In a surprising development in crypto, building products on Bitcoin is surging this year.
Case in point: Ordinals, a Bitcoin-based protocol that allows people to attach digital content to small denominations of BTC. Over 150,000 of Ordinals’ tokens have been minted since the protocol launched on Jan. 31, according to a Dune Analytics dashboard.
Ordinals’ isn’t alone — STX, the token for Stacks, a smart contract platform built on Bitcoin, has doubled in the last week, vaulting the asset’s market capitalization over $800B.
Muneeb Ali, Stacks’ co-creator, told The Defiant that Ordinals’ success and the renewed interest in the Stacks ecosystem were no coincidence.
“What has been missing is that young, enthusiastic developer community that is actually building things, shipping stuff,” Ali said. Ordinals had brought that energy to the Bitcoin ecosystem, he added.
Tool to Mint
Projects in the Stacks ecosystem are moving fast to capitalize on the interest in Ordinals. Hiro, the most-used wallet in the Stacks ecosystem, announced the integration of Ordinals on Feb. 20. And Gamma, an NFT marketplace built on Stacks, also introduced a tool to mint an Ordinal on Feb. 8.
In true crypto fashion, Ordinals wasn’t approved by anyone. Instead, the protocol’s developer, Casey Rodarmor, shipped Ordinals without anyone’s permission by using taproot, a Bitcoin upgrade shipped in November 2021.
Ordinals yield an NFT-like product — the protocol tracks Satoshis, the word for the smallest unit of Bitcoin, allowing them to be “inscribed with arbitrary content,” according to the protocol’s documentation.
Ordinal’s documentation called the individual assets, “digital artifacts,” rather than NFTs, but the parallels are clear. Ordinals have numerous differentiating features, and Ordinals are fully on-chain unlike many NFTs, which can be deleted, .
Not everyone in the Bitcoin community has embraced Ordinals. Some see the protocol as taking the focus away from the blockchain’s core use case for financial transactions.
Bitcoin has undeniably become more heavily used, with much more data included in each block, since Ordinals took off.
This may push users to other Bitcoin-adjacent projects like Stacks, if Ordinal-related transactions continue to impact the cryptocurrency’s blockchain.
If demand to transact on Bitcoin’s blockchain continues, Ali said there could be some parallels to the growth of scaling solutions like Layer 2s for Ethereum. An ecosystem of scaling solutions like Optimism, Arbitrum, and Polygon, as well as a host of competing blockchains, emerged in the face of high usage on Ethereum.
The Stacks community is working on a “trustless bridge” for BTC. If the effort gains traction, users may be able to use their Bitcoin in the Stacks DeFi ecosystem. Obvious use cases could be using the token, called sBTC in the Stacks ecosystem, as collateral.
Ali said the effort could spark a similar rush in the DeFi-on-Bitcoin space that Ordinals did for NFTs on the blockchain.
So far, the Stacks ecosystem has escaped the intense regulatory scrutiny of the crypto ecosystem thanks to planning.
“When offering tokens to the public we basically did the hard thing of actually sitting down with the regulators and doing a qualified offering,” Ali said.
The Stacks co-creator said that in 2019, the public sale of STX was cleared by the U.S.’ Securities and Exchange Commission, which was a first for a crypto asset.
Additionally, the U.S. Commodity Futures Trading Commission (CFTC), which regulates derivatives markets, has designated Bitcoin as a commodity. The definition may provide those building on Bitcoin with some assurance that the base layer of their work won’t become mired in regulatory action.
“We were extremely careful about decentralization,” Ali said.
The Stacks co-creator has moved on from the ecosystem to found Trust Machines, a company dedicated to build applications on Bitcoin. In the context of Trust Machines, Stacks is just a “tool,” Ali said.
That tool may have become much more powerful with the launch of Ordinals.