Bitcoin inscriptions refer to the process of inscribing content onto a satoshi (the smallest unit of Bitcoin) using the Ordinals protocol. This content can include text, images, videos, audio, and more.
Common types of Bitcoin inscriptions generally fall into two categories: text-based inscriptions and image-based inscriptions. These are commonly referred to as BRC-20 tokens and Bitcoin NFTs.
A Brief History of Bitcoin Inscriptions
The Ordinals Protocol
The explosion of NFTs in the previous bull market led some developers to explore how NFTs could be issued on the Bitcoin network. Since Bitcoin does not natively support smart contracts, issuing NFTs directly wasn't possible.
In late 2022, Bitcoin developer Casey introduced the Ordinals protocol on the Bitcoin mainnet. This protocol introduced the concepts of ordinals and inscriptions. The logic behind the Ordinals protocol enabling NFT issuance on Bitcoin involves inscribing the NFT data onto a satoshi and assigning each one a unique serial number (an ordinal). This links the satoshi to information like images, text, or videos, creating a unique, non-fungible token (NFT).
The emergence of the Ordinals protocol captured market attention. Some established NFT protocols also began experimenting with launching new projects on Bitcoin. The most famous example is Yuga Labs, the team behind Bored Apes, launching their new project, TwelveFold, on the Bitcoin network.
The BRC-20 Standard
Building upon the Ordinals protocol, a developer named Domo proposed the BRC-20 standard for issuing fungible tokens on the Bitcoin network. ORDI was the first BRC-20 token issued on the Bitcoin blockchain, with a total supply of 21 million tokens.
The BRC-20 standard rapidly gained popularity, sparking the creation of a wave of other BRC-20 tokens. Recently, listings of these tokens on major exchanges have further fueled market excitement.
The Ethscriptions Protocol
Following the model of the Ordinals protocol, Tom Lehman, co-founder of Genius, proposed the Ethereum Inscriptions protocol, Ethscriptions. The goal was to reduce the cost of minting NFTs and further propel NFT development.
Contrary to expectations, this idea did not gain widespread support from the community or major NFT projects. However, the token-based玩法 (play-to-earn/model) similar to BRC-20 found a continuation on Ethereum. ETHS was the first token created using the Ethscriptions protocol.
Other Protocols
Although the Ordinals protocol saw wide adoption, it still has drawbacks. To address these limitations, other protocols like Atomicals, Runes & Pipe, and Taproot Assets have emerged. Early projects built around these protocols have also gained some market attention and interest during this recent market activity.
Key Characteristics of Bitcoin Inscriptions
- Non-Fungibility: Once an inscription is made on a specific satoshi, it cannot be replicated by someone else later. Each one is unique.
- Relative Fairness: Everyone can participate, and there are no pre-allocations or reservations. This is a key reason for their popularity.
- First-Come, First-Served: Transactions with higher fees are prioritized for processing. Bitcoin miners prioritize bundling transactions that offer higher fees.
- Limited Quantity: The quantity of a specific inscription can be fixed at the time of minting and cannot be altered later.
- Immutability: Bitcoin inscriptions are stored directly on the Bitcoin blockchain, not on external storage solutions like IPFS.
Controversies Surrounding Bitcoin Inscriptions
As the market heat for Bitcoin inscriptions has risen, so has the debate around them.
Proponents argue that inscriptions increase transaction fee revenue for Bitcoin miners, which in turn helps maintain the security of the entire Bitcoin network. The several market surges driven by BRC-20 tokens this year were accompanied by spikes in Bitcoin network fees, meaning increased earnings for miners. Higher miner profits can attract more miners to the network, enhancing its overall security.
Opponents contend that inscriptions clog the network with what they consider "spam data," effectively constituting an "attack" on the Bitcoin network. They also point to potential risks associated with the reliance on indexers for a centralized accounting method. A notable opponent is Bitcoin Core developer Luke.
Despite the ongoing debate, it hasn't dampened market enthusiasm or the fervor of crypto community users. BRC-20 tokens have seen their values soar, and similar inscription-based models have expanded from Bitcoin to various other public blockchains.
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Popular Inscriptions in the Current Market
The inscription trend originated on the Bitcoin network and later proliferated across multiple other blockchains. Following the initial boom, similar inscription phenomena appeared on chains like Ethereum, Solana, Avalanche (AVAX), Polygon, and BNB Chain, among others.
According to the latest market data, the floor price for Ethereum's ETHS and Facet inscriptions have reached 5.798 ETH and 0.778 ETH respectively. Compared to their minting price of around $1 USDT, this represents gains of over 13,000% and 1,700%.
On the Solana network, the SOLS inscription currently has a floor price of 74 SOL. With a minting price of approximately $5 USDT, this signifies a gain of around 1,100%.
The BNBS inscription on the BNB Chain network currently has a floor price of 6.25 BNB. From a minting price of about $0.02 USDT, this is a increase exceeding 76,000%.
The wealth creation effect of inscriptions has attracted a massive influx of users. Increasingly professional teams and players are joining, often using scripts to compete for minting inscriptions, making it more difficult for the average retail participant to mint successfully. Many are thus turning to the secondary market to acquire inscriptions.
Beyond these, BRC-20 tokens have become a popular choice for many retail investors. The recent performance of leading tokens like ORDI and SATS, in particular, has provided significant returns for many users.
How to Acquire BRC-20 Tokens
For the average user looking to participate by purchasing these tokens, the simplest method is to trade them on a cryptocurrency exchange. Several major trading platforms now offer spot and sometimes even futures trading for various BRC-20 and related tokens.
When considering acquiring any digital asset, it's crucial to conduct thorough research, understand the project's fundamentals, and be aware of the high volatility and risks inherent in the cryptocurrency market. Prices can fluctuate dramatically.
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Frequently Asked Questions
What exactly is a Bitcoin inscription?
A Bitcoin inscription is a piece of data (like text, an image, or video) permanently embedded onto a specific satoshi on the Bitcoin blockchain using the Ordinals protocol, making that satoshi unique.
What's the difference between a BRC-20 token and a Bitcoin NFT?
Both are types of inscriptions. A Bitcoin NFT typically refers to a unique image or collectible inscribed via Ordinals. A BRC-20 token is a standard for creating fungible, interchangeable tokens (similar to ERC-20 on Ethereum) using text-based inscriptions on Bitcoin.
Why are Bitcoin inscriptions controversial?
The main criticisms are that they congest the Bitcoin network, driving up transaction fees for regular users, and that they store potentially large amounts of non-financial data on the blockchain. Supporters argue they bring new utility and fees to miners.
Is it too late to get involved with inscriptions?
The market is highly volatile and speculative. While some early inscriptions have seen massive gains, it involves significant risk. New projects and standards continue to emerge, but careful research is essential.
Can inscriptions be created on other blockchains?
Yes. The concept has been adapted for other chains, leading to standards like Ethscriptions on Ethereum and similar concepts on Solana, BNB Chain, and others, though their adoption and mechanics differ.
How do I store Bitcoin inscriptions or BRC-20 tokens?
They are stored on the Bitcoin blockchain. However, to view and interact with them, you typically need a compatible Bitcoin wallet that supports the Ordinals protocol and often relies on external indexers to read the inscribed data.