In January 2023, after the Bitcoin Ordinals protocol was launched, a series of inscription assets including BRC20, Ordinals ARC20 and other inscription assets set off a wave on Bitcoin and other chains. Especially after leading Inscription assets such as ORDI and Sats were listed on Binance and achieved an increase of more than 10,000 times, the FOMO sentiment in the Inscription market has been continuously pushed to new highs, and a new era of “devils dancing” in the Inscription market has been opened. Many users are happy to participate in it. , and enjoy the wealth code brought by the new round of on-chain dividends. Similarly, the crypto market has also ushered in a new round of emotional release after experiencing a long period of silence and depressive bear market.

From a data point of view, according to Dune data, as of December 22, the cumulative fee income from the inscription casting of the Ordinals protocol alone has reached 4,812.3 BTC, which is approximately US$209,890,275. The current total number of inscriptions minted has exceeded 50 million. And after April 2023, Ordinals inscription assets have almost always maintained a high minting volume (this does not include the statistics of other on-chain inscriptions), which fully illustrates the enthusiasm of on-chain players for inscriptions.

Image source: https://dune.com/dgtl_assets/bitcoin-ordinals-analysis

The inscription sector is not limited to the Bitcoin ecosystem, including Arbitrum, Solana, Avalanche, BNB Chain, Polygon, etc., and even some inscription projects have appeared in some on-chain ecosystems that have been dormant for a long time, such as Fantom, Dfinity, etc. The inscription market is also showing a flourishing trend in the multi-chain ecosystem.

Many people refer to the Mingwen craze as the “carnival of long-tail investors” because the Mingwen asset itself adopts a startup method called “Fair Launch”, that is, after the asset is launched, the investment can be directly cast in a fair way without VC. Pre-participation as well as rat warehouse and so on. Therefore, whether you are a VC or a whale user, you have to go to a specific interface to mint on a first-come-first-served basis, or go to the secondary market to pick up the investment. In the new round of upsurge, long-tail investors have more say, which also makes the rise of the inscription sector more “revolutionary”.

“Hidden worries” in the development of the inscription market

However, behind the booming inscription market, there are still some hidden concerns about sustainable development. The token issuance scheme based on the Ordinals protocol makes the Inscription assets themselves have certain particularities. Therefore, the Inscription assets themselves usually indirectly construct transactions in an NFT-like transaction method, especially those like BRC20 that run directly on the bottom layer of Bitcoin Layer 1. With inscribed assets, building liquidity is more difficult.

Also in the early stages of the development of the inscription market, the infrastructure of the inscription market can be described as “rough”. The popularity of inscription transactions has caused the gas fee on the Bitcoin chain to soar. Not long ago, the minimum confirmed gas on the Bitcoin chain even reached 400 s/vb, and the gas fee even exceeded 100 USDT. In addition to the Bitcoin chain, gas fees on Avalanche, Polygon and other chains also once reached extreme levels, and even the Arbitrum chain once went down due to excessive on-chain traffic.

In addition to the bottom layer, there are very few applications that can provide support for inscription assets. There are only a few wallet projects including Unisat that can support users to cast inscriptions and relatively inefficient transaction inscriptions. There are almost no other applications for inscription assets. Lego scene. Therefore, when a user successfully casts or purchases an inscription, the first thing that comes to his mind must be to place an order to sell it instead of continuing to hold it.

So taken together, the liquidity of Inscription assets is lower than the liquidity of the previous NFT market. In this case, when inscription assets have extremely low initial pricing, it will further promote the formation of extremely exaggerated paper increases for such assets, and continue to generate FOMO emotions, that is, the illusion that everyone can earn from the inscription market. This A premium built on extremely low liquidity will usually lead to higher bubbles. This FOMO mood has also resulted in the continuous loss of users and funds from other tracks and narratives.

Judging from the past development experience of financial markets, increasing liquidity and circulation rate is usually an important measure for deleveraging. The good side is that the inscription section is more biased towards technical narratives, which is essentially different from the meme and NFT sections. There are already many developers willing to participate in it, hoping to use innovative technical solutions and mechanisms to help give liquidity to the Inscription sector in a new way and promote the narrative sublimation of the Inscription track.

