Foresight on Bitcoin: New Future unwrapped

Foresight Ventures

30 min readJan 15, 2024

Chelsea@Foresight Ventures

TL:DR

The coming bitcoin halving reduces bitcoin miner’s incentive to maintain the network and alternatives are needed to fill in the disappear bulk of rewards for miners in order to maintain the global ledger that can store and transact value in a borderless and decentralized manner.
Ordinal theory is the CryptoKitty Moment for Bitcoin since it demonstrates the potential of fees market of bitcoin.Specifically, BRC-20 has proved the demand and value of assets issued on Bitcoin and we will see more type of new assets to be issued on Bitcoin.
Bitcoin as an infrastructure to enable programmability onchain is still lacking fundamental technical support even after Taproot Upgradeand need to have another upgrade to allow new programs or applications built on top of Bitcoin with its security guarantee.
We are still early. With the backdrop of loose monetary policy coming next year and regulatory green light for ETF, we will be able to see more liquidity overspill into bitcoin as the cryptocurrency with longest consensus to push for even more technical innovations, businees developement, and trading interests.

Intro：Bitcoin is the most valuable cryptocurrency

Bitcoin, the most valuable and secure cryptocurrency

Bitcoin is known as the earliest, oldest, and most expensive cryptocurrency, also almost used interchangeably with the word “ cryptocurrency” itself if the audience is not familiar with the subject. This renders bitcoin the value to appear in the rigid financial models of our world as an alternative way of representing value, also known as money, and has since the white paper released in 2008 demonstrated the ever-growing influence from a experiment to an asset that is traded across the border with near 1000 billion of US Dollars. The value of bitcoin as an asset to store value has come from:

Value enduring the test of time. Bitcoin has lived through multiple financial meltdown that almost went to zero denoted in dollars, regulatory crackdown from different sovereign authoritites, and most importantly technical disagreements that has split both the tech and community into two different camps since 2008. Time and time has tested Bitcoin in various circumstances, but bitcoin has remained as a global ledger to store and transfer value given the security of its technology, which is mainly contributed to.
Irrationally expensive cost of attacking bitcoin as a network, or as Paul Sztorc put it as Security Budget. As an opensource software that can be adopted by anyone, though realistically speaking the requirement for computing power for competition is so high that no ordinary people are able to afford, bitcoin is still largely run by different operatos, or miners, compared to single owner or operator of any project worth millions dollars of market cap. Therefore, to change or control bitcoin, the attacker has to be able perform 51% attack in order to control the chain, which is calculated as to be $7 milliong per day which can amount to $2.6 billiong a year. Although this number is insignificant comparing to say US military budget, $766 billion in 2022 fiscal year, but the cost has deterred enough attacks to keep bitcoin intact.

Halving changes dynamics of the game

However, there is a new factor that need to be put into the pitcture, halving, that significantly cuts the financial reward miners receives helping maintain bitcoin as intended and further increase potential security risk.Ultimately Bticoin utilizes game theory to incentive people for good behaviors.When incentives is not good enough to incentivize desired behaviors, malicious attack or security might be breached given enough ROI on the act.

Bitcoin is a global ledger, and a currency

Here the dual nature of bitcoin can come in very handy. Bitcoin is not just a store of value, UTXO specifically that can be spent and transder, but also medium of transaction that is consumed when transactions are logged on this ledger.Miners who help maintain the ledger not only receives bitcoin from the protocol for their hard work but also collect fees from transactions initiated by users of the protocol. In other words that can familiar with ethereum community, bitcoin miners also sells blockspace. Therefore, when the reward for miners cut in half, they can rely on the demand for their blockspace to increase transactions fees and potentially help make up the lost. Admittedly transactions could seem negligible at the beginning, healthy fee market combined with price appreciation of bitcoin can at least make mining a sustainable business.

Chapter 1: Ordinal triggers cryptokittes moment in Bitcoin

Ordinal theory, the new kid on the Block

As Casey wrote in Jan 2022, “So what do we?Stimulate demand for block space! Come up with new ways to use Bitcoin, new ways to use L1, and bring things from other chains onto Bitcoin” It’s now officially a year since Ordinal was first imagined by its creator Casey Roadmor which has fueled the philosophical debate about the design of Bitcoin.But don’t forget that we also haven’t seen any new disruptive techology for a year as well. As an industry we have been fascinating ourselves with ZKP, AI, and game for a cycle already, but we haven’t seen any native paradigms on blockchain until Ordinal theory came along. Good or bad, ordinal theory has reignited interests in bitcoin and it potential, which is enabled by Se after rarely talked about Taproot upgrade that enabled new possibility.

Before we talk about Ordinal on Bitcoin, we have to talk about Bitcoin itself

Tokenization on Bitcoin has a longer history than Ethereum itself. Color coined attempted to create other type of assets on bitcoin in 2012 by assigning tag value on bitcoin, without adding extra overhead and can be pruned by full nodes. This early attempt was remembered in history but too early to be widely adopted.Still the idea of digital assets carried on by Namecoin and later introduced real NFT culture into Bitcoin by RarePepe cards, issued on Cournterparty through OP_RETURN in 2016.

