ABCDE: The past, present and future of Bitcoin ecosystem

Dedicated to all contributors to the Bitcoin ecosystem.

Written by: ABCDELabs

Preface

Bitcoin has been around for more than 15 years. Since its inception, Bitcoin has been positioned as a peer-to-peer electronic cash payment system, which has nothing to do with “ecosystem” because Bitcoin’s technical characteristics and natural Turing-complete smart contracts are not supported, and there have always been extensive discussions and controversies surrounding the scalability of Bitcoin, from block disputes and hard forks to the Lightning Network, to Bitcoin’s scalability. New attempts at dynamic expansion never stop. However, on March 8, 2023, Domodata proposed the BRC20 experiment and deployed $ORDI, which was like opening Pandora’s box. A large number of monumental assets appeared in Bitcoin overnight, just like a repeat of the Ethereum ICO wave in 2017. , assets such as $ORDI and $SATS have risen tens of thousands of times, with their market value exceeding US$1 billion.

If Bitcoin is digital gold, then inscriptions are gold ornaments carefully crafted from digital gold. The explosion of inscription assets has also given Bitcoin a formal ecological foundation.

So how will the future of the Bitcoin ecosystem develop?

How did Bitcoin develop from a peer-to-peer cash payment system to a digital financial ecosystem?

At the end of 2023, when Bitcoin is about to be halved, we will write a report in an attempt to review Bitcoin’s past, take stock of Bitcoin’s present, and look forward to Bitcoin’s future. Dedicated to all contributors to the Bitcoin ecosystem.

“If you don’t believe me, or don’t understand, I don’t have time to try to convince you, sorry.”

——Satoshi Nakamoto

Bitcoin’s past: a road full of twists and turns of ecological development

2018-2023: Major events in the development of Bitcoin ecosystem

2008.11.01: Satoshi Nakamoto released “Bitcoin: A Peer-to-Peer Cash Payment System”

2009.01.03: Satoshi Nakamoto dug out the God block on a small server in Helki, Finland: the first batch of 50 Bitcoins, and Bitcoin was born. Satoshi Nakamoto inserted a sentence into the God block: “British Finance Minister Darling was forced to consider a second step to alleviate the banking crisis.” This sentence from The Times not only explains the timing of the block generation, but also makes a mockery of the banking system during the financial crisis.

2009.01.12: Satoshi Nakamoto sent 10 Bitcoins to developer Hal Finney, completing the first Bitcoin transaction.

2010.05.21: Florida programmer Laszlo Hanyecz used 10,000 BTC to purchase a pizza coupon worth US$25. The first price of Bitcoin appeared, equivalent to US$0.0025/btc.

2010.07.17: Bitcoin trading platform MT.GOX was established in Tokyo.

2010.08.15: Bitcoin-bugs Bitcoin vulnerability was discovered and exploited. More than 184 billion Bitcoins were generated in one transaction and sent to two Bitcoin addresses. The illegal transaction was quickly discovered and fixed.

2010.12.16: Pooled-mining Bitcoin mining pool appeared.

2011.04.23: Satoshi Nakamoto disappeared completely after sending his last email. The content of the email is: I have started to move on to other things. Gavin and others will be very good at taking over the Bitcoin project.

2012.09.27: The Bitcoin Foundation was established.

2012.11.28: The block supply is halved for the first time, from 50 to 25 every 10 minutes. At the same time, Bitcoin issuance accounts for half of the total issuance of 21 million.

2012.12.04: Dyecoin white paper released.

2013.08.15：MasterCoin ICO。

2013.10.29: Canada launched the world’s first Bitcoin ATM, which was manufactured by the American Robocoin Company.

2013.12.05: The Central Bank of China and five other ministries and commissions issued the “Notice on Preventing Bitcoin Risks”, triggering a nearly 30% decline in global Bitcoin.

2015.01: Coinbase becomes the first compliant Bitcoin exchange in the United States.

2015.09: The U.S. Commodity Futures Trading Commission (CFTC) ruled that BTC is a commodity covered by the Commodity Exchange Act.

2016.07.10: The amount of Bitcoin is halved for the second time. The output of Bitcoins in a single block has officially increased from 25 to 12.5.

2016.08.03: A huge amount of Bitcoin worth more than US$60 million was stolen from Bitfinex, a well-known overseas Bitcoin trading platform, causing the currency price to plummet, once falling by more than 25%. In the end, all users on the platform shared the loss of 36% of the total assets, and Bitfinex issued a debt token BFX “debt-for-equity swap”.

2017.03.11: The U.S. Securities and Exchange Commission (SEC) officially released a report stating that it has rejected the Bitcoin ETF, and BTC fell 10% in response. This is also the first time that a Bitcoin ETF proposal has been rejected by the US SEC.

