brc20-swap: An Innovative Liquidity Solution for the Ordinals Ecosystem

Ordinals ecological assets have long faced the problem of insufficient liquidity, mainly due to their trading mechanism that relies on limit orders. To improve this situation, a platform integrating engraving, trading, and wallet functions announced the launch of brc20-swap in July 2023. This product entered the testing phase on October 30, aiming to inject new vitality into ecological assets.

The Development History of brc20-swap

In September 2023, the platform issued early access invitations to 620 eligible addresses. The selection criteria for these addresses included: active users with a trading volume exceeding 1 BTC within a specific period, community members with a total of over 500 engraved points, and holders of OG passes at specific block heights.

A month later, the platform announced the specific timeline for the mainnet launch and began distributing commemorative inscriptions called "Prime Access" to the community, allowing holders to participate in early testing of the product. These inscriptions were distributed through official social channels and a lottery system, with a total of 654 units.

In terms of transaction fees, brc20-swap adopts a fee rate standard of 0.3%, similar to a well-known DEX. About 1/6 of this is collected by the platform, while the remaining 5/6 is allocated to liquidity providers. It is worth noting that brc20-swap uses brc20 assets "sats" as transaction fees.

At the end of October, the platform announced the first batch of 14 supported assets. The selection of these assets is based on the trading activity and median trading volume over the past 30 days. After this news was released, the prices of the related assets generally saw an increase.

Product Model Analysis

The functions of brc20-swap are divided into three parts: trading, liquidity pool, and data overview, with an overall structure similar to decentralized exchanges on EVM chains. Users need to recharge assets into the system by "inscribe TRANSFER" before trading, and the recharge confirmation requires 3 block times.

The product is implemented with modular expansion, with each module operating independently. This design has the following advantages:

1. Develop new modules without permission.
2. Modules are isolated from each other, and a failure in a single module does not affect overall operation.
3. When the majority of indexers recognize a certain module, consensus upgrade can be achieved.

However, this model also has a drawback: users cannot freely withdraw assets. The platform alleviates this issue through a dynamic adjustment mechanism, allowing withdrawals when others deposit assets exceeding the withdrawal demand. This design avoids arbitrary issuance but also limits the liquidity and convenience of asset use to a certain extent.

As users' understanding and use of the module increases, the module may gradually transition from the initial "black" state to the "white" state, achieving a consensus upgrade. At that time, users will gain greater freedom in asset operations.

Future Outlook

The launch of brc20-swap is expected to significantly improve the liquidity issues of the Ordinals ecosystem, creating more entry opportunities for investors. As the first native trading platform in the ecosystem, it marks a major step forward for the entire community.

The platform also announced that a portion of the transaction fees will be donated to a foundation that supports the development of the BRC20 protocol, and it has pledged to open source the related code to encourage more indexers to participate. These initiatives demonstrate the platform's commitment to promoting the development of the entire ecosystem.

Although the Ordinals ecosystem has developed for a relatively short time, it has already shown great potential. In the future, with the collaborative efforts of various parties, we have reason to expect that this ecosystem will usher in a more prosperous development prospect.