Vamient 2024 Insights #1 - Bitcoin Ecosystem (Part 2)

After going through an overview of new token standards, BitVM as well as the Layer 2 efforts in the Bitcoin ecosystem in Part 1, we will take a look at the rest of the sectors in this second part. RGB and RGB++, Data Availability options, DeFi/Staking, Interoperability plus especially the NFT ecosystem will all be highlighted.

RGB, short for "Really Good Bitcoin," enhances flexibility and scalability by functioning off-chain, yet it still benefits from Bitcoin's security layer. Its original inspiration came from Peter Todd's work on client-side validation and single-use seals. This led to Giacomo Zucco's initial concept of RGB in 2016, with the first implementation taking place in 2017.

RGB operates on top of the Bitcoin blockchain and utilizes the Lightning Network, functioning similarly to a Directed Acyclic Graph (DAG). In this setup, participants cannot see the complete network state. Every new transaction must be confirmed by at least two previous transactions before it is recorded on the network. RGB enables the issuance and management of programmable and private assets. Additionally, its smart contract capabilities, powered by RGB's own virtual machine, AluVM, support DeFi, NFTs, and other common smart contract use cases. RGB transactions are private unless users opt to publicly broadcast their smart contracts, thus ensuring user privacy.

A single-use seal is an "electronic seal" that secures a message by ensuring it can only be used once. Bitcoin's unspent transaction outputs (UTXOs) can serve as seals for messages, as Bitcoin's Proof of Work (PoW) prevents UTXOs from being spent twice. The RGB protocol uses these single-use seals to link changes in RGB state with the ownership of Bitcoin UTXOs. Consequently, the Bitcoin system validates RGB state ownership and can track all state changes via the UTXOs' transaction records. Seals prevent different parties from providing varying versions of supposedly identical data. Therefore, they enable eligible parties to verify a smart contract's state history. Through the use of a single-use seal, RGB only utilizes Bitcoin script for its security model and access rights and not for its (somewhat lack of) computability.

One of RGB’s core features is Client-side validation, originated by Peter Todd. In RGB protocol, user states cannot be directly on-chain but self-verify by users through off-chain computation. Client-side validation technology allows users to focus solely on the branch history of UTXOs relevant to them, without worrying about unrelated transaction histories. The security of RGB states is maintained through client-side validation, eliminating reliance on any centralized third party.

Each RGB smart contract is represented by a genesis state and a directed acyclic graph (DAG) of off-chain state transitions, validated by client-side validation. The state is assigned to a single-use seal through UTXO. The Schema, defined by the smart contract issuer at the genesis state, contains validation rules. These rules dictate the types of state, seals, and metadata allowed within state transitions, as well as Turing-complete scripts for client-side validation. Each contract maintains its own state history and data, with no intersection or composition with others in terms of states. RGB smart contracts differ from those of Ethereum and other chains as they are defined declaratively, not imperatively. In other words, an RGB smart contract is a DAG of state changes, of which you only ever know a portion that is relevant to you.

The interaction of RGB smart contracts with the Lightning Network is facilitated through Bifrost, an extension to the LN peer-to-peer protocol. Bifrost allows you to send client-side validation data using the LN itself, make RGB-20 payments (RGB's standard of fungible token) over the LN, and will enable more advanced features in the future, such as DEX, decentralized storage, DeFi, and advanced smart contracts through AluVM.

In the upcoming RGB release, users can create simply smart contracts in RGB or use Assembly for AluVM and schema programming. A higher-level language called Contractum is under development to simplify the creation of more complex smart contracts.

RGB++ is an extension protocol of RGB, proposed by the Nervos Network team, utilizing the same concepts of single-use seals and client-side validation technology to manage state changes and transaction verification. In addition to it, It maps Bitcoin UTXOs to Nervos CKB Cells via isomorphic bindings and uses script constraints on the CKB and Bitcoin chains to verify the correctness of state computation and the validity of ownership changes. Hence, all RGB++ transactions will appear on both the BTC and CKB chains, with the latter replaces the client validation process. Users only need to check the relevant transactions on CKB to verify whether the state calculation of this RGB++ transaction is correct. This option is, however, optional, so users can also independently verify RGB++ transactions using client-side validation like with RGB. This makes RGB++ doesn't fully rely on additional security assumption about CKB chain's security.