2017.05.23: Six Bitcoin startups agreed to the Segwit2M (later changed to Segwit2x) compromise proposed by Barry Sibert and jointly signed the New York Consensus.

2017.08.01: On the original main chain of Bitcoin, a new currency resulting from a hard fork was born. Bitcoin Cash is created

2017.08.24: SegWit officially activated

2017.09.04: The Central Bank of China announced that it would characterize ICOs as illegal financial activities and suspend all domestic transactions. Subsequently, regulators continued to announce the closure of all Bitcoin exchanges registered in the country.

2017.12: BTC was born with 8 forked coins in December: SBTC, LBTC, BTP, GOD, BUM, bitcoin Cash Plus, bitcoin Silver, bitcoin X (bitcoin unlimited).

2017.12.11: Bitcoin futures were officially listed on the Chicago Board Options Exchange, with a surge of more than 20% on the first trading day.

2018.01.01: RSK main network is online.

2018.03.15: The Lightning Network released its first mainnet beta program.

2018.09.27: Liquid blockchain is officially launched.

2018.11.15: BSV forks.

2019.09.23: Bakkt launches physically delivered Bitcoin futures contract.

2020.03.12: Due to panic in the financial market, Bitcoin fell by more than 50% in one day.

2020.05.12: BTC is halved for the third time. After the halving, the block reward is 6.25 BTC.

2020.12.16: Bitcoin exceeded US$20,000, setting a record high.

2021.01.14: Stacks main network 2.0 is online.

2021.02.19: Bitcoin reaches a market value of US$1 trillion for the first time.

2021.06.19: The El Salvador Congress passed a bill approving Bitcoin as the country’s legal tender. The bill officially came into effect 90 days later.

2021.11.16: Taproot upgrade officially takes effect.

2022.12.14: Ordinals protocol released.

2023.03.08: domodata proposes the BRC20 experiment and deploys $ORDI.

2023.10.19: Lightning Labs launches the first mainnet alpha version of Taproot Assets.

Should Bitcoin become a payment system or digital gold?

There has been controversy since early on as to whether Bitcoin should be a payment system or a digital currency. On June 17, 2010, Satoshi Nakamoto wrote on the Bitcoin forum:

The design (Bitcoin) supports every possible transaction type I designed many years ago, escrow transactions, bonded contracts, third-party arbitration, multi-party signatures, and more. These are all things we want to explore in the future if Bitcoin can be widely accepted, but they must all be designed from the beginning to ensure that they can be realized later.

Large-scale applications and transaction scale mean more complex trading instructions and larger trading space. Between July and September 2010, Satoshi Nakamoto modified the BTC code many times, including removing two opcodes, disabling some functions of the Bitcoin programming language, etc. On the other hand, when BTC was founded, there was no limit on the block size so that the number of transactions that could be processed at the same time was limited. But when the price of BTC was very low in the early days, the cost of malicious transactions was also very low. In order to solve this problem, Satoshi Nakamoto presided over a soft fork on September 12, 2010, adding that the block size should not exceed 1 MB limit. On October 4 of the same year, developer Jeff Garzik removed the restrictions introduced by Satoshi Nakamoto in the new client he developed, but was opposed by the community and Satoshi Nakamoto himself. Satoshi Nakamoto pointed out that this restriction is temporary, and that the block limit can be raised in a controlled and gradual manner in the future to meet expansion needs.

Source：Bitcointalk

In December 2010, due to unknown reasons, Satoshi Nakamoto sent out his last public message and withdrew from the public eye. However, at this time, the issues regarding BTC’s positioning and scalability were not really finalized, and the 1MB limit was not finalized. It laid the foundation for a series of subsequent controversies.

During this period, discussions on Bitcoin application scenarios other than payment also appeared on the bitcointalk forum. For example, appamatto proposed a proposal to build a decentralized domain name service on the Bitcoin network in November 2010, but The proposal was not recognized by early members, including Satoshi Nakamoto, and the proposed BitX became a core component of Ethereum and other projects, while BitDNS eventually developed into Namecoin, the first altcoin. .

Source：Bitcointalk

Bitcoin 2.0 asset issuance attempt

After Satoshi Nakamoto left, heir Gavin Andresen led the establishment of Bitcoin Core and the Bitcoin Foundation. During this period, exploration of BTC’s scalability has always existed, especially in the field of asset issuance.

Colored Coins

eToro CEO Yoni Assia was the first to propose colored coins in an article published on March 27, 2012. The idea continued to grow, and on forums such as Bitcointalk, the concept of colored coins began to take shape and gain traction. Finally, Meni Rosenfeld released a white paper detailing colored currencies on December 4, 2012.

