Non-fungible tokens (NFTs) are unique digital assets that represent various forms of art, collectibles, games, and more. Most of the NFT activity has been happening on the Ethereum network, which supports the ERC-721 standard for creating and trading NFTs. However, Ethereum is not the only blockchain that can host NFTs.
In fact, Bitcoin, the oldest and largest cryptocurrency, has also developed its own way of storing and transferring digital art on its network. This is done through a protocol called Ordinals, which allows users to embed data, such as images or text, onto a single satoshi, the smallest unit of Bitcoin. Ordinals are essentially the closest thing that Bitcoin has to NFTs, and they have been gaining traction in the past few months, with over 10 million inscriptions created as of May 2023.
According to book author Anndy Lian, at one point in November 2023, BRC-20 NFTs have also surpassed Ethereum NFTs in terms of sales volume, with $35,563,933 worth of transactions in the past 24 hours, compared to $12,142,132 for Ethereum NFTs.
But what if you want to move your NFTs from Ethereum to Bitcoin or vice versa? Is there a way to bridge the two networks and preserve the value and uniqueness of your digital assets? This is where BRC-721E comes in. BRC-721E is a new token standard that was introduced in May 2023 by Ordinals Market, a Bitcoin-based NFT marketplace, and Bitcoin Miladys, a Bitcoin-based derivative of the popular Miladys NFT collection on Ethereum. It claims to be a bridge between the Ethereum and Bitcoin networks, allowing users to convert their ERC-721 NFTs to BRC-721E tokens on Bitcoin. But how does it work, and what are the benefits and drawbacks of using it? In this article, we will explore the features, advantages, and challenges of BRC-721E and how it affects the NFT markets on both Ethereum and Bitcoin.
How BRC-721E works
The process of converting an ERC-721 NFT to a BRC-721E token on Bitcoin involves the following steps:
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The user burns their ERC-721 NFT on Ethereum by sending it to a special address that has no withdrawal function. This means that the NFT is permanently destroyed and cannot be recovered. The user also specifies a Bitcoin address that will receive the BRC-721E token.
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The user inscribes valid BRC-721E data onto a satoshi on the Bitcoin network. The data must include a reference to the Ethereum burn transaction and the Bitcoin address that matches the one specified in the previous step.
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The BRC-721E token is created and transferred to the user’s Bitcoin address. The token will automatically appear on a custom Ordinals Market collection page with complete metadata, such as the name, description, and image of the original NFT.
The BRC-721E token is said to be immutable and verifiable, meaning that it cannot be altered or duplicated and that it can be traced back to the original NFT on Ethereum. However, there are some limitations and risks involved in using BRC-721E. First of all, the conversion is irreversible, meaning that once the user burns their ERC-721 NFT on Ethereum, they cannot get it back or send it back to Ethereum. Secondly, the metadata of the BRC-721E token is not stored on-chain but off-chain on the Ordinals Market website. This means that the token relies on a third-party service to display its full information and that it may not be compatible with other Bitcoin wallets or marketplaces. Thirdly, the user has to pay fees for both the Ethereum and Bitcoin transactions, which may be high depending on the network congestion and demand. Finally, the user has to trust that the Ordinals Market website and the BRC-721E protocol are secure and reliable and that they will not be hacked, shut down, or compromised in any way.
What are the benefits of BRC-721E?
Despite the challenges and risks, BRC-721E offers some potential benefits for users who want to migrate their NFTs from Ethereum to Bitcoin. Here are some of them:
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BRC-721E allows users to access the growing Ordinals ecosystem on Bitcoin, which has been attracting more attention and activity in the past few months. According to CryptoSlam, a data platform for NFTs, Bitcoin ranked second in terms of NFT trading volume by network in May 2023, surpassing Solana and trailing only behind Ethereum4. Some of the popular Ordinals collections include Bitcoin Miladys, Pixel Pepes, Bitcoin Punks, and BTC DeGods.
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BRC-721E enables users to leverage the security and stability of the Bitcoin network, which is widely regarded as the most robust and decentralized blockchain in the world. Bitcoin has a higher hash rate, a longer history, and a larger network effect than Ethereum, making it more resistant to attacks, censorship, and manipulation. By converting their NFTs to BRC-721E tokens on Bitcoin, users may feel more confident and comfortable about the safety and longevity of their digital assets.
