, you will naturally think of ERC, and when you see 20, you will naturally think of token issuance and the ICO boom in 2017. From a practical point of view, both brc20 and erc20 are token standards that carry the tasks of asset issuance and circulation; from the perspective of participation threshold, for ordinary users, the threshold for participating in brc20 tokens is relatively low, and only some basic Bitcoin wallet and transaction knowledge are required. For developers, the deployment and management of brc20 tokens are simpler and safer.

The word web3 seems to have been surrounded by some mysterious terms since its birth, such as decentralization, censorship resistance, and immutability. There is still a visible gap between it and becoming "mainstream".

In-depth study of algorithms, encryption and other related knowledge and technologies seems to have become the "basic literacy" of the consensus of the industry. High cognitive threshold and poor user experience are obstacles to further exploration of encryption value discovery. However, some simple encryption concepts that can resonate with emotions can always emerge. Now BRC-20 is full of "simplicity", the simplicity and elegance of the Ordinals protocol, and the clear narrative concept - the issuance of assets on the BTC chain.

3. Revelation: The Essence of Encryption

1. There is a poem in Gibran's "The Prophet": We have gone so far that we have forgotten why we set out.

Web3 has changed its flavor. How much of the spirit of cryptocurrency is still there? Many of them are called: regulated, large traffic, incremental market... Just like RWA, Hong Kong dollar stablecoin, etc., even if the whole world is involved, what is the point? The essence and original intention of blockchain are only two points, low-cost trust + the freest freedom. Marx said that commercial credit is one of the indispensable conditions in the process of capitalist reproduction, so low-cost trust plays an important role in promoting commodity circulation and accelerating capital turnover; a16z's early articles believe that the decentralized nature of cryptocurrency can give people, resources, etc. more freedom to trade and communicate, thereby breaking the problem of unsustainable innovation cycles. If trust is eliminated and freedom is strengthened, then this so-called "Web3" project is meaningless. These two words are "common sense" in the field of cryptocurrency. You can make money by following value investment, but you will not make money if you violate common sense. "

2. Meme is an experiment, and cryptocurrency is also an experiment. Strong consensus is always criticized. Only by trying new opportunities can you get unexpected rewards.

There are two things that often appear in the crypto field, namely fud and new things - both are rewards for investors. Strong things are often fud → more disputes → consensus, which is the inevitable law of development of things; while new things seem to be fragile, but in fact they only need a few OGs and media hype to grow into giants. Value discovery in cryptocurrencies is too fast, and some opportunities that are not listed on exchanges are on the same starting line as investment institutions. In the end, everyone finds that hyping memes is the return to the original intention of cryptocurrency, no trust intermediary + freedom. The big Alpha behind cryptocurrencies should discover more early on-chain opportunities. This market will reward early participants faster than before. Once listed on mainstream exchanges, value discovery can be completed within a few weeks.

3. Don’t get too involved in the drama, your prejudice is not everything.

More often than not, stakeholders are the biggest driving force behind a project. Market participants are not only traders, and the interests behind them are even more complicated. However, there is always a main line of interest distribution behind each project. Miners, whales rushing into the pool, project parties, exchanges... may all be the operators of a certain project at a certain stage. Find the logic of maximizing their interests and follow it.