The Bitcoin ecosystem is experiencing unprecedented transformations.

Abstract

The anticipation of a spot ETF has once again propelled BTC to new highs, breaking through the bottom range of $25,000. Simultaneously, the BTC ecosystem has witnessed significant advancements, giving rise to native protocols such as Ordinals, Atomicals, PIPE, and more. The innovations within the BTC ecosystem not only bring forth more possibilities for Bitcoin but also present unique investment opportunities. We are optimistic about the long-term growth of native protocol tokens like $ATOM, $PIPE, and established layer-two protocols like $RIF and $STX capturing BTC’s Beta.

Spot ETF reignites market sentiment, making BTC ecosystem worthy of attention

The anticipation of a spot ETF has once again propelled BTC to new highs, breaking through the bottom range of $25,000. On October 16, Cointelegraph reported false information regarding the SEC approving a spot ETF, causing BTC to spike near $30,000. However, the market did not fully retract, consolidating near the MA120 before continuing its upward trend. Clearly, we are in a phase where optimism is high, and the market sentiment for long positions has been ignited.

Notably, the BTC ecosystem has made significant progress this year, giving rise to native protocols such as Ordinals, Atomicals, PIPE, and more. The innovation within the BTC ecosystem not only expands the possibilities for Bitcoin but also harbors unique investment opportunities, with the performance of related tokens even outpacing BTC. The following sections will introduce some of the BTC ecosystem investment opportunities that we are keeping an eye on.

Ordinals Protocol

Ordinals protocol undergoes a major update, and leading token $ORDI experiences substantial surge

On January 21, 2023, Bitcoin developer Casey Rodarmor introduced the Ordinals protocol, ushering in a new era for the Bitcoin ecosystem. On October 24, the Ordinals protocol underwent a significant update, releasing version 0.10.0 with added features like batch engraving, metadata addition, and inscription endpoint numbering. With BTC’s rise and renewed community activity, the flagship token $ORDI experienced a big rebound. On November 7, Binance listed $ORDI, leading to a significant surge, with a nearly 100% daily increase.

The Ordinals protocol, launched earlier in the year, has seen over 38 million inscriptions, with a growing community. As the leading token in the Bitcoin ecosystem, $ORDI currently has a marketcap of around $400 million, yet to be listed on top-tier exchanges like Coinbase and Upbit, indicating potential for further growth. Recently, community members proposed using $ORDI as the governance token for BRC-20, including purposes such as community proposal voting and Indexer staking, potentially providing $ORDI with practical utility to further boost purchasing demand.

$SATS listed on multiple exchanges, with marketcap close to $300 million

Deployed on March 9, 2023, with a total supply of 21 trillion, corresponding to the number of Bitcoin satoshis, $SATS had a maximum single minting limit of 100 million. It’s completed on September 24, half a year later. Among all BRC-20 tokens, $SATS has the highest number of on-chain holding addresses, approaching 40,000. Consequently, $SATS has the most supporters and the widest impact.

Over the past month, $SATS has surged nearly tenfold, sequentially listing on exchanges like Bitget, Kucoin, Gate, and others, reaching a market capitalization close to $300 million. Exchanges are embracing the Bitcoin ecosystem and attracting more attention.

BRC-100 unveiled, poised to initiate native applications such as DeFi and GameFi

On October 25, the Layer 1 Foundation, founded by BRC-20 developer @domodata, introduced BRC-100. BRC-100 is a scalable decentralized computing protocol based on ordinal theory, designed specifically for decentralized applications on the first layer of Bitcoin, including DeFi, SocialFi, GameFi, and more. Derived from BRC-20, BRC-100 can be extended and improved, creating possibilities for applications based on the first layer of Bitcoin.

Although the Ordinals protocol has only been live for nine months, it has attracted developers from various fields and communities, giving rise to numerous applications and gameplay, such as BRC-20, rare satoshis, recursive inscriptions, and more. Protocols and applications around Ordinals’ improvement and expansion continue to emerge, making the future development worth our ongoing attention.

Atomicals Protocol

The Atomicals protocol, launched on September 17, is a simple and flexible protocol designed for the minting, transmission, and updating of digital objects (traditionally known as NFTs) on blockchain networks like Bitcoin’s Unspent Transaction Output (UTXO). Atomical represents a method of organizing the creation, transmission, and updating of digital objects, essentially forming a digital ownership chain defined by some straightforward rules.