The idea of dyed coins is to represent broader assets and values by adding special labels (i.e., dyeing) to specific parts of Bitcoin. A series of entities have appeared in the implementation of dyed coins, which can be roughly divided into two categories:

• Based on OP_RETURN: For example, Open Assets proposed by Flavien Charlon in 2013, using OP_RETURN (proposed in Bitcoin v0.9.0, can be used to store a small amount of data on Bitcoin, the initial limit is 40 bytes, Later increased to 80 bytes). The opcode is stored in the script and read by the outside world to complete “coloring” and transactions. (This pattern is similar to Ordinals relying on external indexes to determine asset legality).
• Not based on OP_RETURN: A typical representative is the EPOBC Protocol proposed by ChromaWay in 2014. Additional information about EPOBC assets is stored in the nSequence field in Bitcoin transactions. The category and legality of each EPOBC asset needs to be traced back to the genesis transaction. to make sure.

MasterCoin（Own）

JR Willett released the idea of MasterCoin on January 6, 2012 and named it “Bitcoin’s Second White Paper” and officially launched the project through ICO in July 2013, eventually raising 5120 BTC. (worth $500,000). The difference between MasterCoin and Colored Coins is that it builds a complete node layer and maintains a state model database by scanning Bitcoin blocks, which resides in nodes outside the blockchain. This design can provide more complex functions than Colored Coins, such as creating new assets, decentralized exchanges, automated price feedback, etc.

In 2014, Tether also launched a stable currency on Bitcoin through the Mastercoin protocol, which is known as Tether USD (OMNI).

Counterparty

Counterparty was officially launched in 2014. Counterparty also uses OP_RETURN to store data into the BTC network. But unlike dyed coins, assets in Counterparty do not exist in the form of UTXO. Instead, information is loaded through OP_RETURN to indicate the transfer of assets. When an asset holder uses a holding address for a transaction with special data After signing, the asset is transferred. In this way, Counterparty can realize the issuance and trading of assets and a platform compatible with Ethereum smart contracts.

In addition, there are also opinions that Ethereum, Ripple and BitShares also belong to the more general “Bitcoin 2.0”.

Block size dispute and hard fork

As Bitcoin becomes more popular, the problems of network transaction congestion and longer confirmation times have become increasingly serious. In 2015, Gavin Andresen and Mike Hearn announced that they would implement the BIP-101 proposal in the new version of BitcoinXT, hoping to increase the block limit to 8 MB. Core developers such as Greg Maxell, Luke Jr, Pieter Wuille, etc. are opposed, believing that this approach will raise the threshold for running full nodes and bring uncontrollable impacts. The debate eventually expanded in terms of topics and scope of participation.

There are no absolute advantages or disadvantages between the two routes. Adhering to the small block route cannot answer the core question “After the block reward is reduced, how can low transaction volume maintain sufficient incentives to ensure security?” And 8 MB will not be the final solution. Once a large block is chosen, it is likely that it will eventually need to be continuously expanded. The stack of technical risks and unpredictable risks caused by unlimited expansion do exist. The essence of this debate remains “What is the vision of Bitcoin?” The debate eventually led to the community split and the hard fork that began in 2017. In addition to BCH (and later BSV), many other BTC forks also appeared during this period. According to BitMEX Research, at least 50 new forks appeared in just one year after the BCH fork. currency.

SegWit & Taproot

After the fork, the BTC chain gradually introduced a series of new technical solutions to improve scalability while maintaining the block size, the most important of which are SegWit and Taproot.

Segregated Witness was introduced at the same time as the BCH fork as an “alternative” to directly increase the block size. SegWit divides the transaction into two parts. The first part contains the sending and receiving addresses, and the second part The two parts store transaction signatures or witness data, and the main block is removed but the verification function is retained. The removal of witness data allows more transactions to be accommodated in the same block size, improving throughput in another way. SegWit was introduced as a soft fork, and the adoption rate continues to increase. It has exceeded 60% by 2020 and reached 95% by December 2023.

*Source: *

In November 2021, another important upgrade, Taproot, also officially took effect in the form of a soft fork. Structurally, this upgrade is composed of BIP340, BIP341 and BIP342. Among them, BIP340 introduced the Schnorr signature that can verify multiple transactions at the same time, replacing the Elliptic Curve Digital Signature Algorithm (ECDSA), once again expanding the network capacity and speeding up the processing speed of batch transactions, making it easier to deploy complex smart contracts. Provides possibilities; BIP341 implements Merkleized Abstract Syntax Tree (MAST) to optimize transaction data storage on the blockchain; BIP342 (or Tap) adopts Bitcoin’s scripting coding language to adapt to Schnorr signatures and Taproot accomplish.

What I am referring to is that SegWit did not initially limit the length of verification information, which resulted in subsequent projects being able to bypass the 1 MB block size limit by verifying information, and also provided a way for subsequent Ordinals laid the foundation for its rise. There has also been controversy in the community about this approach. Some opponents believe that SegWit’s failure to set a length limit is a “mistake”, and therefore the method of using verification information to transmit data is an unfair “attack”. .

