Why Bitcoin is finally worth exploring!
Gm Degens!
Now I’m sure many of you who have followed me over the years will know I have zero BTC exposure. Sounds absurd to many people I tell but there has always been a reason. I personally was just not interested in a store of value asset (given I’m not a whale). I managed to significantly outperform BTC last cycle and have so far outperformed BTC this cycle (from Dec 22 bottom) via alts.
Historically there hasn’t really been much to do with Bitcoin. Yes there were payment networks like Lightening but to be honest, I was never someone who was going to pay with BTC rather than fiat. I had a much stronger interest in stable coins as a payment service.
However, in the last 12 months things around Bitcoin have certainly changed. In fact things around Bitcoin have been on fire! There is so much going on, very similar to when Ethereum and the first smart contract applications popped up. There are now two specific sub sectors of Bitcoin that have popped up that have sparked my interest. These are:
Ordinals (inscriptions)
Bitcoin L2s
What are Ordinals?!
In December 2022, Casey Rodarmor launched the Ordinals network. Let’s dive into what it is and how it works.
Each Bitcoin can be subdivided into smaller units called Satoshis. In fact, 1 BTC = 100,000,000 Satoshis. When Casey Rodarmor launched the Ordinals network in December 2022, each Satoshi could be assigned a unique serial number. This serial number tells us the order these sats were mined which helps to keep track of each one including where they are and who owns them. Interestingly, we can actually attach individual data from text to images to these individual Satoshis, hence creating these new types of assets, essentially making Satoshis like NFTs. This extra added data is what we called inscriptions.
This essentially gives BTC the ability to compete with other smart contract chains by having Ordinals as their own version of NFTs.
Are Ordinals Fungible or Non-Fungible?
This is an interesting question because in my opinion, the current answer is both! The Bitcoin network itself doesn’t actually recognise Ordinals, however, with inscriptions being added to sats, these are all non-fungible.
The most interesting element here is that inscriptions remain on the bitcoin network, whereas, when looking at collections on other chains, the metadata associated with things like NFTs are hosted elsewhere such as IPFS or even decentralised storage networks like Arweave. What better way to store this information than one of the most secure networks worldwide, the Bitcoin network. For me, if there is anything that makes sense, it’s NFTs on Bitcoin!
What Ordinal collections have popped up so far?
Heading over to Magic Eden (the leading Ordinals marketplace) you’ll be able to see a platform that appears very similar to that of Blur, Opensea and Tensor (Other leading NFT marketplaces on Ethereum and Solana). Users can buy and sell these NFTs which are all on the bitcoin network.
You need to get yourself a Bitcoin wallet such as Xverse, Unisat or Leather and then create an Ordinals account which you can do in a couple of clicks on Magic Eden. This will enable the proper separation of your Ordinals and avoid them from mixing in with the rest of your BTC. (Remember, Ordinals are just Satoshis with some inscribed data!)
Popular collections like Node Monkeys, Quantum Cats, Bitcoin Puppets and others have already reached 4-5 figure plus floor prices with a big demand coming for trading and owning these collections, just like the main collections on Ethereum and Solana.
Interestingly, other than these inscriptions, people are also trading rare sats themselves. Sats that have been the in Satoshi Nakamotoss first ever transaction to Hal Finney from January 2009 sell at a premium as well as sats from:
The famous 10,000 BTC transaction to buy pizza
Sats mined by Satoshi Nakamoto
Sats from the first blocks ever mined
Sats that are palindromic (numbers read the same from start to end and end to start)
But what are BRC-20s?
With the technology that comes with Bitcoin Ordinals, a new type of asset could also be created being BRC-20s, similar to ERC-20s but on Bitcoin instead of Ethereum. Examples like ORDI have risen to over $1b in market-cap as speculators try to get exposure. It’s definitely still early but the innovations will slowly continue to come here in my opinion.
What are Runes?
Runes are another new token standard coming to Bitcoin offering fungibility to inscriptions. These are coming in the next month or so and will likely lead the way for a ‘meme coin’ season to happen on Bitcoin. As to where to buy and speculate these, I’m not so sure just yet but I will have some BTC ready to play these games as being early often rewards very handsomely.
Learn about Runes below!
Why do I like them?
Ordinals provide the Bitcoin network with volume and therefore fees that miners desperately needed for the future of Bitcoin to be successful. So far, they’ve been a success with over $200m in fees generated. Given it is still so early, I expect this to go up as more high quality collections and products get built with this technology. I think it’s clear that many Bitcoin miners like Ordinals simply for the fact they they’ll help continue to give miners income as Bitcoin halvings continue every 4 years.
Last cycle, ETH NFTs became a massive craze with collections reaching 5-6 figure floor prices left right and centre. That was Ethereum, what do we think will happen for Bitcoin? For me, Ordinals seem to be the one use case of Bitcoin that makes so much sense. I think the new tech proves to be another avenue for speculation and with BTC pumping, I think the BTC whales or those in big profits would be open to being part of this culture of ‘art’. It’s for this reason why I am placing my capital here.
What are Bitcoin L2s?
Just like with Ethereum, Bitcoin provides incredible security at the expense of scalability. Bitcoin is slow and often expensive and therefore scaling solutions are needed. The current landscape for Bitcoin L2s is fairly early, however, there are a ton of projects building on this space already.
There are two main types of Bitcoin L2s, Rollups and Sidechains.
See the image below to get an idea of some of the players in this space curtesy of HOC.
One way of expanding Bitcoin is via a taproot upgrade called BitVM. This is somewhat similar to an optimistic roll up (the same tech we see in ETH L2s like Arbiturm and Optimism on Ethereum), where instead of computation execution, transactions are simply verified off chain.
Of the above, the ones that have come on my radar so far are Stacks, MAP protocol, Botanix, Merlin, Libre, Syscoin, Tunachain and SatoshiVM. Some of these I need to go into more depth to truly appreciate and there are many others I need to research. As of right now, there isn’t much to invest in other than a few of the above having tokens, Stacks being a popular one too. In due time some of these will including the likes of Botanix which I think will pave the way for a ‘Bitcoin L2 season’.
Below are reading points on some of the Bitcoin L2 chains I am interested in:
Botanix
Thread on overview of botanix - https://x.com/alpha_pls/status/1767958514079596606?s=20
Interview with the founder:
Merlin chain
Interview with the founder:
Syscoin
Syscoin overview:
Keep reading with a 7-day free trial
Subscribe to Mughal's Meta to keep reading this post and get 7 days of free access to the full post archives.