Bitcoin is the first cryptocurrency created and one of the most important blockchains that offer an alternative to fiat money. However, as Bitcoin was the pioneer of the crypto space, several altcoins have been developed over the years, which were created to improve Bitcoin’s shortcomings. This is why Bitcoin needed to undergo significant improvements to remain a top choice for all people and keep up with the innovations that the other digital coins brought to the market.
Over the years, several updates have appeared that have expanded Bitcoin’s use cases and made it more appealing for people and investors. One of these improvements is represented by Bitcoin Ordinals, which were released in 2023. Since that time, they have added unique features that have not been seen in the history of the Bitcoin blockchain.
In this article, we will take a look at all the improvements that have been added to the Bitcoin platform over the years. Keep reading to find out more.
Bitcoin Ordinals
Bitcoin Ordinals are NFTs that are similar to those from Ethereum, but they have a main difference: they are created using Satoshis, representing the smallest units of Bitcoin. Bitcoin NFTs are made with the help of a process called inscribing, where each Satoshi is given a unique serial number based on the order in which Ordinals were minted. Ordinals represent exactly these serial numbers, which have the purpose of determining ownership and tracking individual Satoshis.
Bitcoin Ordinals are developed with the Ordinals Protocol, which has enhanced the capabilities of the Bitcoin blockchain. Compared with the NFTs from Ethereum, Ordinals are created directly on the Bitcoin main chain and not on secondary layers. The data, such as images, songs, text, videos or other documents, is inscribed onto Satoshis, and in this way, it becomes a valuable and scarce token. Plus, as Bitcoin is one of the most secure decentralized platforms, Ordinals also benefit from this feature. Ordinals are essential assets for Bitcoin as they expand its use cases and make the blockchain not only a network that allows simple transactions but also something that encourages the creation of collectables, digital art, and many other unique assets. If you are interested in seeing some of the collections of Bitcoin Ordinals created so far, you can take a look at Magic Eden Ordinals.
Even though Ordinals have brought plenty of improvements to the Bitcoin blockchain, the introduction of this development has attracted some distinct opinions, as some people think that Ordinals don’t align with the simple nature of Bitcoin, and they can even congest the network.
BRC-20 token standard
The BRC-20 token standard is an experiment in the Bitcoin platform that aims to expand Bitcoin’s functionality and give it complex applications that go beyond allowing peer-to-peer transactions. This standard was developed in March 2023 by Domo, an anonymous developer, and since then, BRC-20 tokens have been considered a great idea.
The BRC-20 tokens are strongly connected to Ordinals, and the protocol was developed to be similar to Ethereum’s ERC-20 standard. Still, it has a main difference: these tokens are created directly on the Bitcoin network, which is possible by using the JSON ordinal inscriptions. However, The BRC-20 token standard is not that accessible at present, as it is still at an incipient stage, and its functionalities are confined to transferring, deploying and minting tokens.
Bitcoin Runes protocol
The Runes protocol is also another improvement added to the Bitcoin blockchain to enhance the capabilities of the network. It is a standard that was developed to issue fungible tokens on the blockchain and offer a more efficient method for users to create them. The Bitcoin Runes protocol is set to be launched in April 2024, which will also align with the very anticipated halving event.
The idea of the Runes protocol was inspired by recent developments in Ordinal theory, which allowed users to add file data to individual Satoshis. Casey Rodamor, the creator of the Ordinals protocol, has suggested that Runes would be a more efficient option to the BRC-20 token standard, which is still in its nascent stage.
Runes will function by introducing an Unspent Transaction Output (UTXO), which is a model based on fungible tokens, where all the transactions are made of inputs and outputs. For example, when a transaction is made, the input will be removed, and an output will be generated. The output left is considered a UTXO, and it can be used in the following transaction. Simply put, the UTXOs are the digital coins that remain in a wallet after a transaction is completed.
The Runes protocol is integrated directly into Bitcoin’s UTXO model, and this is why it will streamline the management and creation of tokens without needing a dedicated token or off-chain data. The Runes protocol will leverage the native strengths of Bitcoin, such as robustness, decentralization and security, which are fundamental in the world of cryptocurrencies.
Conclusion
When Bitcoin was launched in 2009, the blockchain envisioned just a purpose: to support BTC, the native cryptocurrency of the network. However, over the years, many improvements have been developed, which have expanded the use case of Bitcoin. For example, in 2023, Ordinals were launched, which were considered an important innovation, as they added features that didn’t exist on Bitcoin’s blockchain so far. Casey Rodarmor developed Ordinals, and they facilitate the creation of NFTs directly on the Bitcoin blockchain by using a process called inscription. Soon after this event, the BRC-20 token standard appeared, which leveraged the Ordinal protocol and was developed to enable the creation of fungible cryptocurrencies on Bitcoin.
However, the BRC-20 standard has gathered criticism, as it led to network congestion. This is why the Runes protocol was created to continue facilitating the development of fungible tokens on Bitcoin and address all the inefficiencies of the BRC-20 token standard.