Looking at the evolution and challenges of BTC expansion from the perspective of asset issuance

星球君的朋友们

Odaily资深作者

2023-11-22 12:00 (UTC+8)

This article is about 3264 words, reading the full article takes about 5 minutes

RGB Taproot Assets with asset distribution + application scenarios have the potential to lead the next narrative.

AI Summary

RGB Taproot Assets with asset distribution + application scenarios have the potential to lead the next narrative.

author:Xuan Rui丨0x Dragon 888

Editing Reviewing:Echo | echoindahouse

Director: Hong Shuning

Presented by Infinitas x AC Capital

Introduction

This article will combine the new normal brought by Ordinals to the BTC ecosystem, look at the current challenges of BTC expansion from the perspective of asset issuance, and finally predict that RGB Taproot Assets with asset issuance + application scenarios have the potential to lead the next narrative.

Abstract (TL;DR)

Ordinals Ecosystem Explodes: Opening Up New Possibilities for Bitcoin Asset Issuance
Ordinals brings a new normal: competition for block space, UTXO expansion
Looking at the evolution and challenges of BTC expansion from the perspective of asset issuance
Expansion solutions with asset issuance + application scenarios have huge growth potential

1. Ordinals explodes: opening up new possibilities for Bitcoin asset issuance

As digital gold or currency, the Bitcoin community has become conservative since the hard fork in 2017, and there has been no new narrative in recent years. The Ordinals protocol in early 2023 turned the gears of Bitcoins destiny, and then the Ordinals ecological users exploded. The handling fees on the Bitcoin chain exceeded Ethereum for the first time in six years.The crypto industry’s narrative imagination returns to the Bitcoin blockchain.

Source：https://cryptofees.info/

Before the birth of the Ordinals protocol, there were several major upgrades on the technical side of BTC. In 2017, SegWit (Segregated Witness) was upgraded and activated, expanding the block space to 4 MB and improving transaction throughput. Immediately after developers launched the Lightning Network, Bitcoin Layer 2 came into public view. The 2021 Taproot upgrade brings more secure, efficient, and private Bitcoin, bringing programmability to Bitcoin.

Technical improvements did not solve the real pain points until the emergence of Ordinals completely opened the door to the BTC ecosystem. In December 2022, Casey launched the Ordinals protocol. The Ordinals protocol is an extension protocol for the Bitcoin network. It allows data to be engraved on Bitcoin Satoshis (Satoshis). The Ordinals protocol is implemented by assigning a unique number to each Satoshi and adding comments. extensions.

Inspired by the Ordinals protocol, Domo created Bitcoins experimental Token standard BRC-20 on March 8, 2023, using the ordinal number and Inscription of JSON data to deploy token contracts, mint and transfer tokens. Use Satoshi to store and manage various information about tokens.

There have always been ways to mint and issue assets in Bitcoin before, such as colored coins in 2012 and Counterparty in 2014, but they failed to capture the pain points of users. The use of the Fair launch+ protocol to control assets on BRC 20 stimulated real user needs. The explosive growth of BRC-20 has also opened up new possibilities for asset issuance on Bitcoin.

So far, the Ordinals ecosystem has produced more than 41 million inscriptions. These digital inscriptions are engraved on the worlds oldest and most secure distributed ledger, including images, text, audio and even applications. Among them, text inscriptions (BRC-20) account for the largest proportion. The Ordinals ecosystem has derived multiple innovative branch protocols such as BRC-20, ATOM, PIPE and RUNES. The explosion of Ordinals has brought new traffic to the BTC ecosystem and also contributed to the BTC ecosystem. A new foreshadowing was laid.

Source：https://dune.com/dgtl_assets/bitcoin-ordinals-analysis

2. Ordinals brings a new normal on the chain: competition for block space, UTXO expansion

The popularity of Ordinals is also reflected in the high transaction fees for users. Text inscriptions occupy a small amount of data. BRC-20 users are willing to pay high transaction fees. Miners fill the block space with a record number of transactions. Excessive BRC -20 transactions will occupy transaction bandwidth, resulting in longer transaction block time and higher handling fees.

