BRC20-Swap Launch: Development History, Product Model, and Future Outlook

The trading mechanism for Ordinals ecosystem assets has long primarily adopted a limit order selling model, with liquidity being a key focus of the ecosystem. In July 2023, a platform integrating engraving, trading market, and wallet functions announced the upcoming launch of brc20-swap, aimed at improving the liquidity of ecosystem assets. The product began 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, a certain platform issued early access invitation inscriptions for brc20-swap to 620 addresses. The selection criteria include:

1. Active community members who trade at least 1 BTC on the platform's trading market between July 16 and September 20.
2. Active community members who accumulate at least 500 points through the platform's inscription during the same period.
3. The platform OG PASS holders (snapshot block height is 808559)

On October 10, 2023, the platform officially announced the launch schedule and other details for the brc20-swap mainnet. They are gradually distributing a commemorative inscription called brc20-swap Prime Access for free to community users, and holding this inscription allows participation in the early testing of the product. Distribution is conducted through official social channels and user lotteries, with a total of 654 units. The current secondary market price is approximately 0.0067 BTC.

The settlement and synchronization of transactions are completed by the sorter. In terms of fees, brc20-swap references the standards of a well-known DEX and charges all trading users a service fee of 0.3%. Of this, approximately 1/6 (0.05%) is collected by the platform, and the remaining 5/6 (0.25%) is distributed to liquidity providers of each trading pair. It is noteworthy that brc20-swap uses brc20 asset "sats" as transaction fees.

On October 30, 2023, the official announcement listed 14 assets that are initially supported. The selection criteria were that the assets had at least 15 days of trading activity on the platform market in the past 30 days, and the median trading volume in the past 30 days was not zero. Following this announcement, the relevant assets all saw significant increases due to positive expectations.

Product Model

The product is divided into three parts: trading, liquidity pool, and data overview, structured similarly to decentralized exchanges on EVM chains. Users need to recharge assets into the brc20-swap module by "inscribe TRANSFER" before trading, and the recharge confirmation requires 3 blocks.

The brc20-swap is implemented through modular expansion, with each module existing independently. The advantages of this model include:

1. Permissionless Development: Developing new modules for brc-20 does not require permission.
2. Isolated Execution: A single module malfunction does not affect the operation of the core protocol and other modules.
3. Consensus Upgrade: When the majority of indexers recognize and implement a specific module index, it can be upgraded from the black module to the white module, becoming a part of the brc-20 protocol.

One drawback of the black module expansion mode is that users cannot freely withdraw assets. The platform improves this issue by dynamically adjusting: withdrawals can be made when others deposit assets that exceed the amount of assets withdrawn. This avoids arbitrary issuance but sacrifices some asset liquidity and convenience.

Once the black module is understood and executed by users, and gradually becomes reliable and accepted by more indexers, it 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, a certain platform holds significant influence and reputation in the ecosystem, providing comprehensive transaction and balance inquiry indexing services for the protocol, which poses certain centralization risks. Its modular operating architecture allows more service providers to participate, which helps achieve decentralization of indexing.

Future Outlook

Common complaints from users in the Ordinals ecosystem include low liquidity and limited entry capital capacity, which causes some large holders to stay on the sidelines. brc20-swap uses the brc20 protocol as the underlying asset foundation, achieving the first native transaction in the Ordinals ecosystem. By continuously optimizing liquidity, it effectively expands the entry capital capacity. Therefore, the launch of brc20-swap represents a progress for the entire ecosystem.

The platform officially announced that 2% of the brc20-swap transaction fees will be donated to the foundation involved in the development of the brc20 protocol, promoting further optimization of the brc20 development and standards. In addition, the platform will open source the complete explanation and verification source code of brc20-swap to facilitate early support from indexers.

These measures indicate a cooperative attitude rather than monopolizing ecological interests. The Ordinals ecological development cycle is relatively short, requiring joint efforts from all parties within the ecosystem to achieve a win-win situation.