Early attempts in tokenization are not set in stone until buillding blocks like Segregated Witness and Taproot Upgrade are put in place.

Bigger Block by Segwit: Segregated Witness essentially increased block size by moving the signature data to the end of transaction and further allowing data to be calculated using weight rather than byte to cut down overhead. The signature effectively gives more blockspace to stuff data onchain and inscription data
More Programmability enabled by Taproot:Taproot successfully upgraded Bitcoin’s signature algorithm from ECDSA to Schnorr signatures and Opcodes to validate Pay-to Taproot outputs. The new payment allows more conditions and thus can perform complicated logcs like” smart contracts”, which can be aggregated and verified like simple transactions with less costs leveraging Schnorr’s efficiency
Program Bitcoin:New use case other than peer to peer transactions are possible with new type of “smart contracts” available on bitcoin now. Discreet Log Contract is effectively a two-of-two multisig performing conditional spending according to the outcome of real-world events trigger by oracle. Partially signed bitcoin transaction, or PSBT, can share transactions between multiple parties in a private and decentralized way.

Ordinal theory is built on the foundation of bitcoin with upgraded programmability and cost efficiency.Arbitrary data that’s inscribed on an individual satoshi is posted on witness part of the transaction and many wallets and marketplace use DLC and PSBT to perform complicated transactions. Ordinal is definitely not the very first attempt of creating digital asset on bitcoin, but it is the very first type of digital asset thats been known by a greater audience other than Bitcoiner and traded by users who haven’t held bitcoin in their wallet before yet.

Consensus is born within disagreement

The very early reaction toward Ordinal theory is not welcome of new attempts but harsh criticism. Of course this is expected as bitcoin core community has been known as conservative given their pure belief in the original bitcoin as the simplest and safest blockchain to maintain itself. The criticism is valid in that Ordinal theory has exposed bitcoin blockspace to potential abuse.

However, there is a large amount of “speckle space” data availability on Bitcoin, which can find important uses even without relying on the second-layer methodology to separately mark BTC units. Concerns about the negative impact of Bitcoin’s fungibility have been exaggerated. According to galaxy research, with 500m inscriptions inscribed oncahin, only 0.2% of Bitcoin’s end point supply becomes “irreplaceable”.

Nonetheless, everything has downsides and it’s not fair to consider only one side of the story and completely ignore the other side. Comparing to the potential threat, the very question raise by Ordinal theory is what can be, not necessarily should be, done with bitcoin block space. As a matter of fact, the loud criticism of ordinal theory has in fact generated more interest in wider community to explore whats ordinal theory and what can it be used for.

Timing, Everybody is waiting for Something New

Though if you look into history of Bitcoin, you will see that ordinal theory is not the first attempt to write onchain but the timing is, just, perfect. Starting from colored coin first proposed in 2012 and codified in 2014 that uses color to differentiate different assets on chain, to counterparty launched in 2014 to create the first standard of NFT which itself has not been defined, to proposed RGB in 2015 that attempts to add Turing-complete VM for programmability utilizing client side verification, not much attention or interests are triggered outside bitcoin community itself. Ordinal theory is controversial enough to motivate people to look into what exactly something can be hated so much(Thanks bitcoin maxi for bring this under spotlight)

Technically speaking ordinal theory is enabled by Taproot upgrade that sparked new possibility of programmability in Bitcoin as a network
Trend wise bitcoin halving has historically set up conditions for upward trend for bitcoin with supply shock.
Market wise trading activites has been quite given the market crash and confidence crisis since FTX crashed and thus new assets and narratives are needed to reboot the market

Ordinal theory comes in a perfect timing when the market is looking forward to another bull market and ordinal theory provides the market the opportunity to pull the trigger.

New Possibility, New Asset,New Market

Ordinal theory is powerful in that it helps people to look onchain and to store arbitrary data on the longest,safest, and most decentralized blockchain,Bitcoin with the largest marketcap. This is like writing on the chain of time. In other words, Ordinal has enabled people to issue new assets like EVM enabled people to imagine what can be created on Ethereum, while the asset is secured by bitcoin as a global ledger and and assets with 1000 billion worth of market cap. And the ordinal theory market itself can reach a 5 billion dollar market, according to galaxy research.

Chapter 2: not just Bitcoin maximist, but money maximist

It doesnt matter whether you think bitcoin is just a peer to peer cash or a blockchain network that can build applications on top of it. Everyone can inscribe on chain and start making money, in millions if you are early.

New assets generating wealth effect

Permissionlessly inscribing assets onchain and thus trade onchain directly gives everyone a fair shot, regardless of your trading experience,capital size, and complicated tools. This is in general called fair launch in this new wave of wealth making. Unlike other projectes with hunderds of millions of dollars raised or narratives with papers and tweets from influencers boasting the importance of its, this is started from the community with low cost , populated by words from the friends who made money being early, and accepted by institutions because the market is always right

Issuing new assets: Any content can be inscribed on Bitcoin, image, text, audio, model, and even models, and as a result, permissionnlessly issuing new assets on top of bitcoin is allowed. date, there is now 51 million inscriptions and over $1billion achieved to date.