In contrast to the Ordinals protocol, the Atomicals protocol is intricately designed, incorporating modules for tokens, NFTs, realms, containers, and more, offering developers and users a variety of commonly used functionalities. Since its launch on September 17, the protocol has gained numerous developers and users, with deployments on wallets, browsers, casting platforms, domain services, and other tools. Minting has reached tens of thousands, and the protocol continues to experience rapid growth.

ARC-20 Tokens

The ARC-20 token standard of the Atomicals protocol addresses the representation of arbitrary fungible tokens on the Bitcoin network. It utilizes a satoshi to represent the deployed tokens. Anyone can deploy and transfer ARC-20 tokens using UTXO-supporting wallets, with options for both direct and decentralized deployment. Additionally, ARC-20 comes equipped with a built-in unique naming system, where the first registered token name is permanent.

As the simplest use case of the Atomicals protocol, several ARC-20 tokens have already been cast by community members. Among them, $ATOM is the first-born ARC-20 token, becoming the representative token of the Atomicals protocol. With a total supply of 21 million, $ATOM currently trades at $1.55, translating to a marketcap of around $30 million. Compared to the market cap of $ORDI exceeding $400 million, $ATOM holds significant growth potential.

NFT

“Atomical Digital Object” is a novel form of NFT that can be minted and transferred on the Bitcoin network. Unlike traditional NFTs, it doesn’t require centralized services or trusted indexers; instead, it is permanently stored on the Bitcoin blockchain. In addition to immutable content and files, it also supports continuous updates, making it applicable for social media, gaming, and other applications.

Realm Name

A Realm Name is a domain identifier that can be used to associate network addresses and resource information. It starts with a “+” and has at least one alphabetical letter. Realms do not require any intermediaries or centralized registrars, and once claimed, users permanently own the domain until transferred to others.

Interestingly, Realms support the construction of sub-realms through suffixes, opening up more applications and possibilities. Recently, there has been a peak in the minting of realms, with short-length domains of 1, 2, and 3 digits being rapidly claimed, totaling over 30,000 realms.

With meticulous preparation by developers, the Atomicals protocol has relatively mature modules and functionalities. With tens of thousands of minting in just over a month since its launch, its rapid development is remarkable. As a competitor to the Ordinals protocol, the Atomicals protocol is expected to unveil more gameplay and applications in the future, making it worth continuous attention.

PIPE Protocol

PIPE is a native Bitcoin token protocol inspired by Casey Rodarmor’s RUNES and Ordinals’ BRC-20 protocol. Developed primarily by the creator of BRC-20 indexer TRAC, PIPE, like BRC-20, includes three functions: deployment, minting, and transfer. However, the key difference is that the PIPE protocol is based on Bitcoin’s UTXO, offering greater flexibility by enabling the creation of fungible tokens and NFTs.

The founder of the Ordinals protocol proposed the RUNES protocol, which has not yet launched and has been controversial due to the inability to conduct decentralized minting. The PIPE protocol builds upon the RUNES protocol by adding the functionality of fair minting and garnered significant community support with its early deployment.

$PIPE is the first token to be deployed and minted, with a total supply of 21 million. The current market price is $1.2, resulting in a marketcap of approximately $25 million.

The PIPE protocol is still in its very early stages, and various infrastructure elements are still under development. SatsX recently launched the minting and transfer functions of the PIPE protocol, along with a trading marketplace. Biston Labs has begun testing the Swap feature for the PIPE protocol, and the related ecosystem is continuously evolving.

Sidechains & Layer 2 Protocols

RIF (Rootstock Infrastructure Framework)

Developed and launched by IOV Labs in January 2018, RSK is a Bitcoin sidechain that shares the security and decentralization features of the Bitcoin network through merged mining. It is also compatible with EVM smart contracts, extending the functionality of the Bitcoin system without compromising security. RBTC is the native token of RSK, pegged 1:1 to BTC, and currently has a circulating supply of 3,334 tokens.

Building on RSK, IOV Labs further developed the Rootstock Infrastructure Framework (RIF), which includes infrastructure such as operating systems, domain services, relays, and wallets. RIF aims to assist developers in building DApps faster and more efficiently through APIs and language libraries. $RIF, the native token, doubled in value during the recent uptrend, and Binance has listed perpetual contracts for $RIF. Despite a significant increase, the market capitalization of RIF stands at only $110 million, suggesting considerable upside potential.