Early exploration of Bitcoin Layer2

As the dispute over block size has settled, Bitcoin L2 has begun to enter the public eye on a large scale. The most mainstream routes are the Lightning Network and Sidechains solutions.

The Lightning Network was first proposed by Joseph Poon and Thaddeus Dryja in 2015. The core idea is to lock a portion of Bitcoins in a multi-signature address, thereby establishing a separately governed collaboration agreement. Transactions in the Lightning Network are conducted off-chain, and the final result is confirmed by the BTC network. In March 2018, Lightning Labs announced that the Lightning Network was officially launched on the Bitcoin main network, with representative applications including Strike, Taro, Lightspark, etc.

The idea of the side chain is to obtain/transfer Bitcoins from the Bitcoin network to the Bitcoin network, but the transaction behavior is independent of the BTC network. The side-chain solution was attempted earlier. In 2014, Blockstream published the first technical paper on the Bitcoin side-chain solution, but the solution was not actually implemented. RSK released a white paper in 2015. In January 2018, RSK finally launched a fully functional mainnet; in September of the same year, Blockstream launched the Liquid Network side chain. In addition to RSK and Liquid Network, Stacks, RootsStocks, Drivechain, etc. are also side chain solutions. In addition, developers have also explored and practiced in aspects such as state channels and roll-up.

Bitcoin Ecology: A string of inscriptions opens Pandora’s Box

Before this, many impressions of Bitcoin had nothing to do with “ecology”. Because of Bitcoin’s technical characteristics and the limitations of not supporting Turing-complete smart contracts, Bitcoin could barely The only ecosystems included are Lightning Network and Stacks, and they have been in a state of neglect all year round. Everyone’s focus is on the “smart contract platform”, whether it is ETH, L2, or Alt L1.

No one expected that an Ordinal protocol would completely ignite the concept of Inion, igniting the entire BTC ecosystem, surpassing all smart contract platforms in one fell swoop, and even ironically, even most smart contract platforms I also started writing inscriptions.

The development history of Ordinal

March 8: @domodata proposed the brc20 experiment and deployed $ORDI

March 9: $ORDI has been minted, and the price of one mint is about 5U.

March 10 to March 23: $ORDI OTC trading, trading around 0.03U

March 23: UniSat launched the BRC20 trading market, and the price quickly rose to 0.3U. Then due to a double-spending problem, UniSat closed the trading market

April 27: UniSat once again launched the BRC20 trading market, which is only open to some users. The $ORDI price quickly rose to 1U and continued to rise.

May 5th: Opensea announced support for Ordinals and BRC20, the mood was completely FOMO, the price came to 6U, various new BRC20s were hyped by various communities, such as nals, xing, oshi, shib, etc.

May 8: $ORDI was listed on gate.io. On that day, BTC on-chain fees accounted for 43.7% of the total miner income. After being listed on gate, the price jumped from 9U to 20U.

May 9: $ORDI reached the highest point of 28U, gate.io began to launch various BRC20, such as BANK, piza, etc., lRC20, DRC20, etc. also appeared one after another, diverting BRC20

May 9th - May 12th: With the selling of large users and the downturn of the entire market, the price of ordi continued to drop to around 7.5U, and the market sentiment decreased.

May 12: OKX announced an official cooperation with UniSat to jointly build the BRC20 industry standard. After a strong shot, the price of $ORDI recovered and fell back to around 12U that day.

May 20th: @okx and @HuobiGlobal launched $ORDI, and the price rose from 12U to 15U, followed by a continuous decline for more than 4 months

September 11: Falling below 3U, a dark day for Ordinal

October 18: UniSat released brc20-swap, and ORDI began to pick up. At this point, $ORDI starts to rise

November 3: The BRC20 ecosystem gradually gained momentum, and the price gradually rose to 6.2U. On that day, the market value of $sats exceeded $ORDI

November 7: Binance announced the listing of $ORDI, which skyrocketed from 7.4U to 13.5U, starting a counterattack.

November 10 to December 1: hovering around 20U

December 2: $ORDI rose from 21.7U to 32U, reaching a record high in more than 5 months

December 5: $ORDI rose to 69U, and the market value exceeded US$1 billion

Ordinal and BRC20

If you want to use a sentence to explain what Ordinal is, then I think the easiest thing to understand is that Ordinal is an inscription protocol that uses BTC as a network disk.

The reason why BTC can be used as a network disk is precisely because the Taproot upgrade 2 years ago removed the previous limit on the amount of data placed in the isolation witness field for a single transaction, directly filling the top grid to 4M, allowing BTC passively began to have the characteristics of a “non-tamperable, permanent storage” network disk - does it sound like Arweave?

