Stacks’ Token doubles as Building-on-BTC activity spikes

Ordinals Protocol Mints 150K tokens in three weeks

In a surprising development in crypto, building products on Bitcoin is increasing this year.

Example: Ordinals, a Bitcoin-based protocol that allows people to associate digital content with small denominations of BTC. Over 150,000 of Ordinal’s tokens have been minted since the protocol launched on January 31, according to a Dune Analytics dashboard.

Ordinals aren’t alone – STX, the token for Stacks, a smart contract platform built on Bitcoin, has doubled in the past week, pushing the asset’s market cap past $800B.

Muneeb AliStacks’ co-creator, told The Defiant that Ordinal’s success and renewed interest in the Stacks ecosystem was no accident.

“What’s been missing is the young, enthusiastic developer community that’s actually building things, shipping things,” Ali said. Ordinals had brought that energy to the Bitcoin ecosystem, he added.

Tool to coin

Projects in the Stacks ecosystem are moving quickly to capitalize on interest in Ordinals. Hiro, the most used wallet in the Stacks ecosystem, announced the integration of Ordinals on February 20th. And Gamma, an NFT marketplace built on Stacks, also introduced a tool to create an Ordinal on February 8th.

In true crypto fashion, Ordinals were not endorsed by anyone. Instead, the protocol’s developer, Casey Rodarmor, sent Ordinals without anyone’s permission using taproot, a Bitcoin upgrade that shipped in November 2021.

Ordinals provide an NFT-like product — the protocol tracks Satoshis, the word for the smallest unit of Bitcoin, so they can be “inscribed with arbitrary content,” according to the protocol’s documentation.

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Ordinal’s documentation called the individual assets, “digital artifacts,” rather than NFTs, but the parallels are clear. Ordinals have many differentiating features, and Ordinals are completely on-chain unlike many NFTs, which can be deleted, .

Not everyone in the Bitcoin community has embraced Ordinals. Some see the protocol as taking the focus away from blockchain’s core use for financial transactions.

Bitcoin has undeniably become more widely used, with much more data included in each block, since Ordinals took off.

This could push users to other Bitcoin-adjacent projects like Stacks, if Ordinal-related transactions continue to affect the cryptocurrency’s blockchain.

If demand for trading on Bitcoin’s blockchain continues, Ali said there could be some parallels to the growth of scaling solutions like Layer 2s for Ethereum. An ecosystem of scaling solutions such as Optimisme, Arbitrum and Polygon, as well as a number of competing blockchains, emerged in the face of high usage on Ethereum.

DeFi-on-Bitcoin

The Stacks community is working on a “trustless bridge” for BTC. If the effort is successful, users may be able to use Bitcoin in the Stacks DeFi ecosystem. Obvious use cases could be using the token, called sBTC in the Stacks ecosystem, as collateral.

Ali said the effort could spark a similar rush in the DeFi-on-Bitcoin space that Ordinals did for NFTs on the blockchain.

So far, the Stacks ecosystem has escaped the intense regulatory scrutiny of the crypto ecosystem thanks to planning.

Hard stuff

“When we offer tokens to the public, we basically did the hard part of actually sitting down with the regulators and doing a qualified offering,” Ali said.

The Stacks co-creator said that in 2019, the public sale of STX was approved by the US Securities and Exchange Commission, which was a first for a crypto asset.

In addition, the US Commodity Futures Trading Commission (CFTC), which regulates derivatives markets, has designated Bitcoin as a commodity. The definition could give those who build on Bitcoin some assurance that the base layer of their work will not be mired in regulatory action.

“We were extremely cautious about decentralization,” Ali said.

The Stacks co-creator has moved on from the ecosystem to found Trust Machines, a company dedicated to building applications on Bitcoin. In the context of Trust Machines, Stacks is just a “tool,” Ali said.

That tool may have become much more powerful with the launch of Ordinals.