RGB++ addresses the technical challenges faced by the original RGB protocol in practical implementation and provides more possibilities, such as blockchain-enhanced client validation, transaction folding, shared states with ownerless contracts, and non-interactive transfers.

RGB++ is live on April 4th and users can already use JoyID wallet to store and transfer assets.

CELL Studio

@ckbcell

RGB++ is NOW LIVE on Bitcoin

The RGB++ protocol transforms BTC Layer 1 asset issuance via advanced tech like isomorphic binding, single-use seals, transaction folding & more. Also, RGB++ expands Bitcoin's capabilities through enabling smart contracts & asset leap between…

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6:15 • 4 thg 4, 2024

For sovereign rollups or non Bitcoin-settled rollups, you can still use Bitcoin only as DA layer with rollup development kits such as Rollkit or OPStack (BOB using this approach as mentioned ). The data in this case is inscribed onto the sats similar to Ordinals. The approach is also adopted by Kasar Labs’s BarkNet - in collaboration with Taproot Wizard - which develops a sovereign rollup using Mandara stack. We expect more efforts like this popping up in the future with the likes of Sovereign SDK allows pluggable modules for rollup’s DA and other components (see for example Chainway’s implementation here).

However, merely using Bitcoin as the DA layer without further Bitcoin alignment or tapping into any of the Bitcoin's strength (security, soundness of the base asset etc) might deemed to be wasteful since Bitcoin's block space is an expensive and valuable resource.

In the less ideal world whereby all Bitcoin rollup solutions and Bitcoin ecosystem projects would utilizing Bitcoin's Layer 1 as a data availability (DA) layer, it could overload Bitcoin since it wasn't designed for DA storage at the first place. A natural workaround would be switching onto an alternative DA layer such as Celestia, EigenDA as some the rollups on Ethereum, especially the app-specific rollups such as LyraChain or Aevo has been attempting. Via (formerly ViaCoin) and Mozita (app-specific rollup for their perp dex) are some of the Bitcoin rollups design that incorporated Celestia onto their architecture design. Avail or Espresso's Tiramisu are other viable alt-DA solutions to consider.

Immutability, censorship resistance, and decentralization are key features highly valued by the Bitcoin community. As such, any rollups should align with these attributes. Given that Bitcoin Ordinals and other inscriptions only require storage without a need for computation, Bitcoin's block space may not be the optimal solution. Those aforementioned DA networks have smaller validator sets, which implies a noticeable difference in the degree of decentralization and security. This is a crucial consideration for Bitcoin rollups willing to adopt such networks. Consequently, there's a demand for a separate, Bitcoin-secured DA layer specifically designed for storage.

Nubit is developing such a DA layer specifically for the Bitcoin ecosystem. It introduces the concept of Nubit tags, which are small cryptographic commitments placed on the Bitcoin blockchain that refer to the actual data stored on the Nubit network. Each tag is associated with a maximum of 8MB data, from which larger data will be aggregated. This design allows for a more efficient use of Bitcoin's limited block space.

The system utilizes Bitcoin staking and Bitcoin Timestamping methods, influenced by Babylon, in the consensus layer to maximize Bitcoin's security (more details about Babylon are provided in the section below). In addition, Nubit employs Data Availability Sampling for simpler data scaling, facilitating light nodes in data verification. A bridge system between Nubit and Bitcoin, which utilizes a Lightning Network-based Payment Channel Network, is adopted for fee payment and validator rewards distribution. This network of channels leverages Hashed Timelocked Contracts (HTLCs) to encourage intermediary nodes to route payments correctly. Lastly, Nubit's SNARK-based signature aggregation enables validators to consolidate their neighbors' signatures into a single proof, allowing a large number of validators to participate in the consensus.

Bitcoin, as the most decentralized and hard currency ever existed, has seen arguments and efforts for its "inclusion" in DeFi. There's a push to let people "put their Bitcoins to work" rather than just holding them. Early DeFi efforts focused on wrapping Bitcoin, either in a centralized or decentralized manner, to Ethereum and other smart contract ecosystems, or to side chains like RSK or Stacks V1. Examples of these include BadgerDAO and Sovryn.