Casey Rodarmor (the founder of Ordinal) is the person who opened Pandora’s Box. It is estimated that when he founded Ordinal, he would not have thought that the BTC ecosystem would be what it is today.

The essence of Ordinal is actually very simple. It is more like an NFT protocol. However, unlike ETH or other public chain NFT metadata (MetaData), which are mostly stored in IPFS or centralized servers, Ordinal’s metadata is embedded in When entering the transaction’s witness field (Witness Data), it is like being “engraved” on a specific person. This is also the origin of the word inscription.

Source:BitcoinFrogs

This is also the narrative and play style of Ordinal at the beginning - BTC cannot be tampered with and has the “network disk nature” of permanent storage. Metadata can support loose properties such as text, pictures, videos, etc., except for the 4MB size limit (see below) When talking about recursive inscriptions, this restriction is no longer there). It seems that nothing is more suitable for an NFT platform than BTC. During this period, what has exploded are various ETH NFT imitations on BTC, such as the BTC version. Punk, BTC version of Ape, etc. No one expected that the winner would be BitcoinFrogs, who was little-known at the beginning.

However, with the new gameplay, the market will not be satisfied with NFT alone. After all, the non-homogeneity and liquidity of NFT make its transaction smoothness and market value different from FT by at least one or two. orders of magnitude. Then another great god Domo appeared. He used an NFT-oriented protocol like Ordinal as a basis and simulated a set of homogeneous token gameplay similar to ERC20, named BRC-20. The implementation method is also very “clever”. Since Oridinal has no restrictions on file formats, JSON File is also acceptable.

Ever since, with the help of three simple “operation codes”: Deploy, Mint, and Transfer, BRC-20 has really realized the minting and transfer functions similar to ERC-20 with the help of Indexer.

The role of Indexer is temporarily relatively centralized, providing basic settings for all BRC20 searches on the Bitcoin chain, and indexing each person’s BRC20 holdings based on the deployment, mint, and transfer conditions. The number of coins.

There are three terms worth mentioning in the BRC20 ecosystem:

ORDI is the first BRC20 inscription, the head of the current entire inscription system. Although it is a Meme from the perspective of application attributes, First is First. Without $ORDI, there would be no hundreds or thousands of others to come. BRC20, various XRC20 that subsequently emerged in the BTC ecosystem, and the inscription system that extends to other major public chains

Due to its 6-month mint time, countless zeros after the decimal point, and a more decentralized chip structure compared to Ordi, SATS was empowered by UniSat to be the first “useful” inscription for BRC-20 Swap fees. Wait for a series of attributes… $SATS, as the “Two Seconds” of BRC20, its market value once exceeded the leader $ORDI, and even competed with $ORDI for the first prize. No matter who it ends up with, $ $ORDI$ $SATS has become a well-known twin star recognized by the market.

Unisat is currently the most core infrastructure in the BRC20 ecosystem, from the earliest printing service to wallet to Indexer to Marketplace, including the latest innovative Module… It can be said that without UniSat, today’s Mingwen ecosystem would not be like this. such prosperity.

Atomic, a rising star

If in the BTC ecosystem, the Ordinal protocol is very similar to BTC, then the one most similar to ETH must be the Atomic protocol. Naturally, the representative of the agreement is Arc20, the “token standard”. The difference between Atomical and Ordinal, or the difference between ARC20 and BRC20, is quite big from the perspective of basic framework.

The most intuitive difference is that Atomic uses a color coin technology similar to what we wrote earlier to directly bind the tokens to the satoshis in UTXO. The result is that although ARC20 also requires Indexer to Index ARC20 inscription “exists”, but its transfer transaction is completely dependent on BTC Layer1 UTXO and is completely independent of Indexer. This is compared to BRC20, a protocol that relies heavily on Indexer from minting to Mint to transfer. Its security is undoubtedly greatly improved, and it also avoids the so-called “junk UTXO” of BRC20.

In addition, Atomic has several eye-catching features. For example, Bitwork, a mining mechanism similar to Bitcoin POW, was introduced during the casting process, making the casting more fair and decentralized, and closer to the technical characteristics of BTC. For example, because UTXO itself can be used in BTC transactions are combined, which makes the programmability of ARC20 tokens better. In theory, the swap between BTC and ARC20 only needs to exchange the input and output of UTXO.

Of course, everything has a price. While Atomics is more decentralized, safer and more programmable than BRC20, it also inevitably brings higher issuance costs, and assets can easily be “spent” with UTXO. There are problems such as loss, and the basic settings are still in a serious missing stage compared to BRC20 (fortunately, UniSat has begun to support Atomics), so Atomics still has a long way to go to catch up with Ordinal.

