Key Takeaways

• While the popularity of BRC-20 waned quickly, various experimental token standards, such as ORC-20 and SRC-20, are emerging.

• ORC-20 is an upgraded version of BRC-20, with added upgrade functionality and a UTXO model.

• SRC-20 uses Bitcoin Stamps to log text, offering a distinct approach to token implementation compared to BRC-20.

1. Declining Trends, Continuing Experiments

In May 2023, after a long period of unfavorable market conditions, the Bitcoin network garnered significant attention, thanks to the introduction of an innovative token standard known as BRC-20. This standard employs Ordinals to inscribe certain text types into Bitcoin’s smallest denomination, the Satoshi (Sat). This standard enables the issuance and transfer of fungible tokens (FTs) within the Bitcoin network. However, it’s important to note that unlike the ERC-20, BRC-20 doesn’t technically represent an actual token. Rather, it establishes a framework that gives the illusion of a token’s existence. For a more comprehensive understanding, please refer to the previous article, “BRC-20 Revitalizes the Bitcoin Network”.

BRC-20’s popularity led to a significant surge in the fees on the Bitcoin network. However, this trend was fleeting and is now showing signs of waning. However, this is where the new token standards come in — ORC-20 & SRC-20. From May 13th to 15th, transactions involving ORC-20 tokens represented a substantial fraction, approximately 10%, of the total transactions. In addition, SRC-20 tokens have begun to gather momentum recently. As a follow-up to our previous piece on BRC-20, this article will pivot its focus onto ORC-20 and SRC-20.

2. ORC-20

ORC-20 is an upgraded version of the BRC-20 standard that addresses some of its shortcomings. ORC-20 is backward-compatible with BRC-20.

2.1 Disadvantages of the BRC-20

While BRC-20 paved the way for a new way to handle FT using Ordinals on the Bitcoin network, it was a very early project and had a lot of downsides.

First, when BRC-20 tokens are initially deployed, the total supply and the maximum number of tokens per mint are fixed and cannot be changed. While this can be beneficial under certain circumstances, it does have the drawback of limiting the flexibility in the design of tokenomics.

The second drawback is that BRC-20 tokens can only have a ticker of 4 characters. ERC-20 tokens have names of various lengths. Removing the limit on the length of the token name would allow for the creation of tokens with a wider variety of names.

The third disadvantage is that the transfer and bookkeeping of BRC-20 tokens are entirely dependent on external, centralized indexers. Since the inscription process itself is simply a matter of writing random data to a Sat, there is no way for the Bitcoin network in the consensus level to prevent inscriptions that violate the BRC-20 standard.

For example, if the maximum supply of Ordi tokens is 21,000,000, and all 21,000,000 have already been minted, using the mint function to mint additional Ordi tokens is not valid according to the BRC-20 token standard, but the transaction will be recorded anyway because of the fee paid to the Bitcoin network. Therefore, it is entirely up to external, centralized indexers to determine which inscription is valid or invalid. Recently, this situation has led to exploitations by attackers. They have leveraged weaknesses in the UniSat marketplace to carry out double-spend attacks on BRC-20 tokens, resulting in financial losses.

2.2 Improvements and Examples for ORC-20

2.2.1 Identification of Tokens

The ORC-20 standard has brought about substantial enhancements compared to the BRC-20 standard. One such improvement is the incorporation of an identifier that can recognize specific tokens. In the case of the original BRC-20 tokens, if tokens with identical names (ticks) were deployed, the external indexers had to make the call on whether the first released token was the legitimate one. Contrarily, with the ORC-20 standard, tokens with the same names can still be differentiated since the inscription number at the time of initial deployment is included in the form of an “id”, thus allowing for identification.

2.2.2 Free Token Names

Second, unlike the BRC-20 standard, which only allowed four-letter words to be used as names (ticks), ORC-20 allows words of any length to be written in a “tick”. You can see that the first ORC-20 token deployed, ORC, has a three-letter word.

2.2.3 Upgradable

Thirdly, the ORC-20 standard introduced the capability to modify the total supply and the maximum number of tokens per mint, even after the initial deployment. During the launch of an ORC-20 token, the “ug” key can indicate whether it’s upgradeable. While this flexibility could potentially be exploited by the initial deployer, it also presents opportunities for various tokenomics experiments. These experiments may include progressively reducing the maximum number of tokens per mint, emulating Bitcoin halving, or increasing the maximum quantity of previously minted tokens to continue rewarding community members.