NFT: JPEG, HTML, or even code are inscribed on bitcoin and,unlike other beloved JPEG onchain, this time content are fully onchain. Ordinal theory use bitcoin blockchain space who guarantees data availability with. And the Sotheby’s auction of BitcoinShrooms just marked the entrance of inscription on Bitcoin as digital artifacts, which is now accepted as alternative asset to be traded by tradition asset holders.
NFTs building with ordinals, which means mainly images inscribed onchain, has accumulated a total number of 1.14 million NFTs in the first 200days, according to Galaxy research. This rate of growth has not been seen anywhere else in Ethereum, Solana, or Polygon.
Bitmap: This is an open protocol using ordinals to build a metaverse on Bitcoin,allowing anyone to inscribe Bitcoin block as a block in a metaverse. The launch of the protocol attracted many interests and further developments are pushed in a decentralized way including directory and explorer. In total this metaverse on bitcoin has an incomplete count of 22,000 addresses and 490 bitcoin trading volume so far
BRC 420 is another NFT standard started building on Bitmap that attracted many capital as well. This takes advantage of recursion from ordinal theory to support complex formats including 3D objects, game items, and even animation effects with native royalties embedded onchain. Based on the main marketplace RSCV,Total assets created and traded has market cap has collected a $5 billion market cap. The representative asset, bluebox, has surged from $ 300dollars to $1.4 million, making 4600x returns for its owners
BRC 721 is an extension of BRC-20 to include NFT with the use of unique identifier, which is mainly populated by New Bitcoin City. So far over 1,000 Smart Inscriptions have been created, among which Sudos, Fading Memories, GlixPunks, and more, that served as the first public BRC-721 collection launches.

Issuings Tokens: Of course our favorite topic in cryptocurrency is which coin we are talking about. Domo started this experimentation called BRC-20 that kicks off trading hype with many tokens and thus many wealth effect heard all over the market.

BRC-20 standard is the simplest yet the most influential version of asset standard permissionlessly with details only including ticker, supply, and mint cap in a JSON file. Obviously a play on ERC 20 token standard, the most traded token $Ordi is also an BRC 20 token. This standard has been used to create more than 24000 tokens, which totals 1.69 billion market cap with 447 tokens created, while the dominating asset Ordi achieving 1.4 billion market cap in less than 6 months, without any active participation from VC or founders.
BRC1155:The BRC-1155 Foundation has been established by the author and co-developers of the protocol on 22 May 2023 (Bitcoin Pizza Day). It still uses JSON to inscribe like BRC 20 but it takes less gas to obtain the certificate and render the corresponding content onchain.
ORC-20 sets out to improve BRC20 token standard by introducing stronger anti double spending with unspent transactions output that clarifies the balance for bothe the sender and receiver, and allowing upgrades on maximum supply and ticker name as well. However, this is only talked about in the market after Binance Academy published an article in May and has accumulated 380k transactions with 26 bitcoin as fess paid mainly in June.
BRC 30 is proposed by OKX to introduce staking functions for BRC-20 tokens and Bitcoins and supported by their wallet OKX wallet, which is the first multichain wallet to support trading of BRC 20 token
BRC21 & BRC 42are presented by Alexei, the founder of cross-chain bridge Interlay. While BRC 21 attracts liquidity from other ecosystem into Bitcoin by locking other tokens, ETH,DOT, ATOM for example, on the native chain and minting mirror assets on Bitcoin as BRC-20 token, BRC 421 extends BRC-20 to bridge BRC-20 assets to other chains to access other yield opportunities.

Still, with more standards popping up thats inspired by BRC-20, the dominance of BRC-20 tokens hasn’t changed with almost monopoly given 90% of trading volume concentrated in BRC-20 tokens.

New protocols are encouraged to try to replicate the success

With new tokens and trading mania happen, new protocols are inspired to recreate more overnight wealth stories

a) Taproot asset protocol is a Bitcoin-native asset distribution protocol with solid technical foundations.Early endeavors like Mastercoin and Counterparty used existing OP_RETURN opcodes to represent assets directly on Bitcoin’s main chain, which has led to data bloat and efficiency issues. Taproot Assets reduces the need for main chain space by representing and manipulating assets off-chain with Merkle-Sum Sparse Merkle Trees, the data structure to effectively prove asset status, and Taproot Asset Trees, the structure embedded in the Taproot script tree used to host assets that’s represented by a series of MS-SMTs, resulting in improved programmability and privacy.

Nostr Asset: As the early adopter of Taproot asset in the new standard,Nostr Assets have no gas fee given peer to peer connections. The most well known two assets are two Tokens,Trick and Treat. Nostr Assets has previously airdropped both tokens to over 7900 Nostr addresses with an approximate amount of 10,000 tokens per address. The cost of the order number is almost zero, but the profit of the order number can reach more than 1000 times.
Nostr Asset has pressed on creating fair launch for Taproot assets, allowing anyone to issue new assets like deploying Ethereum smart contract with token name, symbol, total amount, progress, avatar, and other social information.
lightning network compatible:Taproot Assets are directly integrated with the Lightning Network. This means that users can use Taproot transactions to launch Lightning Channels and deposit BTC and Taproot assets into Lightning Channels in a single Bitcoin transaction with very low cost comparing to bitcoin mainet