Stacks

Stacks is a blockchain network for DApps and smart contracts based on Bitcoin, functioning similarly to a sidechain or Layer 2 on Bitcoin. It boasts a relatively comprehensive ecosystem with applications in DeFi, NFTs, DAOs, and more. STX is the native token, used for transaction and smart contract fees.

On October 20, Stacks released the developer version of sBTC, allowing developers to build applications using sBTC and test basic functionalities such as deposits and withdrawals. sBTC on Stacks corresponds 1:1 to BTC on the Stacks layer, accessible for smart contracts in applications like DeFi and NFTs. Stacks plans to release the Nakamoto upgrade in the first quarter of 2024, significantly enhancing network security and operational speed.

Recently, STX’s price and Total Value Locked (TVL) have both rebounded, with TVL surpassing $20 million, resulting in a market capitalization of $1 billion. STX currently stands as the largest Layer 2 protocol by market capitalization in the Bitcoin ecosystem, with the most DApps. Following the completion of the Nakamoto upgrade, the STX ecosystem is expected to experience further explosive growth.

Taproot Assets

On October 18, Lightning Labs released the Alpha version of the Taproot Assets mainnet, enabling developers to issue and manage stablecoins and other assets on the Bitcoin blockchain, opening up new possibilities for the Bitcoin ecosystem.

Founded in 2016, Lightning Labs has focused on developing the Lightning Network to address the slow transaction speed of Bitcoin. The Lightning Network is a Layer 2 solution, providing a method for small-value payments. Users can conduct off-chain transactions through Lightning Network payment channels, closing channels upon completion of transactions, and then consolidating and settling on the Bitcoin network, reducing transaction fees and increasing the throughput of the Bitcoin network.

In 2022, Lightning Labs secured $70 million in Series B funding, with investors including early investors in Tesla and SpaceX, as well as the CEO of Robinhood. The funds are primarily allocated for building Taro, a multi-asset layer above the Bitcoin network. With robust financial and technical capabilities, Lightning Labs aims to construct a settlement layer for a global currency on the Bitcoin network, further promoting Bitcoin adoption on a mainstream level.

On October 30, the Nostr Assets Protocol was the first to launch on the Taproot Assets mainnet, simultaneously releasing Halloween airdrop tokens $TREAT and $TRICK. The total supply of both tokens is 210 million, with 10000 tokens of either type available for whitelisted users to choose from. Approximately 8,000 addresses have claimed 80 million tokens. Currently priced at $0.09, the total circulating market capitalization is $7 million, with a fully diluted valuation of $38 million. The project team holds the remaining tokens, potentially introducing more gameplay and use cases in the future.

Conclusion

In this year, the Bitcoin ecosystem has witnessed remarkable development, with various native protocol layers emerging. This not only brings more possibilities and applications to Bitcoin but also attracts new members to diversify the Bitcoin community. At present, it’s challenging to accurately predict which protocol will ultimately be successful. However, one thing is certain: we are at the beginning of an explosive growth phase in the Bitcoin ecosystem, and the future is filled with limitless possibilities.

Similar to the public chain competition in 2021, each project has its unique technical features and community culture. The competitive landscape, marked by mutual competition, is expanding the playing field. Among the leading tokens in the BTC ecosystem protocols, $ORDI has reached a market capitalization of $400 million, while $ATOM and $PIPE have market capitalizations of around $30 million. In the early stages of an ecosystem, we can enter at very low prices. Once the ecosystem sees further development, even a diversified investment strategy can yield significant returns.

More importantly, the emergence of BTC ecosystem protocol tokens provides more choices for BTC investors. In previous bull markets, BTC typically led the way, followed by funds flowing into ETH and other altcoins. In the current uptrend, BTC and its market share have set new highs. BTC is the preferred target for institutional asset allocation, and BTC ecosystem projects complement institutional investment choices. If BTC spot ETF approval is successful, BTC ecosystem projects are likely to attract smart money due to their higher elasticity, thereby outperforming other altcoins.

We are optimistic about the explosive growth of BTC native protocols such as Ordinals, Atomicals, and PIPE, as well as the long-term development of Layer 2 protocols like Stacks and RIF. We closely monitor investment opportunities in relevant tokens.

Tide Capital

Tide Capital is a research-driven digital asset investment and trading firm. We study macro and fundamentals to capture beta and alpha opportunities from crypto waves to financial tides. Driven by value, we aim to invest in early-stage projects with significant growth potential. Concurrently, we assess market cycles to inform our investment decisions, trading in the public market to achieve returns.

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