Bitcoin Ordinals’ Growing Ecosystem & Impact: Binance Research

Binance Research recently released its latest report, and it maps the landscape of Bitcoin Ordinals, revealing an ecosystem—from DeFi and NFTs to tooling. The report explicitly points to the fact that inscriptions and BRC-20 tokens have played a significantly important role in catalyzing activity within the Bitcoin ecosystem over the past year. These innovations have not only lured new blood to the developer community but also sped up updates for projects and nurtured the innovation culture.

Inscriptions and BRC-20 tokens have impacted the Bitcoin ecosystem beyond transaction metrics and block demand, serving as catalysts for ecosystem developments.

In our new #Binance report, we examine their impact and latest developments.

Have a read ⬇️https://t.co/cxDJ30uAMg

— Binance Research (@BinanceResearch) February 8, 2024

Bitcoin’s Evolution In 2023

In 2023, Bitcoin experienced a significant turning point in the world of cryptocurrencies. Some­ substantial advancements, like the spot BTC ETFs ente­ring the scene and making improve­ments in its system, made­ things active again. More people­ started paying attention because­ of inscriptions/BRC-20s. This caused a lot of speculation and re­sulted in more transactions in the Bitcoin ne­twork.

Critics argue that inscriptions/BRC-20s might lead to network congestion and fees, whilst others see them as better scaling solutions for Bitcoin more so with the introduction of Bitcoin Layer 2s (“L2s”). This directed the feeling of the community toward building and empowering the ecosystem as discussions on different Bitcoin applications gained traction.

Now, getting into recent developments, it is interesting to trace the evolution of inscriptions and BRC-20s during 2023. According to Casey Rodarmor’s “Ordinal Theory,” inscriptions allow for individual Satoshis to have a unique identifier and be tracked, including any arbitrary content like text, images, or videos that come with these identities. Whereas the release of BRC-20s, created by pseudonymous Crypto Twitter user Domo, kicked off a flurry of new meme coins and had a big impact on speculative activity on the Bitcoin network.

Their effect was further underscored by the slow but steady rise in the minting volume of inscriptions on the network, surpassing milestones throughout the year and contributing substantially to fees. This translated to an increase in activity that can be represented by heightened transaction counts, as well as notable shifts in metrics like the average block size and transaction fees, signifying deep impacts on the BTC ecosystem.

Although the Ordinals protocol was originally developed on Bitcoin, it has seen emulation across projects on different EVM-compatible chains, with transaction activity spiking significantly toward the end of 2023. However, such spikes have sometimes resulted in network outages and degradation in performance, pointing to the problems that could come with increased activity related to inscription on these chains.

While the debates continue about impact, the current state of innovation within the Bitcoin ecosystem seems to have one foot already outshining these concerns, turning towards broader adoption and an exciting future for the ecosystem.