b) Rune is another protocol given birth by the creator of Ordinal theory, Casey Roadmor to improve user exprience and transparency for fungible token after seeing BRC 20 is created using ordinal theory. To get rid of “garbage UTXO” thats permissionlessly created using BRC20, Casey proposed Runes to closely integrate with bitcoin’s existing UTXO model and simplied operations through a simple (ID, OUTPUT, AMOUNT) tuple mechanism.Thus runes provides full transparency onchain without requiring off-chain data storage and retrieval infrastructure. Unfortunately runes has failed to provide fair launch function provided by BRC-20 and,given slow development, has not seen much progress afterwards

c) ORC-Cash is designed to carry on the cash system from the bitcoin whitepaper with TokenID, immitating UTXO, and introduced token credit to be able to break the token balance and transact, with full records on chain. ORC-20 is then proposed by ORCDAO to better compete with BRC -20 and the first token is inscribed as OSH and has achieved highest trading price at $100 with nothing but gas fee as the initial cost.Though ORC has attracted some community for improvement proposals. This standard has relatively a short life span.

d) Pipe protocol is another asset distribution protocol developed by developer Benny who is trying to combine bot Runes protocol an BRC-20 standard.With three main functions: Deploy, Mint, and Transfer, PIPE can create, distribute, and transfer assets on Bitcoin network and so far 16,976 tokens have been deployed. The aim is to decentralize the indexing problem of inscription with its own oracle to track assets created on bitcoin and later went to create an independent protocol called TAP to manage assets that can be associated with ordinals in some way. This protocol is still building its own ecosystem but currently there is already governance token TRAC live onchain with 100mio FDV currently.

e) Bitcoin Stamp Protocol has been viewed as the counterparty of Ordinal theory, by some people, given that the protocol can trace its origin back to Counterparty, the first protocol to give birth to the very first NFT on Bitcoin. The difference is that Stamp Protocol allows arbitrary data to be embedded onto UTXO directly to ensure immutability with multisig, while BRC20 and Ordinal theory could suffer from potential risk of pruning given data included in witness part.

SRC20 is inspired by BRC-20 token to create tokens within UTXO to allow seamless transactions without burning bitcoins or adding extra overheads with other transaction functions. There are now 56 tokens being created totaling 293k trading volume
SRC-721 is created to generate composable NFTs at a more affordable cost by utilizing layers stored individually with small JSON file referencing data on Stamp protocol.

f) Atomicals Protocol emphasize on the decentralization of asset creation, under the ethos of “No transact history, not your digital object”. Unlike Ordinals, which relies on a third-party sorter to sort asset transactions, the Atomicals protocol Astandard uses Satoshi, the smallest unit of Bitcoin, as the smallest unit of issued assets, which allows Atomicals assets to trace the complete transfer history

NFT, or Atomical digital object called here, is a dynacmi NFT allowing the NFT owner to update the content throughout the lifetime with records left on chain permanently. Minting Atomicals NFT is almost like POW of Bitcoin, which is called Bitwork,and the hyperactive github has shown the interest in many developers to download the software and validation the protocol. MInting Atomicals NFT is called Dmint and the hash value of each image file will be calculated and separate json file for each image will be generated. Then hashes of the images will be calculated with a proof, called a Merkle tree, created to verify any NFT. Atomtoothy, AtomCapybaras, and SCIENTISTS are the top 3 mprojects with Toothy’ highest price recorded at $1580.
Realm is considered an alternative to centralized Domain Name System, or DID as we have familiarized ourselves in the last year, and as we have seen with ENS, alllows owner of the realm earning royalties on the realm.
ARC 20: ARC is another mirror version of BRC-20, while allowing decentralized mint.According to Atomical Market, with 159 tokens minted so far, Atom(not the Cosmos Atom) is the absolute leader in the market with $280 million market cap and average of millions dollar trading volume on a daily basis.

Spillover effect to other ecosystems

Inscription has been an inspiration for other any other ecosystem in term of what else can be built on chain. We have been talking about fully onchain games for some time and Ethereum community has gone through a long way to support onchain content with Cancun upgrade. But we still haven’t seen much new use case, until inscription on chain. Inscription is the new game that gives everyone a lottery ticket, whose prize can go up to millions if you hold on it.Simple code to write on chain and new assets are issued to attract new users to find the next gem, and motivates builder to explore what can we do with new assets

We have seen more and more inscriptions growing in other ecosystems

Ethscriptions on Ethereum,has created an NFT marketplace and its token ETHS has recorded all time high price at $20.26 since trading started in Decemeber in 2023
SOLS on Solana, token issued under SPL-20 standard which imitates BRC-20 except on Solana, has $88 million market cap
Avascriptions has bot NFT marketplace and ASC-20 token with $56 million Market Cap an the top token AVAV itself owns $43 million market cap.

These tokens has definitely distracted some attention away from Bitcoin but, ultimately, the real attraction lies in free launch spirit enabled by inscribing dat onchainIn essence, inscription has educated other ecosystem about the potential of tokenization onchain and power of free launch.

