Bitcoin is known to do one thing and does that one thing well: “Serve as Peer-to-Peer Money”.

While no doubt a revolutionary technology with a mysterious origin story involving a genius coder, it appeared to have reached a point of stagnation. Lightning and Stacks represented two genuine attempts to scale Bitcoin, but the layer-1 itself had barely seen two major upgrades in two halving cycles — SegWit (2017) and Taproot (2021).

Bitcoin was holding on to a holier-than-thou image with its “fair launch” compared to “pre-mines” of other blockchains. Purists looked down on platforms that were decentralized in name only. Maximalists spoke with pride that Bitcoin’s essence has been retained despite misguided efforts to change it.

The paranoia is understandable given the mission to stop Bitcoin from becoming the system it is trying to replace: “The Centralised, Fiat-based, World Order.”

In the meantime, Bitcoin’s younger and more dynamic cousin, Ethereum, took on the ambitious task of building blockchain-based infrastructure on which the global financial system could one day stand.

Ethereum attracted the best talent as it offered developers the opportunity to apply their skills to truly innovative products, either directly for the Ethereum blockchain or for dApps built on top of it.

But 2023 has seen things change. Developer activity is back to Bitcoin. And it started with Ordinals. Vitalik Buterin has been quoted as saying that Ordinals have revived builder culture in Bitcoin.

Ordinals

Ordinals brought Non-Fungible Tokens (NFTs) to Bitcoin.

Here’s how it works:

• The smallest unit of BTC is called a Satoshi (SAT), named after the pseudonymous founder.
• 1BTC = 100,000,000 SATs.
• Each SAT has a unique identifier, called the ordinal number, based on its order of mining.
• A Bitcoin Ordinal (or Bitcoin NFT) is created by inscribing unique SATs with digital content.

This is different from NFTs on Ethereum or Solana. In Ethereum and Solana, the NFT simply points to an off-chain location where the digital asset resides. In the case of Bitcoin Ordinals, the digital art is actually stored on-chain

Ordinals were made possible by features added in the two earlier upgrades — SegWit and Taproot. I won't get into all the features that were added in Segwit and Taproot, and instead only mention those that Ordinals are using.

Segregated Witness (SegWit) — SegWit increased block capacity in a unique way. It separated transaction and witness data and stored witness data outside the main block. Witness data has the authentication signature. Before Segwit, witness data used to take up to 54% of block space. Post Segwit, it takes up one-fourth of the space it used to. Digital content for Bitcoin Ordinals is inscribed in the witness section and hence takes a fourth of the space it would’ve if inscribed in the transaction section.

Taproot — The above-described feature introduced in Segwit made storage of ordinals more efficient but ordinals could still have existed without it. Taproot introduced a feature without which ordinals could not have been created at all. It introduced a new address format that made it possible to assign an individual identifier to each SAT

The incredible thing about open-source projects like Bitcoin is that one can’t predict how it will grow. The developers who added the above-described features in SegWit and Taproot had no idea that Casey Rodarmor , creator of the Ordinals Protocol, would one day leverage them to make NFTs on Bitcoin possible.

BRC20

Now that Bitcoin had non-fungible tokens, one began to wonder if fungible tokens could also be created on it.

Here’s how it works:

The fungible token standard on Ethereum is ERC20. ERC20 tokens have features (like total supply, balances, transfers, etc) included in the token.

If digital art can be inscribed into SATs to create non-fungible tokens, why not inscribe SATs with data defining fungible tokens? Anonymous developer, Domo, did exactly that in March’2023. He inscribed features like name, totals supply, and minting limit to SATs to create BRC20 tokens, a new semi-fungible token standard for Bitcoin.

Note that, unlike ERC20 tokens, BRC20 tokens do not have smart contract functionality.

BRC69

In the case of NFTs on Ethereum, the digital art is stored outside the blockchain. The ERC721 (or ERC1155) token simply points to where they’re stored. In the case of Bitcoin Ordinals, the digital art sits within the blockchain. Bitcoin Ordinals, therefore, are truly native.

However, this also means that Bitcoin Ordinals take up a lot more block space. Since the introduction of Ordinals and BRC20 tokens, the Bitcoin blockchain has seen the network get clogged and fees skyrocket.

What was needed was a token standard that utilizes block space more efficiently. BRC69 is a new token standard created by Luminex.io that reduces the cost of ordinal inscriptions by up to 90%.

Here’s how it works:

Large NFT launches are usually collections and not single pieces of art. For example, Bored Ape Yacht Club (BAYC) is a collection with 10,000 NFTs created from 170 unique characteristics. Any single Bored Ape will wear one of 44 clothes, 37 hats, and 7 earrings, have one of 19 furs, 23 eyes, and 33 mouths, and be portrayed in one of 8 backgrounds.

Creating Bored Ape Bitcoin Ordinals would have involved inscribing 10,000 separate images into SATs. Using BRC69’s recursive method, once the 170 unique characteristics are inscribed, the 10,000 NFTs can be created through code that references traits from other inscriptions. Hence one no longer needs to inscribe an entire image. A single line of code would be sufficient to render the entire image across ordinal front ends.

Conclusion

It remains to be seen if these proposals are more than just fads. Ordinals, BRC20, and BRC69 are just proposals yet to become accepted standards integrated into tools like wallets and exchanges.

Why would they not be accepted as standards?

These proposals are contentious. One of Bitcoin’s biggest claims to fame is that it has had zero downtime in over 10 years. This is a HUGE achievement. Blockchains like Solana see outages all the time. Ethereum hasn’t been as bad but has had its fair share of outages. Even the likes of Fedwire and Swift have seen outages despite them already getting downtime on weekends.

New functionalities like the ones discussed in this article expand the surface area for bugs and increase the possibility of disruptions in Bitcoin.

Disclaimer: The views expressed are my own.