Inscription Liquidity Facility

Establishing an infrastructure to provide liquidity for Inscription assets is one of the directions to promote the Inscription track to capture liquidity. There are already some cross-chain bridge protocols that can support cross-chain BRC-20 assets, such as MultiBit, TeleportDAO, etc.

MultiBit is a cross-chain protocol between BRC20 and ERC20. It is based on the BRC20 two-way cross-chain bridge design and can realize cross-chain transmission between BRC20 and ERC20 tokens. Similar to MultiBit, TeleportDAO has also established a cross-chain Ordinals market to support cross-chain transfer and trading of assets between BTC and Polygon.

Allins is a DEX that builds liquidity for inscribed assets in an AMM manner. It encapsulates inscription scripts on different chains in its unique virtual machine and continuously updates the assets through the indexer. Afterwards, it builds liquidity for these inscribed assets. Based on the smart contract liquidity pool, users can further purchase and trade inscriptions through AMM, and earn income in the Farming market through inscription assets.

In addition to the above solutions, Coral Finance, currently on the derivatives track, is also exploring this direction. This agreement further expands its premium trading mechanism from digital assets to the inscription market to help the inscription market establish a unique extension scenario and lay out the inscription competition in advance. The second half of Tao.

Coral Finance expands premium trading mechanism to inscription market

Coral Finance is an on-chain derivatives protocol featuring a unique premium trading mechanism that provides projects with reliable, non-inflationary liquidity solutions. At the same time, it improves users’ capital utilization efficiency and provides asset appreciation and hedging means. \
In the premium trading mechanism, Coral Finance has introduced a new derivative asset, cToken, which holders can obtain by pledging the original token 1:1 to the premium pool.

When the user completes the pledge, the value of the cToken obtained will be much higher than the original token, but the cToken is locked and cannot be circulated. The user needs to continuously perform actions that are beneficial to liquidity, including providing liquidity, completing transactions, etc. To continuously unlock the locked cToken to obtain benefits from the premium.

Taking the BTC asset as an example, we can pledge 1 BTC token to the corresponding cBTC premium pool and obtain 1 locked cBTC token. Thereafter, we need to move the cBTC token from the locked state to the unlocked state (tradable) by providing liquidity to cBTC (cBTC requires additional purchases) in order to earn revenue from it.

Usually, the value of cToken will be a non-limited multiple of the value of the original token. This premium mainly comes from the fluctuations in the intrinsic value of the asset over time, trading strategies and market behavior. Therefore, when the cToken is unlocked and traded, traders and Multiple parties form a game and can fully benefit from it. Arbitrageers can withdraw liquidity at any time, and can also redeem cToken 1:1 for the original Token at any time.

Coral Finance supports users to provide liquidity to one side of the pool in the form of a single currency, instead of adding liquidity to both sides at the same time based on constants like the AMM pool. This method will greatly improve the efficiency of fund use.​

Based on the premium incentive mechanism, when a user wants to obtain income from the premium pool, if the user does not hold the original Token, then he or she needs to purchase the original token to participate in the premium pool, which will drive the liquidity of the secondary market of the original assets; if If a user holds the original token, then his participation in the premium pool will further reduce the secondary market circulation of the original Token, which is more conducive to the market value management of the asset; and when participating in premium transactions, users need to continuously provide liquidity for the premium pool. Only by making a contribution can you obtain premium income (low or even no free losses), which will also bring continuous liquidity to cToken.

Currently, Coral Finance is expanding this liquidity system to the inscription asset market. On the one hand, Coral Finance has launched a new cross-chain Swap function, and at the same time, by cooperating with other cross-chain facilities in the market, it can further introduce a wider range of inscribed assets into Coral Finance.

We have seen that, except for some leading Inscription assets, the vast majority of Inscription assets have small market capitalizations, and the chips are relatively dispersed. Therefore, with the promotion of the premium mechanism, Inscription assets can not only obtain liquidity from the market more widely, but also It is also expected to create usage scenarios for these inscribed assets to further offset the bubble impact caused by FOMO sentiment. On the other hand, Inscription Assets relies on a very broad user base, and more users can capture potential leverage returns from the Inscription market through Coral Finance, which is also a new gain for Coral Finance itself.

