The Bitcoin L2 Landscape

Bitcoin can take heed in being the pioneer cryptocurrency that ignited the digital finance movement, however, its core blockchain faces scalability challenges, limiting the number of transactions it can process per second. This hinders its ability to serve a wider user base and become the global reserve currency that supporters envision. To further compound this issue, Bitcoin’s programming language (Script) isn’t sufficiently verbose to allow for more sophisticated applications like those seen on other networks. However, a couple of soft forks and a dash of innovation have opened up the design space in Bitcoin for what feels like the first time. This initial spark has led to the creation of assets such as Ordinals, BRC20s, and Runes.

Ordinals, BRC20s and Runes

Ordinals 

Bitcoin Ordinals are a new way to create assets similar to NFTs directly on the Bitcoin blockchain by attaching data like images, videos, text, or code to individual satoshis. Ordinals assign a unique identifying number to each sat based on the order they were mined, similar to serial numbers on dollar bills. This allows sats to be tracked, transferred, and imbued with meaning. For example, the first sat of every block is considered “uncommon” whereas the first sat of a halving block is “epic”.

BRC20s and Runes

Bitcoin BRC-20 tokens are a fungible token standard that uses ordinal inscriptions to enable the minting and transferring of tokens natively on the Bitcoin blockchain. However, in practice, they are considered semi-fungible as they can only be exchanged in set increments defined by the mint JSON used to create them.

Bitcoin Runes is a newer token protocol standard that aims to simplify the creation and management of fungible tokens directly on the Bitcoin blockchain. Runes were designed by the same creator of Ordinals and have some advantages over BRC20s;