Development and Prospects of brc20-swap: A New Attempt at Liquidity in the Ordinals Ecosystem

The trading mechanism of Ordinals ecological assets mainly revolves around the order-selling model, and its Liquidity has always been a key issue of concern for the ecosystem. In July 2023, a platform integrating engraving, trading market, and wallet functions announced the launch of brc20-swap, aimed at improving the Liquidity of ecological 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.

The Development History of brc20-swap

On September 20, 2023, the platform issued brc20-swap Early Access invitation inscriptions to 620 addresses that met specific conditions. These conditions include:

1. Active users who trade at least 1 BTC on the platform market within a specific time period.
2. Active users who have accumulated at least 500 points through the platform by inscribing texts within a specific time period.
3. Platform OG PASS holders (based on a specific block height).

On October 10, 2023, the platform officially announced the schedule and details for the launch of the brc20-swap mainnet. They distributed a commemorative inscription called brc20-swap Prime Access for free to community users, allowing holders to participate in the early testing of the product. These inscriptions were distributed through official social channels and user lotteries, with a total of 654 pieces.

The settlement and synchronization of transactions are handled by the sorter. Brc20-swap refers to the fee standards of a well-known DEX, charging all trading users a service fee of 0.3%. Of this, about 1/6 (0.05%) is collected by the platform, and the remaining 5/6 (0.25%) is allocated to liquidity providers of each trading pair. Unlike other platforms, brc20-swap uses brc20 assets "sats" as transaction fees.

On October 30, 2023, the official announcement listed 14 assets initially supported by brc20-swap. The selection criteria required 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 prices of the related assets saw a significant increase.

Product Model

The functions of brc20-swap are divided into three parts: trading, liquidity pool, and data overview, similar to the DEX model on EVM chains. Users need to deposit assets into the brc20-swap module by "inscribe TRANSFER" before trading, and the deposit confirmation takes 3 block times.

The product is realized through modular expansion, with each module existing independently. The advantages of this model include:

1. Permissionless Development: Developing new modules for brc-20 is an open process.
2. Isolated execution: Issues in a single module will not affect the operation of the core protocol and other modules.
3. Consensus Upgrade: When the majority of indexers acknowledge and implement the indexing of a specific module, it can become a part of the brc-20 protocol.

However, this expansion model also has drawbacks, such as users being unable to freely withdraw assets. The platform improves this issue by designing a dynamic adjustment mechanism, which allows withdrawals when other users deposit assets exceeding the amount to be withdrawn. This approach avoids arbitrary issuance but also limits the liquidity and convenience of assets to a certain extent.

As users' understanding and acceptance of the module increase, the product can transition from the black module to the white module, achieving a consensus upgrade. By then, 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, the platform provides complete indexing services for transaction and balance inquiries for the protocol. Its modular operating architecture also creates conditions for more service providers to participate, helping to achieve the decentralization of indexing.

Future Outlook

Common user complaints in the Ordinals ecosystem include low liquidity and limited capital capacity for entry, which causes some large capital users to remain on the sidelines. brc20-swap utilizes the brc20 protocol as the underlying asset foundation, realizing the first native trading platform in the Ordinals ecosystem. Continuously optimizing liquidity means constantly expanding the capacity for entry capital, which is an important advancement 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, in order to promote the development and standard optimization of brc20. Meanwhile, the platform will also open-source the complete explanation and verification source code of the brc20-swap to facilitate early support from indexers.

These measures indicate the cooperative attitude of ecological participants, rather than the pursuit of monopolizing or exclusively enjoying ecological benefits. Given the relatively short development cycle of the Ordinals ecosystem, all parties within the ecosystem need to work together to achieve a win-win situation and promote the healthy development of the entire ecosystem.