Overall, Coral Finance’s premium trading mechanism is very flexible and scalable. Currently, it can support multiple types of assets such as digital currencies, inscriptions, and RWA stocks. Coral Finance is expected to exert value in various financial fields in the crypto world.

In addition to building specific liquidity facilities, building a complete Layer 2 ecological group around the Bitcoin system will further promote Ming Asset’s role in various on-chain applications and provide a foundation for the sector’s long-term narrative space expansion. In this direction, Coral Finance is also launching products built on the Bitcoin Layer 2 version to fully serve the Bitcoin ecosystem.

The popularity of the inscription market has accelerated the return of the Bitcoin ecosystem to its peak

The Bitcoin ecosystem is not Turing-complete. Although the market value of BTC still accounts for more than 50% of the total market value of cryptocurrencies and has the strongest consensus, the incompatibility with smart contracts also makes the Bitcoin ecosystem lose its voice in the crypto market after DeFi Summer. Coming weaker and weaker.

This form of inscription led by Ordinal is crucial to the development of the Bitcoin ecosystem. By engraving some information on Satoshi, the smallest unit of BTC assets, the Bitcoin system can generate non-fungible token assets and solve the problem of Bitcoin. The problem of issuing assets on the chain. In fact, some Bitcoin communities are using this solution to issue some blue-chip NFT assets to the Bitcoin chain. At the same time, the application of BRC-20 has also caused an explosion of Bitcoin ecological asset types, and many people are crazy to participate in it.

In order to more rationally realize the engraving and casting of inscribed assets, the technology upgrade and innovation of the Bitcoin ecosystem have once again been forced. For example, in addition to Ordinal, there have been further asset issuance solutions such as Atomicals, Runes, PIPE, Taproots Assets, etc. etc. In addition, many well-known Bitcoin expansion solutions have also been mentioned and valued again, such as Stacks, Ligtning Lightning Network, RSK, Stacks, RGB, BitVM, etc. Promoted by the inscription wave, these Layer 2 and side chain solutions are expected to achieve new technology upgrades again, and can build a new bottom layer with different characteristics around Bitcoin Layer 1, similar to the Ethereum system, which has evolved from Bitcoin Layer 1 in terms of settlement and security. Get support on.

In fact, some EVM-compatible Bitcoin Layer2 solutions such as BitVM and Stacks can already implement various functions similar to Ethereum Layer2. Drawing on the mature solutions and development history of the Ethereum ecosystem, the DeFi application ecosystem surrounding Bitcoin is expected to quickly land and attract a large number of developers to participate (there is already momentum in this direction), and some projects with mature operations may Quickly migrate within the Bitcoin ecosystem.

This means that in the development of the Bitcoin ecosystem, side chains and Layer 2 are expected to become one of the important development directions of the next bull market. At the same time, this is also the best time for the Bitcoin ecosystem to return to its peak. Therefore, both the Inscription Track and the Bitcoin ecosystem have huge development potential and expectations.

In addition, there are also opinions that the crypto market is developing towards a bull market stage. Events that can have an impact include the Bitcoin halving cycle, ETF applications, and Federal Reserve interest rate cuts, etc. This also indicates that a bull market surrounding the Bitcoin ecosystem may come soon. .

We see that established DeFi protocols, including Compound and AAVE, are early dividend beneficiaries of the Ethereum DeFi ecological development. There are still huge opportunities in the new wave of Bitcoin ecological development. Under this potential bull market wave, Coral Finance is not only an early adopter of the development of the inscription field, but is also conducting horizontal exploration in the direction of Bitcoin Layer 2, which also puts it in a favorable position before the next round of bull market. , seize the ecological niche with first-mover advantage. Under the continuous development trend of the encryption industry, Coral Finance is expected to explode with huge development potential under the innovative value system and become a standout DeFi protocol in the encryption industry.

Disclaimer：

1. This article is reprinted from [chaincatcher]. All copyrights belong to the original author [0xdabai]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.