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BRC-721E provides users with an opportunity to diversify their NFT portfolio and exposure to different blockchain platforms. By holding both ERC-721 NFTs on Ethereum and BRC-721E tokens on Bitcoin, users can benefit from the different features, advantages, and innovations of each network. For example, Ethereum offers more functionality, interoperability, and variety for NFTs, while Bitcoin offers more simplicity, security, and scarcity for Ordinals. Users can also hedge against the volatility and uncertainty of each network by having a balanced mix of NFTs on both chains.
What are the drawbacks of BRC-721E?
On the other hand, BRC-721E also has some drawbacks and limitations that users should be aware of before using it. Here are some of them:
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BRC-721E destroys the original NFT on Ethereum, which may result in a loss of value, utility, and community for the user. By burning their ERC-721 NFT, the user gives up ownership and access to the original asset, which may have more demand, liquidity, and functionality on the Ethereum network. For example, some NFTs on Ethereum can be used in games, platforms, or metaverses, which may not be possible or compatible with BRC-721E tokens on Bitcoin. Moreover, the user may lose the connection and interaction with the original NFT community, which may have more members, events, and updates than the Ordinals ecosystem on Bitcoin.
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BRC-721E depends on the Ordinals Market website and the BRC-721E protocol, which may not be reliable, secure, or trustworthy. As mentioned earlier, the metadata of the BRC-721E token is not stored on-chain but off-chain on the Ordinals Market website. This means that the token is not fully decentralized or transparent and that it relies on a third-party service to display its full information. If the Ordinals Market website is hacked, shut down, or compromised in any way, the user may lose access to their BRC-721E token or its metadata. Furthermore, the BRC-721E protocol is relatively new and untested, and it may have bugs, errors, or vulnerabilities that could affect the conversion process or the token itself.
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BRC-721E incurs fees for both the Ethereum and Bitcoin transactions, which may be high or unpredictable depending on the network conditions and demand. The user has to pay gas fees for burning their ERC-721 NFT on Ethereum and transaction fees for inscribing their BRC-721E token on Bitcoin. Both fees are determined by network congestion and market forces, and they may vary significantly over time. For example, in 2023, the average gas fee on Ethereum was around $20, while the average transaction fee on Bitcoin was around $10. These fees may add up to a significant cost for the user, especially if they want to convert multiple NFTs or if the fees increase in the future.
Summing up
In the ever-evolving landscape of NFTs, the emergence of BRC-721E poses intriguing possibilities and complexities for digital asset holders. It stands at the nexus of a pivotal choice: whether to bridge the Ethereum and Bitcoin networks or risk burning the bridge altogether.
It embodies both promise and peril, offering a conduit for migrating NFTs between Ethereum and Bitcoin yet demanding sacrifices and presenting hurdles in the process. It opens the door to the Ordinals ecosystem on Bitcoin, a realm swiftly gaining momentum in the NFT sphere, showcasing the potential for diversification and security. Yet, its mechanisms paint a canvas of irreversible actions, forcing users to bid farewell to their original ERC-721 NFTs on Ethereum, severing ties with established communities and ecosystems.
While the allure of Bitcoin's robust network security and stability stands as a beacon, the reliance on a third-party service for metadata storage raises questions about decentralization and trust. The vulnerability to website vulnerabilities or shutdowns threatens the integrity and accessibility of BRC-721E tokens, introducing uncertainties in an already complex digital landscape.
Moreover, the financial implications of transitioning through BRC-721E cast shadows of unpredictability. High fees across both Ethereum and Bitcoin networks present a substantial financial burden, amplifying the cost of conversions and potentially deterring users from engaging in multiple transitions.
As users weigh the scales of opportunity and risk, the decision to embrace BRC-721E hinges on individual priorities. It prompts contemplation on the trade-offs between accessibility, security, and community allegiance. The quest for seamless interoperability between disparate blockchain ecosystems demands consideration of the irreversible nature of actions and the inherent risks woven into the process.
The advent of BRC-721E epitomizes the expanding frontier of blockchain innovation, offering a glimpse into the multifaceted nature of NFT migration. It beckons users to navigate a labyrinth of choices, challenging preconceptions and inviting exploration into the boundaries of digital ownership.
In this intricate dance between Ethereum and Bitcoin, BRC-721E casts a spotlight on the juncture where innovation meets consequence. Its significance lies not only in its technical prowess but in the philosophical conundrum it presents—a choice between preserving the familiarity of one's digital assets or embarking on a new frontier, lured by the promises and uncertainties it holds. As the NFT narrative continues to unfold, the saga of BRC-721E will stand as a testament to the nuanced decisions inherent in the evolution of digital ownership and blockchain interconnectivity.