Inscription, the DeFi Summer of 2023.

On November 12th, Binance launched the Bitcoin inscription project SATS (1000SATS), igniting the inscription craze once again. Meanwhile, the prices of inscriptions on chains such as Solana and Avalanche continue to rise, causing major off-chain inscription communities to become active again. Previously, the legitimacy of the Rune Alpha token COOK had been questioned by the community. The minting cost was around $25 per token, but now the off-chain price has reached $400. Many cryptocurrency users have expressed that "whether it's real or fake doesn't matter anymore," highlighting the extent of FOMO.

Earlier today, according to Mempool.space data, the best transaction fee for the Bitcoin network was reported at 324 Satoshi/vbyte, with a total of 278,087 unconfirmed transactions on the network. Looking at the block fee rate data for the Bitcoin network over the past month, it can be seen that in recent days it has reached the level of the previous high point.

"Inscription is a bug" statement did not cause sustained impact on the inscription market, and the community is working on different inscription projects every day, which is hard not to associate with the previous DeFi Summer cycle.

DeFi Era Prosperity

To grasp the rhythm of BTC ecosystem development, perhaps we can review the development path of DeFi, the engine of the previous bull market.

Compoud enables liquidity mining, attracting funds and attention to the protocol by utilizing on-chain liquidity, and distributing protocol tokens accordingly. Combining protocol tokens with existing assets was the first layer of DeFi gameplay at that time.

Later, in order to "improve efficiency" and incentivize the protocol's own token, the so-called "dual pool" emerged, which placed one's own token in the protocol as much as possible to achieve the ambitious goal of "pulling one's own hair and leaving the earth". At this point, DeFi entered the second level of gameplay, also known as the golden age of DeFi Degen. "Only mining dual pools" is their unchanging declaration.

With the launch of yearn (YFI) on centralized exchanges such as Binance, a group of rising stars who embrace DeFi have been cheering for it. At the peak of the craze, the most circulated valuation model for YFI in the YFI community was written by Andrew Kang from Mechanism Capital, as well as a website that predicts when YFI's price will surpass BTC.

Later on, the DeFi market went into a complete frenzy, with Big Data Protocol gaining a TVL protocol of 6.5 billion US dollars in just two days, becoming the top project in terms of total locked positions in DeFi. F2pool, Cobo founder Fish, and FTX founder SBF all participated and contributed a significant portion of the TVL.

Currently, the Big Data Protocol, although social media is still operating, the product is no longer in demand. Although the tokens have been distributed, the funding pool from the initial token distribution on the website still exists, but the APY is nowhere to be found.

Gas fees in the DeFi Summer era often exceeded hundreds of dollars, similar to the current situation of high BTC transaction fees. Along with the notorious high gas fees of Ethereum, the EVM era of DeFi has brought forth Binance Smart Chain (BSC, now BNB Chain), Matic, Fantom, Crons, and Avax C Chain. The EVM chains that are now abandoned by the market were once the gems in the hands of retail investors, and also created many wealth myths.

The above scenario is similar to the inscription market that has spread from the Bitcoin ecosystem to other chains. Looking ahead to the future, the L2 of the Bitcoin ecosystem will also reach its destination like the more orthodox Rollup L2. On the contrary, Ethereum and its EVM chains may become the one that is not orthodox in the bull market of BTC.

The core of cryptocurrency lies in narrative, and narrative is a cycle.

The narrative of the DeFi Summer in 2020 originated from Ethereum. In the early days, many wealth creation myths were created through new asset issuance models such as liquidity mining. Later, as the wealth effect weakened and the bubble burst, Ethereum experienced a surge in infrastructure development, followed by the emergence of many new tracks such as NFT and GameFi, creating another bull market.

After experiencing a whole year of bear market, the narrative of Mingwen has reappeared. Mingwen was born in Bitcoin, from being ignored at the beginning to pioneering on-chain development, to the launch on Uniswap and the entry of various centralized exchanges, the Mingwen track has completed early capital accumulation.

And the further breakthrough of the inscription is the launch of ORDI on Binance, which is as significant as Big Data Protocol to DeFi Summer. At the same time, inscriptions on other chains have also emerged like mushrooms after rain. In addition, it has also driven the development of meme coins and NFTs on Bitcoin. The only difference from DeFi Summer is that people were trading fruits back then, and now they are trading animals. In terms of liquidation, the performance of the inscription is not worse than liquidity mining.

In December, Jademont, the founder of Waterdrip Capital, stated in Space that there will be at least 10 Bitcoin Layer 2 networks launched next year. This also means that the Bitcoin ecosystem and the inscription track will further follow the development path similar to Ethereum and DeFi in 2020, expanding infrastructure and supporting more use cases.

Galaxy Research and Mining predicted in March of this year that the market value of Bitcoin's Ordinals market will reach $500 million by 2025. At that time, there were only 260,000 inscriptions, but now the number has reached 47.75 million, an increase of 180 times in less than a year. Currently, two inscription projects, ORDI and SATS, are listed on Binance with market values of $1.15 billion and $1.294 billion, respectively. This shows that the prediction for the entire inscription market is still far underestimated.

Fair launch

The core logic of the inscription is similar to the Fair Launch of the DeFi Summer.

Fair launch was once a hot concept in the DeFi Summer, which refers to the distribution of assets without the project team reserving any initial tokens. For example, Yearn (YFI) founder Andre Cronje claimed that he did not pre-mine, reserve, or notify internal personnel in advance, which boosted his reputation and gave Yearn the best return on its TVL.

As DeFi Summer comes to an end, more and more projects have emerged, making the entire ecosystem more mature. Capital has also entered the market at the right time, starting a VC-driven project launch model, where those who raise more funds and have a better reputation among participating institutions can receive better market attention. This has also given rise to a group of crypto users who rely on "airdrops" for a living and ordinary retail investors who eagerly await the early release of star projects.

The emergence of inscriptions has changed the situation. Some people call inscriptions the "world of retail investors" because all the chips are cast by retail investors themselves. Although some people question that it still has the attributes of meme coins and cannot last without actual application scenarios, retail investors still gain a lot in this frenzy from rolling funds to relatively fair rolling computer configurations.

With more and more inscription projects, the Bitcoin ecosystem will enter the application construction phase after passing the asset issuance stage. As mentioned earlier, a batch of projects that build Bitcoin L2 will emerge in the market, which means that inscription has reached a turning point in narrative. However, the new bull market has already had the best narrative.