Good boy if you make everyone happy,or not everyone just important ones

Ordinal theory utilized blockspace on bitcoin for the first time with non transaction data emebedded in UTXO and thus can be traded and speculated. However, this usage of bitcoin blockspace has long been controversial in Bitcoin community given the conservative utilization of blockchain space in order to keep the chain from spam and overloading. .Nonetheless, Ordinal theory has proven value to

Miners. who see spiking fees to from increasing transactions with that amounts to nearly 5000 bitcoin as fees paid by ordinal inscription so far
Users, who have chance to own, trade, and speculate a piece of data that is valuable
Builders, who have new reasons to come back to join Bitcoin to start building scaling solution to enable new use case

Whether or not you think Bitcoin maxi will kill ordinal theory, the fact is that ordinal has already expanded itself from the topic in ideology difference between bitcoin community to the infrastructure on which hundreds of projects, and thousands of assets, have built on top of. There is even spillover effect in other ecosystems like ethereum and Solana. In between the time is countless anecdotes of friends who made millions over night from trading ordinal inscriptions. In a way, Ordinal has unlocked the pandora box like EVM’s smart contract enabled ICO

Chapter3: Make Bitcoin Fun again

To make a standard adopted, specification and cos are not enough. Every standard that needs adoption will need everyone in the market to work with them.Ordinal theory and every token standard built on top of it needs to be adopted by wallets, exchanges, and marketplace in order to be displayed, stored, and traded. Unlike ERC tokens that are onchain with transparency, so far, BRC-20 tokens extra need offchain indexers to read and write on Bitcoin. Thus, as a truly decentralized community with no foundation to speak for advocacy, adoption for any standards must be community driven, or more specifically, interest-driven.

Demand shock, Supply shock, New equilibrium

Ordinal theory has proven the market for new asset issued on bitcoin and with the surging demand, new infrastructure is needed to support upcoming demand. Increasing fee and volatile block time have been affecting user experience, which is also considered to be en entrance barrier to select early believers. This is stopping other group people participating in this game and only growth can maintain proper functioning of the ecosystem. New infrastructure is needed to supply existing and upcoming users. After new asset, new infrastructure can be expected to give rise to new use cases, as we have seen Ethereum since 2017 after Cryptokittes

Shovels we can use to uncover the new gold mine

Even if you think this can be the next gold mine, you still need to shovel to help mine it.MInting ordinals or BRC-20 token is not easy. It’s not anything like trading on uniswap and farming with metamask. How to mint and where to trade will be no easy task if you don’t read or write code and these high entrance barrier have thus become the perfect opportunities for builders and developers to create the product with product market fit.

Specifically, as mentioned earlier that Inscription, as additional data written on top of bitcoin, needs third-party indexer to track and retrieve, and programs to parse the data accordingly to read the asset information recorded on chain. Therefore, new tools are developed in the market to facilitate this wave of gold mining.

a) Wallets: As defi summer has shown the market that when new assets are popping, wallet is needed to connect, transact, and store new assets. For bitcoin inscriptions, a couple of wallets have grabbed the market share quickly with their quick rollout and support of new asset standards.

Unisat is one of the very first browser wallet to receive, store, and send ordinals, including both NFT and inscribed tokens. Though suffered from bad review at the very beginning given developer focused UIUX, Unisat has quickly solidified its market stronghold with quick rollout compatible with every single new protocol and standards, pushed out popular functions like inscription as a service to become the go to wallet for ordinals. Now boasting 500,000 wallets weekly active users, Unisat has truly testified the first mover advantage in that later inscriptions has to be compatible with Unisat if they want to capture market share quickly
ordinals wallet is the first batch of tools that has has witness the record spike of inscription actitivities in May and one of the handful of early marketplaces for trading ordinals.However, ordinals wallet had a relatively short cycle of growth given inadequate functions
OKX wallet is a late boomer in Ordinals sector. Though started late, OKX wallet has become the first wallet people used to mint BRC-20 given its large user base from exchange and smooth UIUX. Interestingly, OKX as an exchange, a wallet, and venture capital have all invested and deploy capital in ordinal sector and has now been viewed as one of the most Bitcoin friendly institutions.
Xverse is in another sense the “first mobile wallet built to support bitcoin” that has signaled the market that Bitcoin renainssance is real. Builders have come to ship new products and capital is interested in accelerating the ecosystem

b) Marketplace: The most evident business model in crypto is trading and marketplace is both the easiest and hardest business model because it attracts both sides of transactions and it faces challengers constantly.

Magic Eden was the first major NFT marketplace to support Ordinals and have quickly grabbed market share from the fifth to the largest one in the market. Interesting pivot from solana to bitcoin has made more people look into ordinals NFTs and quickly gathered trading interests to speculate on new assets with new communities.

c) Launcpad:Public funding model definitely matches fair launch and traders are eager to being one of the early group to catch the ride.

Bounce Platform: Started in 2021 as a decentralized platform providing auction as a services with 8 types of auctions, Bounce has refocused on helping Bitcoin projects launching token on its platform on Decemember 11th. Mulbit is the first cross-chain bridge of BRC 20 into EVM ecosystem and has earned 320 mio FDV after launched on Bounce, while making the token of Bounce platform, $Auction, a 290 mio FDV as the golden shovel.

d) Bridge: There is always additional yield opportunity somewhere else in another chain if you can cross chain and given so many blockchains these days there is always demand for cross chain bridge.