In 2022, miners earned a total of 5,374 BTC from transaction fees, and since Ordinals minting has consumed a total of 2,886 BTC from transaction fees, the emergence of Ordinals has made miners’ income no longer dependent on Bitcoin rewards, ensuring that Bitcoin miners Reducing reliance on pure block rewards and significantly increasing the proportion of transaction fees will also bring a second curve to miners income.

Source：https://studio.glassnode.com/workbench/btc-transaction-count-momentum

After the sharp increase in the number of Ordinals ecological inscriptions, the wider Bitcoin community launched a fierce debate over its impact on Bitcoin, with objections that Bitcoin believes that Ordinals transactions will only increase the number of Bitcoin network transactions at the expense of financial transactions. Mempool backlogs, raises transaction fees, and ultimately hinders peer-to-peer transactions.

Casey, founder of the Ordinals protocol, said in September that the current fungible token protocol on the Bitcoin blockchain is 99.9% scams and memes. Yet they don’t seem to be going away anytime soon, just like casinos aren’t going to “disappear” anytime soon. Build a better asset issuance protocol Runes so that gamblers can continue gambling without creating a large number of UTXOs and increasing the burden on nodes.

Ajian, the founder of BTCStudy, also expressed concerns. He said that from a technical perspective, BRC 20 is a backward technology. The casting and transfer of BRC-20 obviously do not require the association on UTXO, but it limits the casting of a single UTXO. With the number of tokens, they are likely to remain in the UTXO set forever, resulting in the expansion of the UTXO set, increasing the burden on Bitcoin full nodes, and significantly affecting the pit censorship and trust-free nature of the Bitcoin network.

Since BRC 20 started trading (April 2023), Bitcoins UTXO set has expanded from 5 GB to 8.16 GB. The Bitcoin development community has been debating whether to use technical means to block inscription transactions and the UTXO expansion caused by inscription transactions. is eroding the Bitcoin network.

Source:https://statoshi.info/d/000000009/unspent-transaction-output

Supporters of the Ordinals ecosystem believe that the explosion of Ordinals has brought new traffic and user habits to the Bitcoin ecosystem, and the BTC ecosystem must also adapt to the new normal on the chain brought by Ordinals. The next step in the narrative of the Ordinals ecosystem should focus on solving UTXO inflation. Ultimately, a better asset issuance method can enable the Bitcoin ecosystem to have more native application ecosystems and promote the sustainable development of the Bitcoin ecosystem.

3. Looking at the evolution and challenges of BTC expansion from the perspective of asset issuance

The BTC ecosystem currently does not lack asset issuance protocols, but what it lacks are smart contracts and scalability. Scalability can determine the development possibilities and life cycle of a certain direction of BTC expansion. The complexity of the Bitcoin Layer 1 expansion plan is high, and it is more accepted by the community. It is to build a new Layer 2 based on Bitcoin Layer 1, which is compatible with and does not affect the Bitcoin system, and at the same time solves the problem of congestion on the chain.

After completing Segregated Witness, the Bitcoin ecosystem is fully developing towards Layer 2 such as Lightning Network and side chains. Whether it is Lightning Network, side chain or RGB protocol, the development of Bitcoin Layer 2 is in full swing. We will not discuss the Liquid alliance chain here, but only from the perspective of better asset issuance, compare Brc-20, Stacks, Bitvm , Lightning Network, RGB, and Taproot Assets have important challenges in the three dimensions of Turing completeness, decentralization, and scalability:

