Bitcoin (BTC) has remained a dominant force in the blockchain sector, continuously adapting and innovating. As decentralized finance (DeFi) grows in importance, Bitcoin’s role in this space is also becoming increasingly significant.
The emergence of a new token economy within the Bitcoin ecosystem is a testament to its adaptive structure.
Read on to explore Bitcoin’s token economy, which highlights its impact on the broader DeFi and crypto landscapes.
New Token Economy on Bitcoin
The new token economy within the Bitcoin ecosystem refers to the creation and utilization of digital tokens that operate on Bitcoin’s blockchain. These tokens can act as cryptoassets themselves or represent various other assets, including other cryptocurrencies or real-world assets. This economy’s significance lies in its potential to enhance security, transparency, and the creation of decentralized applications (dApps) that can interact with Bitcoin.
What Are Tokens on Bitcoin?
Tokens on Bitcoin are digital assets that operate on Bitcoin’s blockchain. They leverage Bitcoin’s robust security features and decentralized nature to offer a wide range of functionalities, from representing value to enabling smart contracts. The key features of tokens on Bitcoin include enhanced security, transparency, and interoperability within the DeFi space of this network.
Understanding Bitcoin Token Standards
Ordinals Protocol
Developer Casey Rodarmor launched the Ordinal protocol, introducing a more straightforward method for creating non-fungible tokens (NFTs) on the Bitcoin network.
Although NFTs on Bitcoin are not a new concept— protocols like Counterparty and Stacks have long enabled Bitcoin-based NFTs— Ordinals have primarily driven the creation of digital collectibles, such as the Runestone NFT collection.
As they are non-fungible, Ordinals are distinct from regular bitcoins, which are identical and intrinsically uniform.
BRC-20
In March 2023, an anonymous developer named Domo introduced the BRC-20 token standard, allowing users to create fungible tokens directly on the Bitcoin blockchain. Unlike the ERC-20 tokens on the Ethereum (ETH) blockchain, which rely on smart contracts, BRC-20 offers a different approach.
BRC-20 tokens are created using a script file stored on Bitcoin, assigning tokens to specific satoshis, the smallest unit of the cryptocurrency. By embedding JSON, a lightweight data interchange format, data into Ordinal inscriptions on the Bitcoin network, users can mint, deploy, and transfer BRC-20 tokens.
Runes
Launched in April 2024, Runes are another token standard within the Bitcoin ecosystem. They enable new use cases and applications and are designed to be flexible, supporting a wide range of functionalities and integrations, and improving upon BRC-20.
Examples of Fungible Tokens on Bitcoin
ORDI (BRC-20)
ORDI stands out as the inaugural token created with the BRC-20 standard that powers the Ordiscan network, a platform that allows users to create and share inscribed digital content. LIke other BRC-20 tokens, ORDI is versatile and can represent different assets, units of value, or bring new utilities within the Bitcoin blockchain.
DOG•GO•TO•THE•MOON (Runes)
DOG•GO•TO•THE•MOON (DOG) is a new meme coin created by the Runes community on the Bitcoin blockchain. Unlike many other memecoins, DOG didn’t have a pre-sale or team allocation. Instead, it was launched through a volunteer-led airdrop to the Bitcoin Ordinals community, ensuring a more fair and inclusive beginning.
RSIC
RSIC (Rune Specific Inscription Circuits) is an allocation system that ensures a more fair way to create and share Bitcoin Runes tokens in a peer-to-peer system.
Users can join a gamified ecosystem where they can earn and track their Bitcoin runes collections. Holders of assets from projects like Bitcoin Puppets, Bitcoin Punks, Bitcoin Bandits, Bitcoin Frogs, NodeMonkes, and OMB can receive airdrops through the RSIC system.
Regulatory Environment
The regulatory environment for cryptocurrencies is changing rapidly. When cryptos first became popular, there weren’t any regulations to speak of, which drew the users to them. However, governments are also involved when there’s wide adoption and traditional financial institutions are taking part in the crypto trade.
Generally speaking, regulations are becoming tighter, and crypto trading is treated more in foreign currencies. It’s a mixed bag, and even though regulations are biting into investors’ profits, they are also bringing more predictability to the crypto market. It’s a tradeoff many investors are willing to make.
The Bottom Line
As more developers join the Bitcoin community to build on this network, there will likely be many new use cases and uses. Thanks to this, the Bitcoin token economy could grow and become more diverse, which would be good for the Bitcoin ecosystem, its users, and the price of BTC.