Mulibit：The first fair launch project on Bounce platform that has made many early participants money has $276 millions locked in its bridges to issue assets on ethereum. Achieved 300 mio market cap in less than a month’s time, now Multibit has grown into more ecosystem like BNB to move assets across chain for new yield opportunities.

e) DEX: The proven business model in crypto time and time again is DEX, where people can join to trade, in the hope of making millions

Alexswap: Started as a Defi platform on Stacks with swap,DEX, and Lauchpad, Alex has accounted fro more than 80% of total trading volume on Stacks and over $40 million locked in. Alexswap has caught the wave of BRC20 with a new DEX rollued out called B20 to trade BRC20 specifically.Many trades flooded to Alexswap and Alexlab has further introduced new trading pair with sUSDT, which is bridged to Stacks from BNB Chain, where users trade quite often. Now the token of Alex swap has already acheived $214 milliong Market cap and can potentially reach higher given its launchpad happening soon.

f) Lending

Liquidium:Ordinals infrastructure now supports inscription gating for platforms like Discord (i.e., exclusive access to digital communities through verifying ownership of an inscription). It also utilizes discrete log contracts (DLCs), a native transaction programmability feature on Bitcoin, that allow collectors to use Ordinals as collateral to take out bitcoin-denominated loans.

New User, New Infra, New people

Ordinal theory has, as killer app should have, exposed vulnerability of bitcoin as the underlying tech stack and how shown to builders that what kind of pain points do people care. There are so many failed minting, or trading, or other problems in this crazy boom of inscriptions. This could be the fault of the indexer, but who is responsible for this and follow up to rectify, This could be the malicious node taking advantage of users transaction, the usual MEV problem we talked about. There is no way users can be protected and this is definitely not the way to continue attract and grow the ecosystem. Ordinals and BRC inscriptions has opened up people’s imagination what else can be done on blockchain, but more importantly, what else we need in order to attract more people to have fun with bitcoin.

Before the tide, and after the tide

Let’s revisit the basic fundamentals of BitcoinBitcoin is written in script, UTXO is used to show the balance, and validators sign their signature to prove the validity. Simple but but no programmability, which needs status, as the account model in ethereum to show history and current status, compute to execute predefined conditions, and finally verifications of the transaction logics. Bitcoin simply do not have enough programmability to support use cases like Defi or play to earn games on top of it.

Still Bitcoin has been around 15 years now since the white paper released by Satoshi Nakamoto in 2008.Of course there have been attempts to scale and improve bitcoin. Previous attempts have taken more or less technical approach on how to scale bitcoin in its tech stack. However, this time ordinal theory has introduced new financial perspective with this huge market impact and, in my opinion, with new technology like zero knowledge being experimented on Ethereum, of course new technical solutions can be adopted to move bitcoin forward.

The old way, the classical way

In the past decade of scaling Bitcoin, there are largely two approaches: on-chain scaling and off-chain scaling. BCH and BSV has already tried on chain scaling by directly changing block size or data structure, which has resulted in hard forks of Bitcoin and thus been considered separate community. Off-chain scaling is, now as most the scaling solutions intended to mean, createing a second layer transaction network outside the Bitcoin main chain

a) State channels, such as Lightning Network, can transfer some high-frequency trading off-chain and thus greatly improve transaction efficiency

Lightning network, Practitioner of the original thesis in “peer-to-peer electronic cash” that’s held dear by many bitcoin core community

Historically consistent: Joshph Poon and Tadge Dryja publied a white paper detailing the state channels to enable the visions of digital cash of Satoshi in 2015. Since then, lightning network has been used interchangeably with state channels and many more hardcore bitcoin fans have been trying to push for adoption of lighting network to realize the vision of satoshi’s digital payment.
developer focused:The ethos and the tech expertise of lighting lab has attracted to join the effort to scale bitcoin and at the time become the main talent pool to continue the work of decentralization in other projects, like the founder of Nostr netwokr which is used to send peer to peer message without relying on any centralized entities.
Socially accepted:As a matter of fact, centralized exchanges have been using lighting networks to help process bitcoins moving onchain and offchain and as the result of this trading boom of ordinals inscriptions more channels are created in order to cut down onchain transaction costs for themselves. Morever,Former CEO Jack Dorsey publicly supported Lighting network many times and has actually integrating micropayment from lighting networks into twitter to push for mass adoptions.While the first country that legally authorized bitcoin has adopted lighting network to facilitate cross border payment on lighting network with its government-created wallet, Chivo. And don’t forget the famous pizza legend is also used paid via Lightning network.

Still lighting network itself has experienced growth pain in scalability again from flooded transaction from liquidity provisioning problem to custodial issues, even though lighting lab has already worked on this solution for more than 5 years. Nonetheless, with 40million TPS in theory,lighting labs still has the best chance to substitite the global clearing network between financial instituions that underpins our international financial system to realize Satoshi’s vision of peer-to-peer cash.

b) Client side validations allows transation verification

RGB, the first attempt of introducing turing-complete VM into Bitcoin

Technically innovative: Giacomo Zucco proposed RGB based on the idea of client side valiation and single use seal, which prevents double spending by using blockchain as a database to store the status of transaction, in this case bitcoin. To further the development of the network, Giacomo added turing-complete VM with Scheme and interface to design programs.
Progressively programmable:By moving computations on the client side instead of onchain, RGB has allowed more complicated transactions happening offchian and Maxim has continued to develop AluVm trying to created a new language called Contractum to substitute Rust to allow developer to write programs.