However, it's important to note that new liquidity in the BTC ecosystem mainly comes from institutional BTC holders and non-crypto native holders. These holders might feel uncomfortable with the trust assumptions on wrapped assets or the increased vulnerability/risk vectors that come with Turing-complete smart contracts. They may also be unfamiliar with Ethereum or other blockchain ecosystems. Projects that align with these users' demographics may have a better chance of finding a product-market fit in this popular area.

Bitsmiley is a Bitcoin DeFi protocol that includes bitUSD, an over-collateralized stablecoin on the Bitcoin blockchain, as well as a lending and derivative protocol.

This protocol allows any Bitcoin holder to deposit BTC into the bitSmiley Treasury smart contract, which is deployed on a Layer 2 (L2) network. This allows them to mint bitUSD and redeem bitBTC back to BTC, subject to a stability fee. Similar to models like MakerDAO, any treasury with a Collateral-to-debt ratio falling below a certain threshold will be liquidated on the L2 network. The liquidation process follows a Dutch auction format, with a liquidation buffer funded from the protocol's revenue to cover any shortfall in auction proceeds.

This mechanism allows bitUSD to be minted and function on the Bitcoin blockchain itself, while still ensuring sufficient programmability for the protocol on an L2 network.

Atomic Finance uses DLCs to make it possible for people to earn a self-custodial yield on Bitcoin. Users can sell covered calls on Bitcoin whilst being totally self-custodian and does not relies on a L2 or wrapped assets. They are, however, moving on to automated covered call strategies after listening to feedback from users about their preference. In the future you will have a flexibility to choose between the automated strategies and the manual approach.

At the time of writing, the Bitcoin Layer 2's DeFi landscape is still in its infancy. Each Bitcoin layer 2 is primarily focused on developing infrastructure and attracting developers to their chain. Rootstock (RSK) and Stack, however, stand out as they have been around for many years and are therefore at a much more mature stage in terms of ecosystem development. Additionally, Merlin has shown potential this year as a Bitcoin layer 2 that is attracting projects to build on it.

RSK is, historically the largest side chain on Bitcoin with a total 200M in TVL across DeFi. At its core is Sovryn - an all-in-one Defi protocol built on Bitcoin. Sovryn incorporates spot and margin trading for crypto assets, a money market for lending and borrowing, and SovrynDollar (DLLR) - a Bitcoin-backed stablecoin. It's also developing BitcoinOS which is a network of rollups that all share Bitcoin's security and interoperable with each other.

Money on Chain provides cryptocurrency-backed stablecoins and decentralized staking options. Its offerings include the Dollar on Chain (DoC), a Bitcoin-Collateralized Stablecoin pegged 1:1 with the USD, and BPro, the interest-bearing token of BTCX (a leverage token of RBTC).

Tropykus is a decentralized lending protocol created specifically for emerging markets in Latin America. Conversely, Oku is a Decentralized Exchange (DEX) featuring an advanced front end with analytics and trading data. It allows users to trade, set up Liquidity Provider (LP) positions, and establish Uniswap v3 type of pools.

Stacks is a prominent figure in the Bitcoin L2 landscape due to the comprehensiveness of its 'DeFi legos'. In this ecosystem, Alex stands out as a DeFi super app comprising an AMM, order book DEX, money market, launchpad, and a bridge asset from Bitcoin L1.

StackingDAO simplifies the process of running a node in the Stacks network and shortens unstacking time by introducing a liquid staking token called stSTX. Currently, StackingDAO holds the highest TVL in Stacks, exceeding 100M, a number expected to rise following the Nakamoto upgrade.

Papaya offers liquid staking on Stacks v2 for sBTC (staked BTC), which is currently on their testnet. On Papaya, users receive an equal amount of an LST called stBTC when they stake their sBTC. This stBTC represents liquid staking for sBTC deposits. The liquidity from these deposits is used by their Proactive Market Maker (PMM) to dynamically rebalance the pools for capital efficiency. Besides staking, users can also provide liquidity to the PMM in the traditional manner.