Finally, there are two very unique “gas qualities” of Atomics that I have to mention:

The first is the founder. Many people initially viewed Atomics as an Ordinal imitation disk. After entering the community, they discovered that it has a long development time, the determination of the founder, and the number of scenarios and features considered. It is an extremely complete set of protocols. , it is not what LTC is to BTC at all. Some KOLs even sighed after watching several interviews with the anonymous founder of Atomicals: The rationality and feeling of this person’s speech are too much like the young Steve Jobs… An anonymous founder of Steve Jobs style, this It also makes the quality of the entire agreement completely different.

The second is Atomicals’ big killer AVM. Some time ago, the ZeroSync team dropped a bombshell, and the concept of BitVM, which “theoretically allows BTC to calculate anything,” sparked countless discussions across the entire network. The current consensus in the industry is that BitVM is indeed feasible in technical theory, but the project is still a few years away from implementation, and the calculated Cost is also difficult to implement from a commercial perspective. However, once Once successful, it may be the best solution for BTC expansion and development. And the founder of Atomicals said after the white paper was published, “The idea of bitVM is great, and I have learned a lot. With a few modifications to the mechanism of the Atomicals protocol, similar effects should be achieved.” This also allows AVM to carry the hopes of many insiders.

Rune, BRC100

Rune

Ordinal founder Casey has always been unhappy with BRC-20, but he can’t do anything. After the advent of the Atomicals protocol, inspired by it (blind guess, because Atomicals was released first), the Rune protocol was released for the issuance of FT inscriptions.

The core layers of Rune and Atomics are very close. They both write Token information such as TokenID, output and quantity in the UTXO script, and hand over the transfer to the BTC layer 1 for processing. They are not highly dependent on Indexer.

The difference is that Rune writes the specific number of Tokens in the script data, which is no longer 1sats=1token. The advantage is that it has higher accuracy than ARC20, but the disadvantage is that the complexity also becomes higher, making it difficult to achieve the same accuracy as ARC20. This method directly utilizes the composability of BTC UTXO.

What’s funny is that Casey’s Rune protocol was just an “idea” without a specific product, which led the founder of Trac to preemptively write the first usable protocol based on it and release the pipe inscription.

Later, a Rune Alpha project appeared and released a Cook inscription. Everyone thought it was Casey’s project. They never expected Casey to deny it, but the market was already hot before the denial, so even after the denial, Cook’s The market enthusiasm is still not low.

BRC100

The concept of BRC100 is based on the Deploy, Mint, and Transfer functions of BRC20, and also introduces some concepts of decentralized computing, so that in the future, Bitcoin natives such as AMM DEX, lending, SocialFi, and GameFi can be built. Centralized application. However, BRC100 is still under development. For specific development details, please refer to:

SRC20，BRC420

SRC20

SRC20 originated from the BTC Stamps protocol. This protocol is not born out of Ordinal, but directly competes with Ordinal. There is such a picture on the Internet that can well illustrate the difference between BTC Stamps and Ordinal.

The core layers of Rune and Atomical are very close. They both write Token information such as TokenID, output and quantity in the UTXO script, and transfer the transfer to the BTC layer 1 for processing. They are not highly dependent on Indexer.

The difference is that Rune writes the specific number of Tokens in the script data, which is no longer 1sats=1token. The advantage is that it has higher accuracy than ARC20, but the disadvantage is that the complexity is also higher, making it difficult to match ARC20. This method directly utilizes the composability of BTC UTXO.

What’s funny is that Casey’s Rune protocol was just an “idea” without a specific product, which led the founder of Trac to preemptively write the first usable protocol based on it and release the pipe inscription.

Later, a Rune Alpha project appeared and released a Cook inscription. Everyone thought it was Casey’s project. They never expected Casey to deny it, but the market was already hot before the denial, so even after the denial, Cook’s The market enthusiasm is still not low.

BRC420

BRC420 is the “BTC Metaverse Protocol” launched by the Recursiverse team. Unlike several previous asset issuance protocols, BRC420 is more application-oriented and more complex.

BRC420 brings three very interesting things:

The first is recursive inscription assets. BRC420 defines more complex asset formats recursively. By recursively combining multiple inscriptions into one complex inscription, anyone can create their own element. Universe inscriptions include, but are not limited to, game images, game DLC, HTMl scripts, music, videos, etc… and ultimately achieve “on-chain inscription modularization”.

The second is on-chain royalties. Because there is a recursive modular asset call, anything as small as a character or pet, as large as an entire game script, a virtual machine or even an AI model can be combined into on-chain assets. , it is reasonable at this time, and the automatically executed royalty system can very well encourage the developer ecosystem and allow more valuable modules to exist on the chain. For example, in many full-chain games, if a popular battle system, card drawing system, blind box system, etc. can be used as a separate module to inscribe culture, the original author can also obtain it when called by other games. Tax income.

