BRC20-Swap Launch: A New Breakthrough in Ordinals Ecosystem Liquidity

The trading mechanism of Ordinals ecological assets has long relied on the order selling model, which has made the liquidity issue a key obstacle to ecological development. To improve this situation, a platform integrating inscription, trading market, and wallet functions announced the upcoming launch of BRC20-Swap in July 2023, and officially started testing on October 30.

This article will provide a detailed introduction to the development history, product model, and future prospects of BRC20-Swap.

Development History of BRC20-Swap

On September 20, 2023, the platform issued BRC20-Swap Early Access invitation inscriptions to 620 addresses that met specific criteria. The screening criteria include:

1. Active users who have traded at least 1 BTC on the platform's trading market within a specific period.
2. Active users who engrave inscriptions through the platform and accumulate at least 500 points within a specific period.
3. Special pass holders on the platform (based on a specific block height).

On October 10, 2023, the official announcement was made regarding the launch schedule and related details of the BRC20-Swap mainnet. The platform is distributing a commemorative inscription called BRC20-Swap Prime Access for free to community users, allowing holders to participate in early testing of the product. These inscriptions are distributed through lottery on official social media channels, with a total of 654 available, and the current secondary market price is approximately 0.0067 BTC.

The transaction settlement and synchronization to the Bitcoin mainnet is performed by the sorter. BRC20-Swap adopts a fee standard similar to mainstream decentralized exchanges, charging all trading users a service fee of 0.3%. Of this, about 1/6 (0.05%) is collected by the platform, and the remaining 5/6 (0.25%) is distributed to the liquidity providers of each trading pair. Unlike others, BRC20-Swap uses BRC20 assets "sats" as the transaction fee.

On October 30, 2023, the official announcement revealed 14 assets initially supported by BRC20-Swap. The selection criteria required that these assets have at least 15 days of trading activity on the platform market in the past 30 days, and a non-zero median trading volume in the past 30 days. Following this announcement, the prices of the related assets saw a significant increase.

Product Model

The functions of BRC20-Swap are mainly divided into three parts: trading, liquidity pool, and data overview, similar to the decentralized exchange format on the Ethereum Virtual Machine chain. Users need to recharge assets into the BRC20-Swap module by "inscribe TRANSFER" before trading, and the recharge confirmation process requires 3 blocks.

BRC20-Swap adopts a modular expansion implementation, with each module existing independently. The advantages of this model include:

1. Permissionless Development: Developing new modules for BRC-20 does not require additional permission.
2. Isolated execution: A single module encountering issues will not affect the operation of the core protocol and other modules.
3. Consensus Upgrade: When the majority of indexers recognize and implement the indexing of a specific module, that module can be upgraded from a black module to a white module, becoming a part of the BRC-20 protocol.

However, one drawback of the black module expansion model is that users cannot freely withdraw assets. The platform improves this issue by designing a dynamic adjustment mechanism, which allows withdrawals when the assets deposited by other users exceed the amount to be withdrawn. This approach avoids the arbitrary issuance model seen on Ethereum virtual machine chains, but it also somewhat restricts the liquidity and convenience of user assets.

When the behavior of the black module is understood and accepted by users, gradually becoming reliable and adopted by more indexers, the product can transition from the black module to the white module, achieving a consensus upgrade. At that time, users will be able to freely deposit and withdraw assets.

In addition, since the BRC20 protocol and the entire Ordinals ecosystem are still in the early stages, the platform currently holds significant influence and reputation within the ecosystem, providing complete indexing services for transactions and balance inquiries for the protocol. This modular operating architecture allows more service providers to participate, helping to achieve decentralization of indexing.

Future Outlook

Users in the Ordinals ecosystem often report issues with low Liquidity and limited entry capital capacity, which leads some large fund holders to only observe. BRC20-Swap utilizes the BRC20 protocol as the underlying asset foundation, creating the first native trading platform in the Ordinals ecosystem. By continuously optimizing Liquidity, BRC20-Swap is expanding the capacity for entry capital, which is an important advancement for the entire ecosystem.

The platform officially announced that 2% of the BRC20-Swap transaction fees will be donated to the foundation participating in the development of the BRC20 protocol, to promote the further optimization of the development and standards of BRC20. In addition, the platform plans to open source the complete explanation and verification source code of BRC20-Swap to facilitate early support from indexers.

These measures indicate that the platform hopes to cooperate with all parties in the ecosystem rather than monopolizing ecological benefits. Considering the relatively short development cycle of the Ordinals ecosystem, all parties within the ecosystem need to work together to expand the overall market size and achieve a win-win situation.