Bitflow currently ranks as the second-largest DEX in terms of TVL on Stacks. It comes with a built-in AMM and enables users to borrow stablecoin using Bitcoin as collateral. Meanwhile, Velar will concentrate on a Uni v2 style AMM for spot trading in its v1.1. For V2, it aims to implement a Uni V3 style and perpetual trading.

Furthermore, Arkadiko is a decentralized liquidity protocol where users can collateralize their STX, stSTX, and sBTC to mint a stablecoin named USDA.

With over $3B secured in the Merlin Seal program, Merlin has emerged as the largest Bitcoin L2 in terms of Total Value Locked (TVL). The chain was launched in January 2024. Currently Cobo Global and Meson Protocol are the most popular venue to bridge assets from Bitcoin Layer 1 and other chains to the Merlin Chain.

Merlinswap combines both ambient liquidity (akin to Uni V2) and concentrated liquidity (similar to Uni V3). It provides enhancements such as limit orders and efficient gas usage in trading.

bitCowis an AMM offering BTC-native stable swap and automated concentrated liquidity on the Merlin BTC L2, developed by the bitSmiley team.

Merlinstarter is Merlin's native launchpad. To date, it has facilitated the launch of three projects. Additionally, Merlinswap has set a new record for the most extensive IDO fundraising, with $400M committed.

Surf Protocol (perpertual dex) and Solv Protocol (yield-bearing native asset) are the projects that first deployed on Base and Arbitrum, respectively, but are coming over to Merlin and looking to be the leaders in their corresponding segments there.

Additionally, Merlin Chain is progressively completing their DeFi Lego through partnerships with numerous projects such as Nubit, Pyth, and Stakestone.

Other Bitcoin Layer 2 projects are still under development, and their ecosystems are not fully established or even existent. We anticipate that these ecosystems will become much more robust in the future given the demand.

Bitcoin staking protocols allows bitcoin holders to stake their bitcoin for PoS blockchains which need security and are willing to pay yields for it, without needing any third-party custody/bridge/wrapping. It provides slashable economic security guarantees to the PoS chains while Bitcoin holder can earn yield on POS chain. Compared to some other traditional methods of sharing the security of Bitcoin like merge mining, Bitcoin staking solves the “Nothing at stake” problem whereby the miners can still attack the side chain or other units of economy that is supposedly sharing the security, whilst still being honestly mining on Bitcoin chain.

Babylon uses Remote staking method where users locked Bitcoin in staking Taproot contract. Once the staking transaction is confirmed on the Bitcoin chain, the stakers can start to contribute to the security of POS chain. The stake is “slashed” upon malicious behaviour using Extractable one-time signatures (EOTS) which is a signing primitive that allows the extraction of private key from 2 signatures signed with the same key. The private key is then used to send the BTC to burn address - effectively produce the same effect as slashing.

Babylon also incorporate Bitcoin Timestamping Protocol - the technique whereby hashes and signatures of the PoS chain blocks are recorded on Bitcoin blockchain. This gives an extra layer of ordering for PoS chain blocks and protects against long-range attack. Thus, it can be used to allow fast unbonding period for PoS chains. Babylon themselves is building a PoS CosmWasm chain that aggregates the checkpoints sent by the PoS Cosmos chains and posts them to Bitcoin on their behalf.

Currently there are various PoS chain especially Cosmos SDK based looking to integrate with Babylon for extra security as well as reducing unbonding period. Teams such as AltLayer also looking to leverage Bitcoin security through Babylon for rollups.

Building on top of Babylon’s staking protocol, Lorenzo’s Liquid Bitcoin Staking Protocol allows stakers to keep hold of an equivalent amount of stBTC for their staked BTC amount. Lorenzo handling the management of staked BTC by introducing a system called Liquid Staking Plan, in which the users will be able to choose from before staking. Each plan contains its own portfolio of PoS systems the staked amount will be used to secure, length of the staking cycle, and a corresponding delegate vault on Babylon Protocol which will be staked to the corresponding portfolio PoS systems.

This mechanism isn’t only lower the barrier of entry for BTC staking on Babylon (Babylon requires a min amount to become validator) but also mitigate the slashing and security risks of the staked PoS systems. Being an IBC-compatible chain, Lorenzo AppChain also allows stBTC users to tap into the vibrant DeFi economy on Cosmos ecosystem.