Sidechain Stacks: Sidechain leader Stacks currently has 19.3 MTVL on the chain. Stacks has many benefits, especially the ability to directly move existing Ethereum applications. However, sidechain solutions such as sidechain Stacks and RSK are facing centralization issues. Q4 Stacks Nakamoto is about to be upgraded, and sBTC will be launched as a smart contract soon.
BRC 20: The leader of Inscription ecology. BRC-20 is a Bitcoin script. The completeness of the picture bell is not complete. It has a large user base and the protocol is simple enough, but it takes up too much space on the chain. At the same time, BRC-20 is too central to complete the fund security. ization, lack of scalability and Turing incompleteness limit the further development of BRC-20. Currently, Rune, Arc-20, pipe, BRC-20 Swap, etc. are further solving related problems;
Lightning Network: Lightning Network is the largest and most influential Layer 2 in the Bitcoin ecosystem. More and more companies are entering the Lightning Network ecosystem, which pay off-chain through specific state channels and ultimately conduct transactions on the Bitcoin chain. Settlement, but the Lightning Network cannot issue Tokens. It is only suitable for high-frequency payments and has no smart contract function. It has poor Turing completeness. The number of users and usage scenarios of the Lightning Network is still small, but the protocol Taproot Assets developed based on the Lightning Network , RGB, etc. have more room for imagination.
RGB: Inspired by the concepts of Single-use seal and Client-Side Validation proposed by Peter Todd in 2016, RGB introduced smart contract functions to the Lightning Network and released GRB v.010 in April 2023. , due to technical complexity, the ecosystem has not yet been implemented. Infinitas, Bitlight Labs, Diba, Bitswap, Pandora Prime Inc and other projects have gradually opened up the possibility of RGB implementation. Tether’s CEO also said that RGB is the best choice for issuing stablecoins on the Bitcoin chain, and Tether is considering the possibility of issuing USDT through RGB.
Taproot Assets: It is also a client asset verification protocol. Taproot Assets v 0.3 mainnet alpha version will be released in October 2023. The goal is to expand Bitcoin into a scalable multi-asset network. However, the asset issuance of Taproot Assets is a distribution system. The application scenarios of Taproot Assets are more suitable for project parties and institutions to distribute assets rather than actively minted by users. Currently, the new protocol Nostr Assets Protocol built based on Taproot Assets introduces assets into the Nostr social protocol.
BitVM: The white paper was released in October 2023. BitVM uses an idea similar to Rollups to execute complex programs off-chain, and then puts key evidence on the chain. It also brings Turing-complete smart contracts to Bitcoin, but BitVM places extremely high requirements on computing power and is only theoretically executable. Scalability and commercial implementation need to be further understood.

4. The BTC expansion plan of asset issuance + application scenarios has huge growth potential

As the various infrastructures of the Bitcoin ecosystem are improving day by day, various expansion routes have been competing for space. There are two core issues that need to be resolved in the next stage of competition for BTC expansion:

From the perspective of asset issuance: Is the technical route suitable for practical application scenarios? Is it decentralized and Turing complete? Is it scalable?
From the perspective of asset circulation: Can the progress of the protocol be adopted and supported by the infrastructure and users in the industry?

From the perspective of asset issuance, BTC is still far behind Ethereum in terms of asset issuance. First, it lacks well-known projects, and second, the user scale is not as good as Ethereum. However, as the blockchain network with the highest market value currently, in the future BTC Layer 2 with asset issuance protocol + application scenarios has huge growth potential.

The current Ordinals completely opens up the possibility of asset issuance on Bitcoin, but it is impossible for Ordinals to support on-chain calculations like Ethereum. How can the BTC ecosystem complete asset settlement like Ethereum?

At the same time, in the future Bitcoin multi-asset era, the explosion of BTC ecology will also require diversified application scenarios. The premise of diversified application scenarios is to use stablecoins as the basis, and the Lightning Network is the best stablecoin issuance platform, but it does not have enough With the accumulation of many stablecoins, Taproot Assets and RGB have the potential to accelerate development in high-frequency payments, stablecoins, DeFi, NFT and other fields in the future, cover more tracks and users, and expand the diversified application scenarios of the Lightning Network.

Summarize

The Bitcoin ecosystem is currently ushering in the first round of Ordinals. In addition to asset issuance, the Bitcoin ecosystem also needs more complex and sustainable application scenarios for sustainable empowerment. From the perspective of the evolution of asset issuance technology, RGB Taproot Assets The client-side verification paradigm is driving changes, with less on-chain calculations and more on-chain verification, giving rise to a more reasonable asset issuance method in the Bitcoin ecosystem.

If you are a developer in RGB Taproot Assets-related fields and believe in the potential of the client-side verification paradigm Mass Adoption, you are welcome to contact AC Capital and Infinitas. If you have different opinions, you are also welcome to leave a message for discussion.