While issuing blockchain-based digital assets has been a buzzword with several blockchain networks for a while now, Bitcoin has lagged behind in this regard as its focus has been on digital money. However, the concept has now found its way into the Bitcoin ecosystem.
This article explains how the newest updates to Bitcoin’s technology are enabling the network to support the issuance of digital assets while maintaining its foundational principles.
4 New Ways to Issue Digital Assets Secured by Bitcoin
Let’s take a look at four different ways assets can be issued on Bitcoin, either on-chain or on Bitcoin layer-2 protocols.
1.) NFTs on Bitcoin Using Ordinal Inscriptions
Based on the Ordinals protocol, Bitcoin Ordinals have introduced an innovative way of creating Non-Fungible Tokens (NFTs) on the Bitcoin network. Ordinal Theory assigns each satoshi (the smallest Bitcoin denomination) a distinct identity. Using inscriptions allows every satoshi to be tracked and transferred with exclusive meanings.
Additionally, each satoshi can be inscribed with content, such as images, videos, sound files, and more. However, unlike NFTs held on other blockchains, the entire metadata of Ordinals is contained directly on the Bitcoin blockchain, giving them a higher level of immutability.
For comparison, image files of NFTs on other blockchains are stored off-chain. At the same time, the metadata includes the images’ links, making it potentially easy for third parties to alter the images. Ordinals make each satoshi different from another, rendering them genuinely non-fungible.
2.) Fungible On-Chain Tokens
BRC-20 tokens are a paradigm-shifter within the Bitcoin network as they enable fungible tokenization, thereby introducing the possibility of using the blockchain beyond digital currency and creating digital assets.
Unlike its ERC-20 counterpart, BRC-20 tokens rely on Ordinal inscriptions, not smart contracts. BRC-20 helps create a fungible token standard on Bitcoin Ordinals, allowing seamless integration with the Bitcoin ecosystem to leverage exchanges, digital wallets, and the network’s robust infrastructure.
3.) Taproot Assets
Taproot Assets is a new protocol that enables the issuing, sending, and receiving of assets on the BTC network. Taproot Assets leverages Bitcoin’s latest upgrade, Taproot, to issue assets on top of Bitcoin, allowing users to transfer assets using Bitcoin and the Lightning Network.
With Taproot Assets, users of the Lightning Network can hold more than just cryptocurrency in their digital wallets. The system routes payments through the protocol through the Lightning Network while offering liquidity for payments made in other assets.
For a network that has faced congestion issues in the past, especially following the introduction of on-chain assets on Bitcoin, Taproot Assets also helps reduce network congestion and improve transaction speeds on the Bitcoin blockchain.
4.) Fungible & Non-Fungible Tokens on Stacks
As a layer-2 solution within the Bitcoin network, Stacks introduces a unique approach to developing and integrating smart contracts. Developers can create fungible and non-fungible tokens on the Stacks blockchain using Clarity intelligent contracts, which are secured by the Bitcoin blockchain.
Stacks is designed to facilitate the development of Bitcoin DeFi due to their ability to leverage the Bitcoin ecosystem’s security and settlement guarantees. The Stacks blockchain is connected to Bitcoin via a Proof of Transfer Mechanism that enables settling transactions via BTC, enabling Stacks to leverage the Bitcoin platform’s reputation.
Final Take
The ongoing developments within the Bitcoin ecosystem are creating new opportunities for users within the Bitcoin community. The releases have the potential to dramatically increase Bitcoin’s liquidity and enable users to hold different digital assets in the same wallet, including NFTs, stablecoins, and fiat currencies.
New use cases on Bitcoin are poised to increase BTC’s adoption rate, transforming the narrative surrounding Bitcoin and attracting more users.
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