Beside Liquid Staking, Lorenzo also set their eyes on become a L2-As-A-Service platform on the Bitcoin ecosystem, allows easy bootstrapping of a new rollup with modular, customizable execution, settlement, DA and consensus layer - with the modular component systems like DA all secured by staked BTCs.

BounceBit has implemented a similar approach of tapping into Bitcoin security by introducing the Dual-Token Staking Consensus. This mechanism, which shares some commonalities with EigenLayer’s Dual Staking, uses two tokens to secure the same PoS blockchain - both BTC and BounceBit's native token. After staking, you'll receive an Liquid Staking Derivative ( LSD ), which can later be restaked to Shared Security Clients (SSC). These SSCs, similar to EigenLayer's AVS, can be any system that needs its own distributed validation semantics for verification. This allows sidechains, bridges, DA layers, etc. in the Bitcoin ecosystem (and technically, any other ecosystem) to tap into Bitcoin's security. This is a crucial step in reducing trust assumptions and vulnerabilities throughout the entire ecosystem. Furthermore, BounceBit's EVM compatibility enables a robust DeFi ecosystem on top of BTC and the aforementioned LSDs.

Stroom Network - on the other hand - on a mission to enhance liquidity on Bitcoin’s leading layer two for payment Lightning Network by introducing liquid staking derivatives for users that stake their Bitcoin onto Stroom’s treasury. The staked BTCs will be used to participate in Lightning Network channels, of which the fees collected will then be routed back to the stakers. Upon staking, stakers also receive an LSD called lnBTC on EVM blockchains which they can also possibly use to engage in various DeFi activities. Stroom’s treasury and bridge are based on a K-of-N multisig federation where each member of the federation monitors both ETH and BTC blockchains. The K-of-N validating nodes approve the operation for each lnBTC minting, redemption, or LN channel opening and closing. Similarly, a K-of-N federation multi-signature script will be employed on the LN hub side to manage the operation using Schnorr threshold signatures.

With the deployment of more Bitcoin Layer 2 solutions, a standard bridge between them is currently absent. Each one possesses its own bridge, secured by different methods. This scenario results in fragmented liquidity and a lack of interoperability. A unified, trust-minimized bridge is needed to address this issue and enhance the user experience when transferring assets between Layer 2 solutions. In the current landscape, WBTC issued by Bitgo has gained wide acceptance and use across many chains with over $10 billion in total value locked. However, it is centralized and controlled by a group through multi-signature wallets. There are several approaches available that offer a more decentralized design than WBTC.

Projects like eBTC and NomicBTC propose a more trustless approach. eBTC, constructed by the team at BadgerDAO, is a collateralized crypto asset on Ethereum, soft pegged to the price of Bitcoin. Unlike wrapped assets such as WBTC, which require trust in a centralized entity, eBTC is a synthetic asset backed by stETH, using a well-known CDP mechanism. It's built on the proven hypothesis that ETH and BTC are significantly correlated, giving borrowers more confidence in maintaining longer-term debt positions.

NomicBTC, in contrast, operates an IBC-compatible Bitcoin sidechain, serving as an intermediary layer for BTC to enter the Cosmos DeFi ecosystem. Using Taproot and Schnorr signatures, Nomic enables a highly trust-minimized bridge. It only requires 10% of honest validators, and includes an emergency disposal process that allows the Bitcoin on the bridge to return to depositors on the Bitcoin blockchain if the Nomic network fails.

Meanwhile, Threshold Network has already launched an SDK, simplifying the integration process for dApps and new Layer 2 solutions, and enabling seamless Bitcoin Layer 1 deposits.

Polyhedra aims to improve Bitcoin's interoperability with other blockchains using zk-SNARK. Its Bitcoin messaging protocol is fully compatible with the existing zkBridge infrastructure when Bitcoin is the sender chain. However, when Bitcoin is the receiver chain, validators must stake the sending chain's native token to write data to the Bitcoin network. Message consensus is reached by a Multi-Party Computation (MPC) committee formed by these validators. In the event of detected malicious actions, anyone from the Bitcoin chain can send a fraud proof, including the related transaction block headers. This proof is relayed to the sending chain by the relay network. If the fraud proof is verified, dishonest validators have their stakes slashed.

zkBridge Messaging Protocol for Bitcoin. Source: https://blog.polyhedra.network/introducing-the-bitcoin-messaging-protocol-with-zkbridge

Native cross-chain swapping paves another way towards enhanced interoperability. Projects such as ThorChain, Maya, ChainFlip, and Portal Finance facilitate direct trading of native assets without the need for wrapping.

