The Development History, Product Model, and Future Outlook of brc20-swap

The liquidity of Ordinals ecological assets has always been a focal point in the industry. In July 2023, a platform integrating engraving, trading, and wallet functions announced the launch of brc20-swap, aimed at improving the liquidity of ecological assets. The product began testing on October 30.

The Development History of brc20-swap

On September 20, 2023, the platform issued early access invitation inscriptions for brc20-swap to 620 addresses. Selection criteria included:

1. Active users who trade at least 1 BTC on its trading platform between July 16 and September 20.
2. Active users who have accumulated at least 500 points through the platform during the same period.
3. The platform OG PASS holders (based on the snapshot at block height 808559).

On October 10, 2023, the official announcement was made regarding the launch schedule and details of the brc20-swap mainnet. They began distributing commemorative inscriptions called brc20-swap Prime Access for free to community users, allowing holders to participate in early product testing. These inscriptions are distributed through a lottery via official social channels, with a total of 654 available.

Regarding transaction fees, brc20-swap adopts a fee standard similar to that of a well-known DEX, charging all trading users a service fee of 0.3%. Of this, approximately 1/6 is collected by the platform, while the remaining 5/6 is distributed to liquidity providers for each trading pair. The difference is that brc20-swap uses the brc20 asset "sats" as the transaction fee.

On October 30, 2023, it was officially announced that 14 assets would be initially supported by brc20-swap. The selection criteria were assets that had at least 15 days of trading activity in the past 30 days, and a non-zero median trading volume. Following this announcement, the prices of the related assets saw a significant increase.

Product Mode

The product is divided into three parts: trading, liquidity pool, and data overview, similar to DEX on EVM chains. Users need to recharge assets to the brc20-swap module by "inscribe TRANSFER" before trading, and the recharge confirmation requires 3 blocks.

brc20-swap adopts a modular extension implementation, with each module existing independently. The advantages of this model include:

1. Permissionless development, allowing for the free development of new modules for brc-20.
2. Isolated execution to ensure that issues in a single module do not affect the core protocol and other modules.
3. Consensus upgrade: when the majority of indexers recognize and implement a specific module index, it can be upgraded from the black module to the white module, becoming part of the brc-20 protocol.

However, the downside of the black module expansion mode is that users cannot freely withdraw assets. The platform improves this issue through dynamic adjustments, allowing withdrawals when others deposit assets exceeding the withdrawal amount. This avoids the problem of arbitrary issuance on the EVM chain, but it also restricts the liquidity and convenience of the assets.

As users' understanding and acceptance of the black module improve, the product may transition from the black module to the white module, achieving a consensus upgrade. By then, users will be able to freely deposit and withdraw assets.

In addition, as the BRC20 protocol and the entire Ordinals ecosystem are still in their early stages, the platform currently occupies an important position in the ecosystem. Its modular architecture allows more service providers to participate, helping to achieve decentralization of indexing.

Future Outlook

Ordinals ecosystem users often report insufficient liquidity, which restricts the entry of large funds. As the first native trading platform in the ecosystem, brc20-swap utilizes the brc20 protocol as the underlying asset foundation, aiming to improve this issue. By continuously optimizing liquidity, the platform can expand the capacity for incoming funds and promote the development of the entire ecosystem.

The platform officially announced that 2% of the brc20-swap transaction fees will be donated to the foundation that participates in the development of the brc20 protocol to promote further optimization of the protocol. At the same time, they plan to open-source the complete explanation and verification source code of the brc20-swap to encourage more support from indexers.

These measures indicate the platform's attitude of seeking cooperation rather than monopolizing ecological benefits. Given that the Ordinals ecosystem has developed for a relatively short time, all parties within the ecosystem need to work together to achieve mutual benefits and promote the healthy development of the entire ecosystem.