The BTC ecosystem is a community network that encompasses complex and rapidly evolving technologies and applications centered around the adoption and development of Bitcoin. This ecosystem covers all kinds of decentralized applications (DApps), including infrastructure, wallets, trading markets, NFTs and layer 2 solutions. Due to the scale and maturity of the underlying infrastructure, this nascent ecosystem has shown tremendous growth and potential.
Data from Glassnode suggests that the number of active Bitcoin addresses has been increasing since the start of 2023. At the same time, the network has also experienced strong growth in transaction volume. Despite fluctuations in the price of ORDI, business in the chain has continued to thrive, which is an indicator of a vibrant ecosystem.
1. Ordinal NFTs
Ordinal NFTs are unique, non-fungible tokens inscribed on the Bitcoin blockchain in a specific order. Unlike traditional NFTs minted via smart contracts on blockchains like Ethereum, NFT Ordinals are directly inscribed on satoshis, the smallest unit of Bitcoin. Here are some NFT Ordinals projects that have gained traction in the crypto community, each using the Ordinals protocol to create unique and valuable NFTs on the Bitcoin blockchain.
● Ordinal Punks: A collection of PFPs (profile picture) with a total supply of 100 NFTs on the Bitcoin blockchain minted in the first 650 registrations.
● Bitcoin Frogs: Another popular collection of NFT Ordinals. Each seed NFT represents a unique entry on the Bitcoin blockchain that highlights the value and collectability of each seed.
● DogePunks: The project combines the popularity of Dogecoin with the uniqueness of the Ordinals protocol in a collection of NFTs. Each DogePunk NFT represents a specific entry on the Bitcoin blockchain.
● TwelveFold: An NFT Ordinals project focused on scarcity and uniqueness, where each NFT represents a unique listing of Bitcoin.
However, it should be noted that the Ordinals protocol has sparked different views in the crypto community. Some see it as an innovative way to expand Bitcoin’s use cases and create valuable cryptoassets, while others worry about its scalability and potential impact on transaction fees. Nevertheless, the rise of Ordinal NFTs has drawn attention to Bitcoin’s Layer 2 network and its potential to advance more applications.
BRC20 (Bitcoin Resource Contract 20), an experimental token standard developed for Bitcoin, enables the issuance, minting and transfer of tokens on the BTC network. Similar to Ethereum’s ERC20, BRC20 specifies the naming, sourcing, transfer and other functionality of tokens issued on the blockchain. Compared to other standards such as ERC20, BRC20 offers the advantage of minimal technical barriers. Because the BRC protocol platform has already been coded, developers can easily implement additional tokens by adjusting code parameters.
Despite this, it is important to note that BRC20, an experimental format, comes with an unfinished design. Nevertheless, thanks to its fair token distribution mechanism, BRC20 has become quite popular among cryptocurrency users. With BRC20, all users are treated equally in terms of minting, and project teams cannot reserve or issue additional tokens, creating a level playing field. However, it should be noted that BRC20 tokens do not provide any intrinsic value and are often considered speculative commodities.
In terms of implementation, BRC20 tokens are inscribed in satoshis, the smallest unit of Bitcoin, and unlike ERC20 tokens, they cannot interact with smart contracts. Still, the BRC20 protocol offers the Bitcoin community a new way to implement tokens, facilitating innovation in the ecosystem and attracting more developers and users to the community.
3. L2/DeFi projects
As Bitcoin’s transaction volume continues to grow, a key development trend is figuring out how to maintain Bitcoin’s underlying security while allowing it to process more transactions. At the same time, the issue of miner rewards has become more prominent as bitcoin’s halving approaches, triggering the emergence of layer 2 (L2) and sidechain solutions.(sidechain), which focus on limiting the bitcoin block size. Today, let’s dive into several L2 solutions and DeFi projects built on Bitcoin’s Layer 2 network.
Stacks is an L2 solution for Bitcoin that enables the execution of smart contracts and the development of decentralized applications (DApps) on the Bitcoin blockchain. The project aims to introduce smart contracts functionality into Bitcoin without changing the network itself. In addition, Stacks has a separate ledger to store data outside of Bitcoin’s L1 network, allowing developers to build all applications on the blockchain.