ThorChain operates as a Layer 1 protocol built on the Cosmos SDK. It functions as a cross-chain liquidity protocol that facilitates non-custodial swaps of native assets between supported blockchains, including Bitcoin. It has been active throughout the last cycle and the current one, and is currently the primary venue for on-chain Bitcoin trading. After a successful year in 2023, ThorChain plans to introduce rapid swaps - a feature that combines the price efficiency of a streaming swap with the speed of a regular swap. In addition, it aims to launch perps this year and is looking into supporting memoless transactions for easier wallet integration.

Maya, on the other hand, is a friendly fork of ThorChain that introduces unique designs for capital efficiency, security, and value capture, such as liquidity nodes, dual token mechanism, and impermanent loss protection, while also supporting more chains.

ChainFlip introduces a unique just-in-time (JIT) Automated Market Maker (AMM). In this model, the Liquidity Provider (LP) creates range and limit orders, similar to the UNI V3 style, while Market Makers actively manage their liquidity ranges or limit orders, updating them based on real-time user input. When transactions are "witnessed", they compete in an auction to provide the best execution price. This DEX operates like an open, transparent, decentralized OTC desk. It's important to note that there are no actual liquidity pools on each chain. All transactions take place on the State Chain, a dedicated chain that handles all cross-chain swap transactions using virtual assets. This design reduces the effort required to support individual chains and ensures users receive the best market execution price.

Portal Finance is a non-custodial cross-chain DEX where assets stay on their native chains, and the swap's accounting occurs on a State Chain (Notary Chain). The central components of this network are the AMMs designed for each chain - a Uniswap-style AMM for EVM chains, and a Hashed Time-Locked Contract (HTLC) based AMM for Bitcoin. A group of validators controls the transaction flow to facilitate swaps and ensure accurate and timely transaction processing. These validators monitor balances across chains, handle events, and execute instructions. They also maintain the Notary layer, which records transactions and fund flow.

Finally, Atomiq Exchange and Zeus Network are projects that aim to connect Bitcoin and Solana specifically.

Atomiq enables atomic swapping, both between Bitcoin L1 or Lightning Network to Solana. For swapping from/to Bitcoin L1, they utilize a method similar to HTLC called PTLC (Proof-time locked contract), where the claimer must provide a proof instead of a secret for a hash. In this case, the proof is transaction verification through bitcoin relay.

For swapping from the Lightning Network, a submarine swap is used. Submarine swaps are a type of Lightning-specific transaction. To settle a Lightning Network invoice, the receiving party must reveal a secret whose hash equals the payment hash in the invoice. This can be used to create a similar HTLC with the same hash on Solana. An intermediary is needed to obtain the secret from the payee on the Lightning Network and then use it to receive the funds on the HTLC on the Solana network. They also offer a swap for gas service, allowing users to swap small amounts of BTC on the Lightning Network for SOL. This enables them to use Atomiq trustlessly, even when starting with a 0 SOL balance.

Zeus Network operates similarly to Nomic, functioning as a Bitcoin sidechain that runs on the Solana VM. A multi-signature consortium is established to authenticate the locking and unlocking of Bitcoin. Each node on the network includes a Verifier Registry, which requires nodes to stake SOL or a Solana LSD to participate in the consensus process. This process involves a threshold signature mechanism using Bitcoin taproot and Schnorr signature. A challenge period is also introduced for each transaction. During this period, an honest verifier can submit fraud proof to indicate any malicious actions. If the Proposal Management Program on Solana successfully verifies the fraud proof, the stakes of the malicious verifier are slashed, and a percentage is given to the honest verifier.

Zeus will release the first dApp building on top of the network this year called Apollo - which enabled native $BTC staking and offers a 1:1 two-way pegged $zBTC. $zBTC holders will then be able to engage with the robust DeFi ecosystem on Solana. More BTC-based DeFi use cases on Solana as well as Zeus Programming Library (ZPL) for general interoperability programmability is on the pipeline.

