BRC20-Swap Launch: Its Development History, Operating Model, and Future Prospects

The trading mechanism of Ordinals ecological assets mainly relies on the limit order selling model, which has made liquidity a key concern for this ecosystem. To improve this situation, a platform that integrates engraving, trading market, and wallet functions announced the upcoming launch of brc20-swap in July 2023, with testing starting on October 30.

This article will provide you with a detailed introduction to the development history, product model, and future expectations of brc20-swap.

The Development History of brc20-swap

On September 20, 2023, the platform issued brc20-swap Early Access invitation inscriptions to 620 eligible addresses. Users who received the invitation include active community members who have conducted at least 1 BTC transaction on the platform during a specific period, as well as active users who have accumulated at least 500 points through the platform's inscription. Additionally, holders of the platform's OG PASS are also on the invitation list.

Subsequently, the platform announced the launch schedule and relevant details of the brc20-swap mainnet on October 10, 2023. The platform began distributing a commemorative inscription called brc20-swap Prime Access for free to community users. Users holding this inscription can participate in the early testing of the product. These inscriptions are distributed through official social media channels and user lotteries, with a total of 654 pieces.

In terms of trading fees, brc20-swap adopts a fee standard similar to that of a well-known decentralized exchange, charging all users participating in the transaction a service fee of 0.3%. Of this, approximately 1/6 (0.05%) is collected by the platform, while the remaining 5/6 (0.25%) is distributed to all liquidity providers of the respective trading pairs. It is worth noting that brc20-swap uses the brc20 asset "sats" as the transaction fee.

On October 30, 2023, the platform officially announced the initial support for 14 assets in brc20-swap. The screening criteria for these assets were that there had to be trading activity on the platform market for at least 15 days within the past 30 days, and that the median trading volume in the past 30 days was not zero. Following this announcement, the involved assets all experienced a significant price increase.

Product Model

The product functions of brc20-swap are mainly divided into three parts: trading, liquidity pool, and data overview. The overall structure is similar to that of decentralized exchanges on the Ethereum Virtual Machine (EVM) chain. Before trading, users need to first recharge their assets into the brc20-swap module by using "inscribe TRANSFER"; the recharge confirmation process requires 3 blocks.

brc20-swap is implemented through modular expansion, with each module existing independently from the main body. This model has the following advantages:

1. Permissionless Development: This makes developing new modules for brc-20 a permissionless process.
2. Isolated execution: Ensures that if any single module encounters a problem, it will not affect the operation of the core protocol and other modules.
3. Consensus Upgrade: When the majority of indexers recognize and implement the indexing of a specific module, it can transition from the current black module to the white module, becoming a part of the brc-20 protocol.

However, the expansion mode of the black module has a drawback: users cannot freely withdraw assets. The platform improves this issue by designing a dynamically adjusted form, which allows users to withdraw only when the assets deposited by others exceed the amount to be withdrawn. This approach avoids the arbitrary issuance model seen on EVM chains, but also limits users' asset liquidity and operational convenience to some extent.

When the behavior of the black module is understood and accepted by users, gradually becoming reliable and recognized by more indexers, the product can transition from the black module to the white module, achieving a consensus upgrade. At that time, users will be able to freely deposit and withdraw assets.

In addition, since the BRC20 protocol and the entire Ordinals ecosystem are still in the early stages, the platform currently occupies a significant influence and reputation within the ecosystem, providing complete indexing services such as transaction and balance inquiries for the protocol. This situation carries certain centralization risks. However, its modular operational architecture creates conditions for more service providers to participate, which helps to achieve the decentralization of indexing.

Future Outlook

Users in the Ordinals ecosystem often complain about low liquidity and limited capital capacity for entry, causing some large capital users to only observe. Brc20-swap, as the first native trading platform in the Ordinals ecosystem, utilizes the brc20 protocol as the underlying asset foundation, hoping to improve this situation. By continuously optimizing liquidity, brc20-swap is actually expanding the capital capacity for entry, which is an important advancement for the development of the entire ecosystem.

At the same time, the platform officially announced that 2% of the fees from brc20-swap will be donated to the foundation participating in the development of the brc20 protocol to promote further optimization of the brc20 development and standards. In addition, the platform will also open source the complete explanation and verification source code of brc20-swap to facilitate early support from indexers.

These measures reflect the platform's desire to collaborate with other participants in the ecosystem rather than monopolize ecological benefits. Given the relatively short development cycle of the Ordinals ecosystem, all parties within the ecosystem need to work together to expand the overall market size and achieve a win-win situation.