One of the main features of Stacks is its integration with Bitcoin. Built on top of the Bitcoin blockchain, Stacks uses the same underlying technology and security features as Bitcoin. In other words, the project inherits the security and decentralization of Bitcoin, making it a reliable and secure platform for building decentralized applications (dApps). Transactions on stacks are safer and more reliable because they are protected by the Bitcoin network. Stacks also allow apps and smart contracts to use bitcoin as an asset or currency to settle transactions on the bitcoin main chain.
The Stacks ecosystem is growing rapidly and a wide variety of projects and apps are being developed. Over 88 projects are listed on its official website covering DeFi, NFTs, DEXs and more. Stacks aims to empower people to control their data and wealth by offering a more accessible internet and a decentralized economy.
● Root stock
As a sidechain running on the Bitcoin network, Rootstock (RSK) is designed to execute smart contracts using Ethereum’s Solidity. One of the main features of Rootstock is its EVM compatibility, which allows developers to implement and interact with smart contracts on Rootstock using familiar tools and frameworks. Compatibility also extends to widespread Ethereum wallets such as MetaMask, allowing users to access and interact with decentralized applications (dApps) in the Rootstock ecosystem. Rootstock’s native token is called rBTC, which is pegged to bitcoin. This means that the value of rBTC is tied to Bitcoin and users can move BTC seamlessly to the Rootstock sidechain and back to the Bitcoin network. In addition, Rootstock has developed an infrastructure called RIF, which is a platform built on top of Rootstock that provides blockchain facilities and services such as domains, storage and authentication to facilitate the development and deployment of decentralized applications (DApps). Based on the security and robustness of the Bitcoin network, Rootstock strives to provide a secure and scalable platform for the development of smart contracts and DApps.
Alex is a DeFi protocol built on the Stacks blockchain and is one of the most prominent protocols on the network. Per As of May 29, 2023, Stacks’ Total Value Locked (TVL) is $28.31 million, of which $26.7 million is from Alex. Considered the largest DEX in the Stacks ecosystem, the protocol offers a wide range of products and a decent user experience. Alex’s product offering includes Lending LaunchPad, DEX, Order Book and Futures. Alex frequently interacts with other developers in the ecosystem, including those behind crypto wallets, and has built a vibrant community. In addition, the protocol uses Stacks to implement smart contracts, DeFi and NFTs on Bitcoin. Alex’s DEX allows users to trade, bet and provide liquidity for BTC in a fully decentralized manner. In addition, the project also offers automated liquidity management (AMM) on the testnet and an off-chain order book so users can participate in margin trading.
Arkadiko, a decentralized liquidity protocol based on Stacks, intends to provide various DeFi solutions to improve the liquidity of assets on Stacks. One of its key features is that users can use their STX tokens as collateral to mint a stablecoin called USDA, which can be used for farming and loan repayments on Arkadiko. The protocol also uses a Proof of Transfer (POX) consensus mechanism to generate farming rewards.
According to LD Capital, Arkadiko is the second largest protocol in the Stacks ecosystem with a TVL of $6.9 million. Arkadiko’s team, with strong technical capabilities, works closely with the Stacks team and existing projects in the ecosystem. Still, STX, Arkadiko’s primary security, comes with a low market capitalization, and the USDA stablecoin also faces challenges such as limited services and use cases in the market. Together with the launch of Stacks SBTC and the enrichment of L2 applications on Stack, USDA should capture a decent market share in the future stablecoin market, especially within the layer 2 of Bitcoin. Arkadiko plays a vital role in the BTC network as it provides a decentralized stablecoin to the ecosystem.
In summary, with the emergence of standards and protocols such as BRC-20 and Ordinals NFT, the BTC ecosystem has seen rapid growth and innovation. At the same time, advances in supporting devices such as wallets and L2 marketplaces are driving the expansion of the entire ecosystem. In addition, Bitcoin’s integration of DeFi protocols and sidechains solves issues of scale and transaction speed. As the BTC ecosystem continues to develop, it will provide tremendous momentum to shape the future of blockchain technology and decentralized finance.
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