However, RGB has been proposed almost the same year as lighting network but still not much of its vision has been realized. The ambition of the network and the complexity of the technology itself has prevented further development of the network and there is still one remaining question, that is how to verify the transaction on bitcoin mainet, needs to be answered before more people join this ecosystem with their asset and time

c) Sidechain like Stacks and Rootstock

Stacks, the good old bitcoin scaling project that’s known and traded by everyone

Historically early :Stacks is one of the very early projects that builds to scale bitcoin and launched in 2017 and the very first project to receive approval from SEC to sell tokens in ICO in 2019 with $23 million raised. Being one of the early tokens traded in this market almost always means being legitimate, and given the test of time trading interest grows almost automatically as votes of trust wins trust from the market almost automatically
legally compliant:Stacks has successfully completed its upgrade which means stacks blockchain is no longer controlled by any single entity and thus can no loger be categorized as a security under SEC regulations. Therefore, any U.S investors can trade stacks tokens on digital asset exchange. In light of current regulatory environement, this is definitely the edge that cannot be understated.
Technically innovative: Stacks has announced and completed Nakamoto Upgrade with two-way Bitcoin peg and thus created sBTC as the first trustless and non-custodial bitcoin peg-out. This encourage bitcoin capital outflow to maximize capital efficiency given Defi opportunities available on Stacks while transaction hashes are written on Bitcoin to provide security
Ecosystem complete: with early start and live mainet, stacks has been able to build its eocsystem for years with dapps ranging from Defi,NFT, to social platforms, with $60 million locked. Some of ordinals trading hype has spilled over into stacks ecosystem, like Alexswap mentioned ealier. Given this head start in Defi ecosystem, there is hope for stacks to build the Defi flywheel for bitcoin holders to increase their capital efficiency.

Stacks has been viewed by many people as the main trading target under this bitcoin renaissance and coming ETF approval given its history and compliance. Though from the technical standpoint, sidechains like stacks still have security concern given independence from bitcoin. Nonetheless, Nakamoto upgrade allows stacks to share security with bitcoin and EVM compatibility will welcome more developers to build on this scalable network.

The new way, and more ways

Bitcoin also changes. With Segwit and Taproot upgrade, bitcoin has been able to increase its block and allowed new assets issued onchain, while still remaining decentralized and secure. These fundamentals give rise to the wave-making ordinal theories and wealth effect as a result has further pushed the market to look for new ways to continue the renaissance on bitcoin to invite more people to have fun on bitcoin.

BitVM: the kid thats talked by everyone

The lightbulb: The white paper published by Robin Linus has presented a new design in scalability by moving computation offchain using logic gates and verifying on chain with fraud proof. This new design allow programmbility on bitcoin without changing the core part with optimistic fraud approach.This has excited many people, interestingly both people who have been drawn to this problem for years, and even more people who hasn’t been following whats happening with bitcoin. Robin’s new whitepaper dropped the bomb in the market and now more and more people and capital are moving their attentions in Bitcoin
The challenge: The whitepaper has demonstrated feasibility, but, in pratice, the workload of computation offchain seems to be too big to be carried out in reality. Though moved the computation off chain but breaking tranasaction into logic gates is actually increasing the workload by multiples exponentially and thus the practicability still remains a question.Also this is under the condition of two party contract which is still limiting the scope while use cases like games might ask more parties to be involved.
The change: The real road block ahead is changing the opcode of bitcoin, which has prove to be extremely hard given the conservative approach of bitcoin community and decentralized nature of this ecosystem.Nonetheless, Robin has been exceptionally good at educating the market and building communities to push forwarda technical transformation

BitVM is the new light house in bitcoin development. New game plan is presented to the world and more eyes are onto bitcoin now. Just like zero knowledge first proposed to scale Ethereum in 2019, many challenges and difficulties are still head of implementation of adoptions of BitVM. But luckily, the market is ready for new tech and desires new ways to scale bitcoin to have more possibility enabled by the most secure blockchain.

Open question, Open answers

When we talk about rollups, we are, most of the time, using the mental models of rollup from Ethereum that offloads computation on rollup which pushes final results on the mainet for verification and punishment if fail. However, Bitcoin is different. Bitcoin has no smart contracts to verify the global states like ethereum. Bitcoin is designed as an asset with limited computation on chain to stay decentralized and secure. The difference between Bitcoin and Ethereum pose new questions for builders and the answers can be different as well.

