Bitcoin was the first decentralized cryptocurrency created and is now the most traded and well-known, both among crypto-enthusiasts as well as the general public. Without the creation of Bitcoin, the cryptocurrency space would not be what it is today. This is why we have been conducting research into the future and sustainability of Bitcoin.
Despite other coins consistently taking the headlines, Bitcoin has retained its dominant position atop the crypto market capitalization charts. Nonetheless, Bitcoin’s sustainability is worth a discussion. How will the falling block rewards (halved every four years) and relatively low transaction fees impact Bitcoin’s security model? While Bitcoin has held its lead till now, will this continue in the future without a Bitcoin-native smart contract market?
Ordinals and Inscriptions
Ordinals and Inscriptions, which emerged at the start of 2023, might bring some answers to that. The Ordinals protocol, which was launched in January 2023, allows users to inscribe data on satoshis – the smallest units of bitcoin – with each such inscription called an Ordinal. The inscribed data can include smart contracts, which enables arbitrary data, such as images, videos and texts to be inscribed on the Bitcoin blockchain, creating digital artifacts or effectively, NFTs. With this latest innovation, not only are we witnessing the start of “Bitcoin NFTs”, we are seeing a resurgence in excitement and attention across the entire Bitcoin ecosystem.
Inscriptions have led to a noticeable impact on Bitcoin’s on-chain metrics, and transaction fees are on the rise. Perhaps most importantly, the pace of innovation is increasing and developers are shipping updates everywhere. With increased activity and the opening up of a plethora of new use cases for Bitcoin, the very natural question of scalability follows. How will Bitcoin handle the increased traffic? Enter Bitcoin Layer-2s.
Bitcoin smart-contract market
For many years now, Bitcoin has dealt with a lack of developer tooling, stagnant infrastructure and what seemed like limited innovation relative to smart contract giants such as Ethereum, BNB Chain and Solana.
However, things seem to be changing. With names like Yuga Labs, DeGods and Magic Eden having entered the Bitcoin NFT space within weeks of Ordinals, while Celestia builds Rollkit to scale Bitcoin, the wheels are definitely turning. Builders finally have something to do with their Bitcoin. Developers are staying up late, sand shipping updates at a rate that has not been seen in Bitcoin in a while – all of it driven by organic demand. This is the key part, when an ecosystem is going through a period where organic, genuine user demand is essentially forcing innovation and product development, a virtuous cycle can ensue and things can escalate fast.
A New Era of Bitcoin
Ordinals and Inscriptions have introduced a fresh vibrancy to developing on Bitcoin, instilled a new set of stakeholders with differing voices and opinions and ultimately, injected life and enthusiasm into an ecosystem which has been somewhat lagging in the age of monkey NFTs and perpetual swap driven DeFi markets.
In Binance Research’s latest Insights & Analysis report, we take a closer look into the world of Bitcoin and cover all there is to know and look forward to, in Bitcoin’s new era. In this report, we provide a brief update on Bitcoin’s recent performance, deep dive into Ordinals & Inscriptions, discusses Bitcoin’s nascent layer-2 ecosystem, and provides a view of what we expect next for Bitcoin. A fully-fledged Bitcoin smart contract market, Bitcoin rollups, and the upcoming Bitcoin halving are also some of the key themes covered.
To read the report, click here: https://research.binance.com/static/pdf/a-new-era-for-bitcoin.pdf