Bitcoin NFT trading volumes have grown month-over-month coinciding with major catalysts like the approval of the first Bitcoin ETF and the upcoming halving event. Every NFT ecosystem develops its own character and culture over time. With the Bitcoin network itself is a value storage chain. By adopting Ordinal protocol, users can inscribe images and create a variety of NFTs on Bitcoin with generating fully on-chain, immutable, and censorship- resistant.

Marketplaces are a core component of the growing Bitcoin NFT infrastructure. Early leaders included OKX and Unisat, due to their quick support as some of the first platforms to list Bitcoin-based collections. Initially, OKX Marketplace attracted volume with zero transaction fees for both market takers and makers.

However, Magic Eden has gained momentum after expanding into Bitcoin NFTs. It offered faster support for new projects and a creator launchpad to easily debut collections. Magic Eden also launched an incentives program to boost early activity on its platform. These initiatives helped Magic Eden surge past competitors, capturing around 50% of total Bitcoin NFT trading volume at its peak.

As more exchanges integrate Bitcoin NFT support, it increases options for users to both trade and list their creations. This enhances liquidity across the entire Bitcoin NFT ecosystem

In every NFT ecosystem, it's impossible not to mention PFPs (profile pictures) as key components. Initially, there were only a few collections within a small community. However, with the adoption of Ordinal, Bitcoin now has a more unique PFP collection within a vibrant community. One distinctive feature of Bitcoin NFTs is the inscription number; the lower it is, the more premium users are willing to pay for it. For instance, there are Bitcoin Punks with inscription numbers ranging from 89 to 34,399, and Node Monkes from 83,522 to 111,319.

NodeMonkes and Ordinal Maxi Biz have arguably become the preferred PFPs within the Bitcoin community. NodeMonkes concluded an auction of 8000 monkeys at 0.03 BTC in December 2023. Each Monkes has five attributes that are used to create it. Some traits are similar to Ethereum collections, such as Hoodies and Aliens as a tribute to Crypto Punks, and Gold as a tribute to BAYC.

Ordinal Maxi Biz (OMB), created by @ZK_shark and the art was created by Tony in 2023. A unique characteristic of OMB is that their Sats number is inscribed on Bitcoin from 2009 (block 78), making it one of the most valuable collections on Bitcoin.

Because of the 4MB block size limitation, inscribing heavily rendered artwork on-chain can be challenging. However, artists can take advantage of one unique feature of Ordinals, which is the Sats number. This number signifies historical value when inscribed in rare Sats. This method is widely used by many artists, distinguishing Bitcoin Gen art from other blockchains.

Vivid Gallery is a pioneer in supporting artists to launch collections on Bitcoin. So far, they have launched five collections, which include notable works like 'The Golden Ratio' by Harto. These collections are inscribed using a Parent/Child Provenance, with the Child inscription being made on Sats from the first Bitcoin of Block 9 450x, the oldest Sats in circulation.

Bitglyph, inspired by Autoglyph (the first on-chain generative art on Ethereum), uses a version of Autoglyphs code that has been modified and rewritten in JavaScript. Bitglyph also records all metadata and the generative art source code on-chain.

Nullish, an early Bitcoin NFT artist, focuses on the rare Sats in his artwork. He has several significant collections, including 'Uncommon Pattern.' This project comprises 50 pieces, each ranked by Sats age, all inscribed on uncommon Sats. Another notable collection is 'Remnants of a Distant Supernova,' where each piece is inscribed on block 9 satoshi, the oldest Sats in circulation.

As Bitcoin approaches the 2024 halving and the Bitcoin ETF approval, institutional adoption could substantially increase investment in Bitcoin financial products in the long run. The expansion of new use cases for Bitcoin Layer 2, Ordinals, and the growing use cases in DeFi, will likely attract more interest and capital. This integration of traditional finance could potentially use Bitcoin in a decentralized manner in DeFi or other Bitcoin use cases.

Overall, these developments are expected to significantly increase Bitcoin's market capitalization and the Total Value Locked in its ecosystem, marking a new chapter in Bitcoin’s history book.