Bitcoin as consensus layer: This is what we have seen in the past effort by fully leveraging the security of bitcoin.This is undoubtedly the most secure and native way to scale bitcoin. Though already given time and tested by the market, we have yet to see new use cases except mircopayment. Another interesting roadmap for lightning network or Taproot asset is not necessarily creating native use case onchain but supplementing or even replacing our current gloabl financial rail with its decentralized and censor-free payment network
Bitcoin as settlement layer: This is normally the approach that we’ve seen in Ethereum community, still, bitcoin is innately different from Ethereum given its design philiosophy and underlying tech stack. However, the big question lies in front of everyone is how do we verify. There has already been a couple solutions provided, from Taproot ScriptVM to implement ZKP on bitcoin, BitVM using fraud proof to be verified onchain, to completely verify offchain in client side verifications. As we have seen how Ethereum has pushed computation offchain, Bitcoin can go one step further to push verification offchain, given its inflexible upgrades and unyielding pursuit of decentralization

More Chapter coming, We are still early

Ethereum saw the necessity in scaling since 2017 from cryptokitty,started with Plasma at first, considered optimism, explored zero knowledge for four year, and finally settled down with rollup centric settlement layers with different flavor of rollups. Bitcoin saw this cryptokitty moment in 2023. It took Ethereum almost 6 years to finally scale the ecosystem. Bitcoin can take longer or shorter time to scale.Nonetheless,Bitcoin can still exist as digital gold, with or without bitcoin being used as a blockchain to verify other transactions or building smart transactions on top of it.

Bitcoin is old and simple. Unlike ethereum that has an Ethereum foundation that actively pushes for technical upgrade and educates the market for the upcoming challenge and solutions, Bitcoin is a truly decentralized community that anyone can push for his or her theory. Vitalik has been doing an extremely good job in directing the market and therefore capital in how to build Ethereum, so far we have not yet seen anyone been able to unite the market moving into one direction. Yes we’ve seen many attempts to move the market in certain way, like Casey, like Robin, but this is still early in the road to say who dominates the market. We don’t know who will be this person or when we will see this happen. But the important thing is, we are exited to see this happening in the near future to make bitcoin fun again!

Reference

https://www.truthcoin.info/blog/security-budget-ii-mm/

https://twitter.com/Jiurn/status/1735338643969994819

https://twitter.com/MorganTBennett/status/1482411645838241800

https://docs.ordinals.com/

https://github.com/ordinals/ord/

https://chain.link/education-hub/ordinals-bitcoin-nfts

https://www.sothebys.com/en/digital-catalogues/bitcoinshrooms-an-ordinals-auction

https://www.galaxy.com/insights/research/bitcoin-taproot/

https://dune.com/dgtl_assets/bitcoin-ordinals-analysis

https://www.galaxy.com/insights/research/bitcoin-ordinals-inscriptions-5-billion-nft-market/

https://www.galaxy.com/insights/research/technical-developments-in-bitcoin-q4-2023/

https://www.galaxy.com/insights/research/bitcoin-inscriptions-and-ordinals/

https://docs.orc20.org/

https://dune.com/ordinalstats/orc-20

https://docs.orc.cash/overview/how-it-work

https://interlay-labs.gitbook.io/brc-21/

https://rcsv.gitbook.io/brc-420/

https://ivantkf.gitbook.io/brc-1155/

https://interlay-labs.gitbook.io/brc42-cross-chain-brc-20/

https://www.cybord.org/#introduction

https://docs.rs/crate/bitcoin-psbt/0.1.16-alpha.0

https://academy.binance.com/pl/glossary/orc-20-tokens

https://github.com/mikeinspace/stamps/blob/main/BitcoinStamps.md

https://www.brc-20.io/

https://hackernoon.com/what-are-bitcoin-stamps

https://coinranking.com/coins/src-20

https://github.com/adshao/brc-721

https://academy.binance.com/pl/glossary/orc-20-tokens

https://github.com/0xFacet/ethscriptions-indexer

https://ethscriptions.com/

https://twitter.com/solkekw

https://cointelegraph.com/learn/what-is-the-lightning-network-in-bitcoin-and-how-does-it-work

https://mirror.xyz/0x5CCF44ACd0D19a97ad5aF0da492AC0388469DfE9/_k3vtpI7a5cQn5iISH7-riECpyudfI4BTeeeBMwNYDQ

https://twitter.com/tmel0211/status/1733001724598874388 https://twitter.com/tmel0211/status/1742053195109830734

https://dune.com/hashed_official/bitcoin-tokens

https://blog.blockstack.org/blockstack-token-sale-sec-qualified

https://mirror.xyz/0x5CCF44ACd0D19a97ad5aF0da492AC0388469DfE9/_k3vtpI7a5cQn5iISH7-riECpyudfI4BTeeeBMwNYDQ

About Foresight Ventures

Foresight Ventures is dedicated to backing the disruptive innovation of blockchain for the next few decades. We manage multiple funds: a VC fund, an actively-managed secondary fund, a multi-strategy FOF, and a private market secondary fund, with AUM exceeding $400 million. Foresight Ventures adheres to the belief of “Unique, Independent, Aggressive, Long-Term mindset” and provides extensive support for portfolio companies within a growing ecosystem. Our team is composed of veterans from top financial and technology companies like Sequoia Capital, CICC, Google, Bitmain and many others.

Website: https://www.foresightventures.com/

Twitter: https://twitter.com/ForesightVen

Medium: https://foresightventures.medium.com

Substack: https://foresightventures.substack.com

Discord: https://discord.com/invite/maEG3hRdE3

Linktree: https://linktr.ee/foresightventures