The third is Bitmap. Bitmap is a very “cool” and very hard-core thing. It can be understood as a Sandbox based on BTC, but it is much more native than Sandbox. Because each .bitmap inscription maps each block on Bitcoin, the number increases simultaneously with the blocks. There are currently more than 810,000 Bitmaps, with an increase of 50,000 every year. Holder has more than 20,000 independent addresses, second only to Ordi and Sats.

Of course, BRC420 does not own Bitmap, but it is the biggest booster behind Bitmap and monopolizes more than 95% of Bitmap browser traffic. More than a hundred teams have issued assets on BRC420. It can be said that BRC420 is a Bitmap deeply bound application protocol.

Taproot Asset，RGB

These two technical solutions are representatives of Client Side Validation, and they are also the most powerful competitors in the long-term BTC expansion plan in the eyes of many people.

Taproot Asset’s project worth mentioning is naturally the Nostr Asset Protocol. Contrary to what many people think, Nostr Asset has little to do with Nostr, the decentralized social network messaging protocol, because it does not use the Nostr protocol to issue assets, but simply serves as a Nostr. The application controls the managed wallet by using Nostr messages, allowing users to send and receive incoming wallets at the Nostr protocol layer through Nostr’s public and private keys.

Taproot Asset. The project also suffered from controversy on the Internet for a period of time because of this name.

Taproot Asset will be tested in conjunction with the Lightning Network in the first half of next year. If everything goes well, we will see more asset issuance and new applications of Taproot Asset on the Lightning Network in the next 6-12 months.

RGB has basically failed in this hot BTC ecosystem, but in the long run it is still one of the best solutions for BTC expansion. Its support for smart contracts makes it scalable and flexible. It is better than Tarpoot, especially Tether’s intention to issue USDT in RGB, which makes it very popular. The number of teams developing based on RGB is also far greater than that of Taproot Asset.

However, through communication with many RGB and Taproot developers, we learned that RGB’s current technology stack is very difficult to integrate with the Lightning Network. Therefore, the Liquid side chain may be RGB’s “temporary choice” in the short term. Founder Maxim even said It is intended to create a new Layer1 to carry RGB. From the perspective of legitimacy, the Lightning Network is undoubtedly the best choice, but whether the technical compatibility issues can be overcome, only time will give us the answer.

Of course, BRC420 does not own Bitmap, but it is the biggest booster behind Bitmap and monopolizes more than 95% of Bitmap browser traffic. More than a hundred teams have issued assets on BRC420. It can be said that BRC420 is a Bitmap deeply bound application protocol.

The future of Bitcoin: Entering the golden age

When we look to the future of the Bitcoin ecosystem, we can foresee exciting innovations and changes in a number of key areas. It may even be possible to redo what happened in the Ethereum ecosystem over the past few years.

Layer 2 Solution

The Layer 2 solution of the Bitcoin network is to deal with the problems of network congestion and high transaction fees. These solutions, such as BSquared, which is an EVM Compatible Layer2, provide an off-chain trading platform that supports Turing-complete smart contracts, improve transaction efficiency and reduce costs, while at the same time by comparing zero-knowledge proof (ZKP) technology with Bitcoin’s Taproot integration ensures enhanced privacy and security of transactions. This project can be 50 times cheaper and 300 times faster than BTC. The team also encourages developers to build various DeFi and NFT platforms on the chain. The network aims to develop Bitcoin into a dynamic platform. In addition, both Bitmap and Babylon will develop their own layer2 businesses. Bitmap has a huge advantage in the layer2 ecosystem with its say in the asset protocol on the first layer and a strong community. Babylon can rely on BTC The huge traffic brought by staking empowers the construction of Layer2.

Asset issuance and trading

In the future Bitcoin ecosystem, it is expected that more asset issuance and trading platforms will emerge, allowing users to create and trade various digital assets. Bitmap innovatively proposed the BRC420 protocol. Unlike other Ordinals protocols which are all “single inscriptions”, the BRC-420 protocol recursively combines multiple inscriptions into a complex inscription. Anything as small as a character or pet, or as large as an entire game script, a virtual machine or even a large AI model can be combined into on-chain assets for developers to purchase or pay royalties. BRC-420 consists of two parts, one is Metaverse Standard (i.e. Metaverse Standard), and the other is Royalty Standard (i.e. Royalty Standard). The former defines an open format for assets in the Metaverse, while the latter sets economic settings for creators. on-chain protocol.

