Liquidium: A P2P Ordinal Lending Solution
Ordinal Inscriptions are a new form of digital assets created by inscribing data on satoshis, the smallest unit of Bitcoin (BTC). Satoshis are named after Satoshi Nakamoto, the pseudonymous inventor of Bitcoin. Ordinal Inscriptions became possible thanks to the Taproot upgrade that was activated on the Bitcoin network on November 14, 2021. Taproot introduced a new way of encoding Bitcoin transaction data, allowing for more flexibility and privacy.
Ordinal Inscriptions are similar to NFTs (non-fungible tokens) on other blockchains such as Ethereum. NFTs are unique and indivisible digital tokens representing ownership of various digital or physical assets, such as art, music, games, collectibles, etc. However, Ordinal Inscriptions have some distinctive features that differentiate them from Ethereum NFTs.
First, Ordinal Inscriptions are inscribed directly on the Bitcoin blockchains without relying on any intermediary layer or protocol. This means that they inherit the security and decentralization of the Bitcoin network, which is widely regarded as the most robust and resilient blockchain. This results in Ordinals being immutable and scarce by nature because of bitcoin's limited block size and amount.
Second, Ordinal Inscriptions are ordered by their position in the Bitcoin blockchain. The first Ordinal Inscription ever created has index #1, the second one has index #2, and so on. This creates a natural scarcity and rarity for Ordinal Inscriptions based on their ordinality. The lower the index number, the more valuable and prestigious an Ordinal Inscription is likely to be. For example, Ordinal Punks is a collection of 100 pixelated avatars (inspired by CryptoPunks) that were minted within the first 650 inscriptions ever. The lowest price of one Ordinal Punk is around $100,000 (as of March 2023).
Third, Ordinal Inscriptions can contain any type of data encoded in binary format. This includes images, videos, text, audio files, software applications, and more. The data can be either embedded within the transaction itself or referenced by a hash or a URL pointing to an external source. This allows for various creative possibilities and use cases for Ordinal Inscriptions.
All of this has led to a surge in interest in Ordinals. Big companies like Yuga Labs (Company behind Bored Ape Yacht Club, Mutant Ape Yacht Club, CryptoPunks, etc.) are already starting to create Ordinals. They have just recently auctioned a 300-piece collection for $16.5M. Besides Yuga’s TwelveFold, many other collections are trading for multiple BTC. The volume of Ordinal marketplaces within the first month of launching (Feb 15th, 2023) is $7,720,370 (https://dune.com/domo/ordinals-marketplaces).
This is in contrast to OpenSea, the biggest NFT marketplace on Ethereum, which only had a volume of $11 within its first month of launching and didn't reach the same volume as Ordinal marketplaces until almost three years later (https://dune.com/rchen8/opensea).
In summary,
Ordinal Inscriptions are a novel and exciting way of creating and owning digital assets on Bitcoin.
Ordinals have generated a lot of volume and value in the market, with some pieces selling for millions of dollars. According to data from NFTStats.com, Ordinals have locked more than $1 billion worth of value in their smart contracts as of March 2023.
However, this also poses a challenge for Ordinal owners: how can they access liquidity without selling their precious assets? This is where Ordinal lending solutions come in handy. Ordinal lending allows owners to use their Ordinals as collateral to borrow Bitcoin or other cryptocurrencies while retaining ownership and exposure to their Ordinal. This way, they can leverage their Ordinals to access capital for various purposes, such as investing in other assets, paying bills or taxes, or diversifying their portfolio. On the other hand, lenders can earn interest by supplying liquidity to the Ordinal lending market.