The Future is Ordained: BRC-20, Ordinals and ‘Bitcoin Smart Contracts’
Bitcoin is stupid. No, not like that. The world’s pioneer crypto is by some distance the most valuable. When it comes to trustless ledgers, security, and decentralisation — time is a great proof of concept, and Bitcoin is both the market’s frontrunner and forerunner. It is, however, stupid. It records who has what amount of Bitcoin, and nothing else.
Successor chains like Cosmos, Ethereum, and Solana have greatly expanded the use cases for crypto through the use of smart contracts and virtual machines. ‘Clever’ chains can act as substrates for all kinds of complex financial and access-rights utility due to their programmability. An ERC-20 smart contract address can automatically send out new tokens upon receiving Ethereum, to give a basic example.
Retrofitting utility onto the Bitcoin blockchain has long been considered, if not impossible, then close to it. Bitcoin already does what it does so well, so what need is there for utility beyond the ‘peer-to-peer’ cash system it functions as?
However, with the combination of two (comparatively) recent updates to the Bitcoin protocol, Segwit and Taproot, Bitcoin’s morphing into a utility chain, or at least gaining some additional functions, became possible. Segwit allowed more arbitrary data to be attached to Bitcoin transactions, while the Taproot upgrade led to a significantly increased blocksize.
With these upgrades, ordinals, BRC-20, and an expanding utility for Bitcoin — such as creating Bitcoin ‘NFTs’ (or ‘digital artifacts’, as the Ordinal protocol creator Casey Rordarmar calls them) — became possible. But how?
The Ordinal protocol works by sequentially ordering every satoshi on the Bitcoin blockchain by minting date and assigning it a number depending on when it was created. A satoshi (or ‘sat’) is the smallest divisible unit the Bitcoin protocol allows a user to send. In doing this, each satoshi becomes unique. Just as a dollar note will have a unique serial number, through the Ordinal protocol, every satoshi now has a unique identifier.
Now each satoshi has been rendered unique, they can now be inscribed. Just as the currencies on the back wall of a holiday bar have messages from patrons, with inscriptions, each satoshi can now have specific metadata attached to it, allowing it to function as a discrete information vessel held securely on the Bitcoin blockchain.
Et voila, the ingredients for Bitcoin NFTs, or artifacts, is born. The concept of using the Bitcoin blockchain for something other than simple value-transfer opens up, as specific satoshi’s become individualised and able to refer to specific data, whether that be text, images, video, or more.
This pioneering development was built upon with the introduction of the BRC-20 token standard, echoing the Ethereum ERC-20 standard. BRC-20 tokens are satoshis with JSON (Javascript Object Notation) code attached. This JSON code defines the token, and sets the rules for its minting, transaction limit, and so forth. Anyone with an ordinal wallet can mint BRC-20 tokens, but the code itself cannot be changed in any way.
It’s important to note, though, that due to the lack of programmability, the current utility for these tokens is far more limited than their ERC-20 counterparts. The BRC-20 protocol runs in parallel to the Bitcoin network, not directly upon it, meaning that a failure of the BRC-20 protocol wouldn’t affect the functioning of the Bitcoin network itself, as the Bitcoin network simply processes transactions sent to it by the BRC-20 program, rather than executing the code directly.
Although experimental, ordinals, inscriptions, and BRC-20 mark the beginning of a new chapter for Bitcoin. Utility is limited, but as Bitcoin continues to become adopted in the financial mainstream, it further cements itself as the world’s most secure decentralised network. Indeed, the most secure network of any kind. By boosting its utility, even in increments, it opens the door to using Bitcoin as far more than a peer-to-peer cash system, but a network system that can define every interaction of our modern digital world.
As the Arc Bridge Hub expands, contributors are looking forward to adding support for BRC-20 on the Onomy Exchange, further opening the Onomy ecosystem to the next wave of Bitcoin.
