brc20-swap launched: Explore new horizons of Liquidity in the Ordinals ecosystem

The trading mechanism of Ordinals ecological assets has long relied on a listing sale model, making the liquidity issue a key focus for ecological development. 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 ecological assets. The product officially entered the testing phase on October 30.

This article will provide readers with a detailed analysis of 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 criteria. These criteria include:

1. Active users who traded a volume of at least 1 BTC on the platform market between July 16, 2023, and September 20, 2023.
2. Active community members who accumulate at least 500 points through platform inscriptions during the same period.
3. Platform OG PASS holders (based on block height 808559).

On October 10, 2023, the official announcement was made regarding the launch schedule and related details for the brc20-swap mainnet. They are gradually distributing a commemorative inscription called brc20-swap Prime Access for free to community users, and holders can participate in the early testing of the product. These inscriptions are distributed through official social channels and user lottery methods, with a total of 654 available.

Regarding trading fees, brc20-swap refers to the fee rate standards of mainstream DEXs, charging all trading users a service fee of 0.3%. Of this, about 1/6 (0.05%) is collected by the platform, while the remaining 5/6 (0.25%) is allocated to liquidity providers for each trading pair. It is worth noting that brc20-swap uses the brc20 asset "sats" as the transaction fee.

On October 30, 2023, the official announcement revealed the 14 assets initially supported by brc20-swap. The selection criteria were assets that had at least 15 days of trading activity on the platform market in the past 30 days, and a non-zero median trading volume in the past 30 days. Following this announcement, the relevant assets saw a significant increase.

Product Model Analysis

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

The product is achieved through modular expansion, with each module existing independently. This model has the following advantages:

1. Permissionless Development: Developers can freely create new modules for brc-20 without additional authorization.
2. Isolated Execution: A problem 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, that module can be upgraded from the current black module to a white module, becoming an official part of the brc-20 protocol.

However, the black module expansion mode also has a drawback: users cannot freely withdraw assets. To improve this issue, the platform has designed a dynamic adjustment mechanism, allowing withdrawals when other users deposit assets beyond the withdrawal demand. This design avoids the problem of arbitrary issuance on the EVM chain but also restricts the liquidity and convenience of asset usage to some extent.

As users gradually deepen their understanding and use of the black module, and as the reliability of the module is verified and accepted by more indexers, the product will transition from the black module to the white module to achieve a consensus upgrade. At that time, users will be able to freely deposit and withdraw assets.

In addition, considering that the BRC20 protocol and the entire Ordinals ecosystem are still in their early stages, the platform currently holds significant influence and reputation in the ecosystem, providing complete indexing services such as transaction and balance queries for the protocol. This relatively centralized situation poses certain risks. However, the modular operating architecture creates conditions for more service providers to participate, which is expected to promote the decentralization process of indexing services.

Future Outlook

Users in the Ordinals ecosystem frequently report insufficient Liquidity, with limited capacity for entry funds, leading some large investors to adopt a wait-and-see attitude. brc20-swap, as the first native trading platform of the Ordinals ecosystem, utilizes the brc20 protocol as the underlying asset base, aiming to continuously optimize Liquidity and expand the capacity for entry funds. This is undoubtedly an important advancement for the development of the entire ecosystem.

At the same time, the officials announced that 2% of the brc20-swap transaction fees will be donated to the foundation involved in the development of the brc20 protocol, to promote further optimization and standard improvement of the protocol. In addition, the platform also plans to open source the complete explanation and verification source code of the brc20-swap to facilitate support for early indexers.

These measures demonstrate the cooperative attitude among ecological participants, rather than the pursuit of monopolizing or exclusively enjoying benefits. Considering the relatively short development cycle of the Ordinals ecosystem, it is crucial for all parties to work together to expand the market and achieve a win-win situation for the long-term development of the entire ecosystem.