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Ordinals protocol introduces dollar-backed stablecoin on the bitcoin blockchain

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TL;DR Breakdown

  • The controversial BRC-20 standard and Ordinals protocol make a stablecoin possible and keep growing its footprint in the Bitcoin ecosystem. 
  • The U.S.-based Stably, which describes itself as a fiat gateway for crypto trading, has announced its BRC-20 stablecoin backed by the U.S. dollar on Twitter.
  • Ordinals launched in January are frequently used to build NFT-like assets on Bitcoin and have been a contentious topic ever since.

The launch of a BRC-20 stablecoin by U.S. crypto company Stably recently sparked a contentious debate about ordinals among the bitcoin community. The contentious BRC-20 standard and the Ordinals protocol enabled it to continue leaving a larger mark on the bitcoin ecosystem. The most recent stablecoin is Stably USD, which claims to be the first BRC-20 stablecoin.

Debate over the significance of BRC-20 tokens in the bitcoin community

Since they are ERC-20 tokens, Tether (USDT) and USDCoin (USDC), two of the biggest stablecoins, transact most of their volume on the Ethereum network. Nevertheless, both tokens are now accessible on several networks, including TRON, Solana, and Avalanche.

BRC-20s are quite similar to NFTs, just like ERC-20 tokens. They enable the inclusion of arbitrary, non-financial data to the bitcoin blockchain without requiring a sidechain or extra token. Within the bitcoin community, there has been a lot of discussion about BRC-20 tokens, with influential people having both pro- and anti-positions.

The BRC-20 U.S. dollar-backed stablecoin was recently launched on Twitter by U.S.-based Stably, which describes itself as a fiat onramp for cryptocurrency trading. However, there are certain warning signs.

The company’s website lists the entire supply as $69.420 trillion. That is more than twice as much as the U.S. national debt and probably refers to meme culture. And things are moving slowly. Their supporting documents refer to a reserve wallet with a $220 amount.

Although Stably says Stably Trading LLC is a registered money transmitter, their website’s registration number and address don’t match those found on the FinCEN database under “Stably Trading, LLC.”

image 981Ordinals protocol introduces dollar-backed stablecoin on the bitcoin blockchain
Source: Stably

The business stated that “#USD is backed and redeemable 1-to-1 for USD collateral managed by our regulated custodian” and added that a third-party firm will conduct monthly attestations to guarantee the collateral always matches what’s been issued.

Technically, StablyUSD is not a brand-new stablecoin. It has existed since 2019. However, it was just recently transformed into a BRC-20 token on Bitcoin. Its market value over 11 distinct blockchains, including Ethereum, BNB Chain, and Arbitrum, is $7 million, according to the most recent attestation report.

image 980Ordinals protocol introduces dollar-backed stablecoin on the bitcoin blockchain

According to the USDS listing on CoinGecko, the currency’s price peaked at $9.89 on November 30 before plummeting to $0.05 on December 9 of the following year. On the decentralized market UniSwap, the token’s liquidity is shared between two trading pairs for around $5,000.

The reserves for Stably USD are held by Prime Trust, a regulated custodian, according to the website for Stably. However, it is more plausible that Prime Trust uses accounts at a small number of FDIC-insured banks rather than holding reserves directly, as stated on its website.

To counter this, Stably said it would impose a know-your-customer (KYC) and anti-money laundering process (AML) on anyone who wished to exchange stablecoins for genuine dollars.

Despite Stably’s hasty claims to be the first USD stablecoin on the Bitcoin network, USDT was originally introduced on OMNI, a sidechain for the Bitcoin network, in 2014. The network supports several stablecoins backed by the U.S. dollar, including DoC on Rootstock.

However, the new stablecoin is the first to use the BRC-20 standard. It has to be seen whether the disputed Ordinals protocol will usher in a new era of stablecoins or whether this is just another BRC-20 fad that will rapidly pass away.

Impact of Ordinals on the Bitcoin Community

According to Michael Saylor, co-founder and executive chairman of MicroStrategy, the business is not only aware of Ordinals but is also curious about how the protocol that has the Bitcoin community buzzing could spur software innovation.

Ordinals launched in January are frequently used to build NFT-like assets on Bitcoin. Despite not being fully adopted by the Bitcoin community, the protocol has sparked a new round of experimentation with the oldest cryptocurrency.

An experimental framework for creating tokens on top of Bitcoin is one recent advancement that uses Ordinals. Early in March, the enthusiast for on-chain data who goes by the moniker Domo invented it. Since then, thousands of additional “BRC-20 tokens” have been produced.

Depending on who you ask, all those transactions are partially—or entirely—to blame for the increased transaction fees on Bitcoin. This has proved advantageous for Bitcoin miners, who receive transaction fees in exchange for helping to secure the network. 

However, a large portion of the community has expressed dissatisfaction over the fact that high fees make it difficult for common users of BTC to use it as the peer-to-peer electronic cash system that Satoshi Nakamoto, the Bitcoin creator who goes by the pseudonym, envisioned.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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