Stablecoin

Stablecoins will play an important role in the Bitcoin ecosystem, providing users with a relatively stable digital asset and aiming to alleviate the volatility of Bitcoin prices. This will enhance the utility of Bitcoin, making it more suitable as a stable store of value. BitSmiley is a comprehensive solution for BTC Defi, filling the most missing “stablecoin” link in the current Bitcoin ecosystem. In addition to providing URC20 format stablecoins compatible with BRC20 in the form of BTC over-collateralization, BitSmiley also provides peer-to-peer lending based on BRC20, as well as insurance and CDS derivatives built on lending, and has established cooperation with a number of BTC Layer2 relationship to provide it with stablecoins and Defi ecological products. The overall over-collateralization mechanism of BitUSD is similar to MakerDAO. At the minting level, users mortgage BTC (either using Wrap BTC on the cooperative Layer2, or using BitSmiley’s own official bridge to bridge BTC) to BitSmileyDAO, and then mint Out bitUSD. BitSmiley complements the “inscription-shaped stablecoin” link that is most missing in the current BTC ecosystem, and opens a new door for BTC Definition through lending, insurance, CDS derivatives and other solutions, and is bound to become a key player in the BTC ecosystem. An indispensable key component project.

Lending & Pledge Platform

With the further popularity of Bitcoin, lending platforms will provide users holding Bitcoin with more financial service options, such as lending, interest earning, etc. This will help promote broader financial melting of Bitcoin and attract the participation of more traditional financial institutions. Babylon allows Bitcoin holders to pledge their idle Bitcoins to increase the security of the PoS chain and earn profits in the process. Proposed a Bitcoin staking protocol that allows Bitcoin holders to stake Bitcoin and earn stake returns without the need to bridge to the PoS chain, and provides complete slashable security to the chain ensure. The protocol supports rapid unbundling to maximize liquidity for Bitcoin holders. In addition, the protocol is designed as a modular plug-in that can be used on a variety of different PoS consensus algorithms and provides a basis on which the reset protocol can be built.

Cross-chain technology

In the future, cross-chain technology in the Bitcoin ecosystem will become more mature, enabling interoperability between different blockchains. This will enhance the synergy of the entire blockchain ecosystem, making it easier for different projects and blockchains to collaborate and interact. A relatively efficient way to explore DeFi applications in the Bitcoin network without smart contracts is to bring BTC assets into public chains with smart contract functions such as Ethereum, and directly use their complete DeFi infrastructure. Polyhedra Network launched a zkBridge-based Bitcoin cross-chain messaging protocol to significantly improve the interoperability of the Bitcoin network. This innovation aims to enable the Bitcoin network to perform efficient and secure cross-chain interoperability with other layer-1 and layer-2 blockchain networks. The introduction of the Bitcoin interoperability protocol by Polyhedra Network marks a major leap forward in blockchain technology. By enabling the Bitcoin network to act as both a sender and a receiver, combined with zkBridge, such an interoperability protocol paves the way for unprecedented interactions between Bitcoin and various blockchain networks.

Application

Applications based on Bitcoin will flourish and cover many fields. From identity verification to supply chain traceability, various decentralized applications will provide users with more reliable solutions through the security and immutability of Bitcoin. Bitmask is the most popular and most popular wallet on RGB. The built-in Market Place (Coming Soon) can facilitate RGB asset transactions. In addition, the team will launch the launchpad part in the next stage. As a “native expansion” solution, RGB is logically and technically the most suitable for BTC. It has been half a year since RGB V0.1 was officially released, V0.11 Alpha is about to be released, and the RGB ecosystem is expected to gain momentum within half a year. It will be the right time to coincide with the Bitcoin halving.

MEV

As a feature of the POW mechanism, MEV is also theoretically applicable to Bitcoin. During the BRC20 craze, a Bitcoin OG developed an MEV machine named “Sophon” in order to protect BTC from the inscription’s dust attack. “Sophon” quickly deployed a token with the same name through a front-running strategy. Token, set the supply to 1, pay a high gas rate to obtain priority deployment, and prevent others from deploying tokens with the same name again. Sophon caused a surge and decline in the number of BRC-20 tokens in a short period of time. Sophon is an attempt at MEV on BTC. However, in practice, since Bitcoin transactions are mainly simple Bitcoin transfers, MEV opportunities are relatively few. But as more complex transactions are introduced into Bitcoin through Taproot or Layer 2 efforts, the opportunity for MEV may increase, especially after all Bitcoins are mined, MEV may serve as a New source of mining income. Under the current circumstances, there are no economic incentives to encourage miners to actively search for MEV. We look forward to seeing ecological projects such as Flashbot on BTC Layer2 soon.

ABCDE BTC Ecological Investment Landscape

We believe that these innovations and changes will shape the Bitcoin ecosystem in the future, giving it broader usability, scalability, and applicability. This outlook is not only a preliminary imagination, but also a promising prospect. The actual future development will benefit from the continuous progress of technology, the collaborative cooperation of the community and the continuous market demand for innovation.