Bitcoin Ordinals: Hype?

24 May 2023

Photo by fatido

The cryptocurrency market has witnessed a surge in popularity, leading to an influx of new digital assets being developed and launched. Among these, Bitcoin Ordinals and BRC-20 tokens have created quite a buzz in the crypto community.

But is this latest trend just another fleeting fad, or are we witnessing the inception of a game-changing phenomenon in digital finance? We’ll weigh the pros and cons to help you decide whether these new digital assets are worth your attention or merely partaking in the hype surrounding them.

Bitcoin Ordinals

Bitcoin Ordinals, also known as Bitcoin protocol versions, are a way to categorize different stages of the Bitcoin protocol’s development. The primary purpose of these ordinals is to provide better compatibility between various nodes on the Bitcoin network and ensure smooth functioning.

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Each ordinal signifies a version of the Bitcoin protocol that has been released or proposed, with specific features and improvements.

As Bitcoin technology evolves, these ordinals help developers identify and implement necessary upgrades while maintaining backward compatibility with older versions. This ensures a more efficient and secure network for users worldwide.

BRC-20 Tokens

BRC-20 tokens are standard for creating and issuing digital assets on the Binance Smart Chain (BSC), a parallel blockchain within the Binance ecosystem.

These tokens follow the rules and guidelines, ensuring compatibility with various platforms and services such as wallets, exchanges, and smart contracts.

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BRC-20 is similar to Ethereum’s widely known ERC-20 token standard but operates on the BSC network, which offers higher performance metrics like faster transaction times and significantly lower gas fees.

The flexibility of the BRC-20 standard enables developers to create a wide range of financial instruments, including utility tokens, governance tokens, or even stablecoins pegged to traditional currencies.

BRC-20 tokens are tokens created on the Bitcoin blockchain via the Ordinals protocol.

To achieve this diversity in token functionality, developers can utilize customizable features within the smart contract code.

Consequently, BRC-20 has contributed immensely to the growth of decentralized finance (DeFi) applications within the BSC ecosystem by offering an efficient medium for value transfer and interaction across various projects.

Just a Hype?

Despite these positive factors, several reasons suggest that the excitement surrounding Bitcoin ordinals and BRC-20 tokens may eventually fade:

1. Market Saturation: The ease of token creation using these standards has led to an oversupply of digital assets in the market.

As a result, many projects may struggle to gain traction and deliver value to their users or investors, leading to disillusionment and reducing enthusiasm for newly launched tokens.

2. Regulatory Crackdown: Regulatory scrutiny on cryptocurrencies is increasing worldwide, with regulators paying particular attention to Initial Coin Offerings (ICOs) and token sales.

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Governments will likely implement stricter regulations on token issuance in the future, which may temper excitement around new projects built on Bitcoin ordinal or BRC-20 standards.

3. Scalability Concerns: Scalability remains a central challenge for many blockchain networks, including Bitcoin and Binance Smart Chain.

As more tokens are issued on these blockchains, network congestion can lead to slow transaction speeds and increased fees, ultimately impacting user experience negatively.

Factors Driving the Hype

The hype surrounding Bitcoin ordinals and BRC-20 tokens has steadily increased, primarily due to several key factors.

One primary driver is the growing global interest in digital currencies and decentralized finance, which has positioned these assets as desirable alternatives to traditional banking systems. In addition, several factors contribute to escalating excitement around Bitcoin ordinals and BRC-20 tokens:

1. Novelty Factor: Introducing new technology tends to generate exaggerated expectations, especially in industries such as cryptocurrency with high levels of innovation.

As a result, early adopters tend to be overly optimistic about new technologies’ potential benefits, which translates into heightened interest and excitement.

2. Market Speculation: Cryptocurrency markets are highly speculative, with investors often drawn to projects offering potentially high returns on investment.

The ability to create custom tokens using Bitcoin ordinals or BRC-20 standards has enabled many new projects to enter these markets, fueled by speculative investment activity.

3. Ease of Token Creation: The ease with which developers can create new tokens using these standards has dramatically lowered entry barriers for launching crypto projects.

This increased accessibility has led to an explosion in newly issued digital assets, further contributing to the hype.

Lessons from Previous Hypes

One relevant example illustrating unsustainable hype within the cryptocurrency industry is the ICO boom of 2017-2018. Thousands of ICOs were launched based on Ethereum’s ERC-20 standard. However, as time progressed:

Regulatory action against some high-profile projects dampened enthusiasm.
As a result, many ICO projects failed to deliver utility or returns for their investors.

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A subsequent bear market resulted in considerable losses for those who had invested in these hyped coins. This example is a cautionary tale for the current enthusiasm surrounding Bitcoin ordinals and BRC-20 tokens.

SRC-20 Tokens

SRC-20, commonly called STAMPS, is an innovative token specification model inspired by the well-known BRC-20. This advanced model distinguishes itself from traditional Counterparty by offering enhanced features and more wonderful token creation and management flexibility.

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Designed to focus on user experience and adaptability, SRC-20 enables developers to quickly create and issue custom tokens while maintaining compatibility with existing systems.

As a result of its unique attributes, SRC-20 stands out as a groundbreaking development in the world of blockchain technology and digital assets.

Final Thought

While the hype surrounding Bitcoin ordinal tokens and BRC-20 projects has been driven by genuine excitement over technological innovation, history has shown that such enthusiasm can be unsustainable. Factors like market saturation, regulatory crackdowns, and scalability concerns may eventually lead to diminishing interest in these developments.

As investors and cryptocurrency enthusiasts, remember to approach new projects with skepticism and realistic expectations to avoid getting caught up in unsustainable hypes.

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