For ORC-20 tokens that are upgradeable, a variety of parameters can be changed by properly specifying the “tick” and “id”, and inscribing the upgrade function into the Sat. In the provided example, the supply is adjusted from 21,000,000 to 2,100,000, the issuance limit is revised from 10,000 to 1,000, and “ug” is set to “false” to disallow future upgrades. Note that “v” denotes the version of the ORC-20 token, which automatically increments by 1 after each upgrade, thus eliminating the need to manually input it.

2.2.4 UTXO Models

Fourth and most importantly, ORC-20 have added the concept of UTXOs for the transfer of tokens. The UTXO model is used on the Bitcoin network and is often compared to Ethereum’s account model. For example, let’s say A sends B $2 while B has $1 on hand. Under the account model, B’s balance would appear to be $3, with $1 and $2 combined, but under the UTXO model, B’s balance would have two separate UTXOs, one for $1 and one for $2. If B sends $2.5 to C, the UTXOs for $1 and $2 are combined and split into UTXOs for $2.5 and $0.5, with $2.5 going to C and $0.5 going to B himself. The advantage is that UTXOs can only be used once, essentially preventing double-spending. ORC-20 adds the concept of UTXOs to token transfers, which is the biggest difference from BRC-20.

To send ORC-20 tokens, you can inscribe the above text to the Sat, and you need an inscription at the end to send the remaining balance back to the sender. This is the same process as UTXO, and it is also possible to cancel the transaction in the middle if the last inscription is not performed. Therefore, it is essential for wallets or marketplaces that have adopted ORC-20 to wait until the ORC-20 transfer transaction is completed to the end (if the services only see inscription 1 in the figure above, they must make sure that inscription 2 is performed, as it can be canceled in the middle).

2.3 Ecosystem and Status

While ORC-20 hasn’t been around as long as BRC-20, we can see that it’s gaining some traction, with about 260,000 total transactions involving ORC-20 to date and about 19.5 BTC spent in fees.

There are some community projects such as bitPunks which provides an ORC-20 explorer, and the OrcDAO which utilizes ORC tokens.

3. SRC-20

While the ORC-20 standard can be considered an enhanced version rectifying the limitations of BRC-20, the SRC-20 standard, utilizing Bitcoin Stamps to inscribe text, operates on an entirely distinct system. Ordinals involves inscribing arbitrary data in the witness data of Bitcoin transactions. This process, however, can occupy a large chunk of the distributed ledger’s capacity, enabling nodes to trim or eliminate the witness data. Additionally, it’s not mandatory for all nodes to retain or disseminate this witness data.

(Bitcoin Stamps | Source: rarestamp)

However, in the case of Stamps, since the information is stored in spendable outputs, or UTXOs, every full node has to store them, making them much more persistent and blockchain-like than ordinals. While this is a clear advantage, the space for storing data is limited, with images being 24x24 pixels and 8-color-depth PNG or GIF being acceptable.

The text used to deploy, mint, and transfer SRC-20 tokens is also in JSON format, very similar to BRC-20. The specification for SRC-20 tokens can be found at the following GitHub link, and a list of SRC-20 tokens can be found at https://stampsrc.github.io/.

4. Conclusion

Since the introduction of the Ordinal theory in January 2023, several endeavors have been made to employ text and image files. This started with Sats Names, which we explored in a previous article, and extends to the recently popular BRC-20, as well as ORC-20 and SRC-20 that we discuss in this piece. There are even efforts to incorporate staking functionalities into BRC-20 tokens. Why is there so much experimentation on the Bitcoin network?

Firstly, The first is the low level of utilization compared to the strong security of the Bitcoin network. The scripting language’s nature restricts the execution of complex smart contracts on the Bitcoin network, thus limiting its applications. However, its superior security levels encourage developers and users to continually test and leverage its capabilities. Of course, a very high level of security is required just to store and transfer money, but it would be nice to be able to use this security for a variety of other purposes.

Secondly, there’s the boundless expressive potential of text. Much like the early days of PCs when numerous games were text-based, text can fuel imagination and represent an extensive range of concepts. Sats Names, BRC-20, ORC-20, and SRC-20 tokens symbolize intangible entities using mere text and employ external indexers to provide them with a sense of tangibility. While these approaches are still nascent and come with their own constraints, there’s no doubt that they will serve as the foundation for a multitude of innovative experiments in the future.

Thanks to Kate for designing the graphics for this article.