With the market trend driven by the Bitcoin spot ETF, the most notable gains undoubtedly belong to a slew of protocols related to the BTC ecosystem. Last week, Binance even launched the $ORDI token, the most community-consensus protocol within the BTC Ordinals BRC20, reviving the BRC20 sector, which had been quiet for over half a year, and other derivatives built on top of BTC, suddenly filling with FOMO. BRC20, Atomicals, RUNE, PIPE & Taproot Assets - various related protocols flooded my Twitter feed. So, what makes these protocols distinct from each other?

This week’s CryptoSnap Dr.DODO will take us through each one, introducing and explaining them in the simplest and most understandable way!

Ordinals BRC20

Ordinals, initiated by developer Casey Rodarmor, is a project that, after Bitcoin’s SegWit upgrade, allows a single block to contain more information through segregated witness data. Following the Taproot upgrade, the introduction of new script support methods enhanced the flexibility and functionality of Bitcoin scripting. Based on these two major updates, Ordinals emerged early this year. Essentially, Ordinals inscribe data (such as images, text, audio, etc.) on Bitcoin’s Satoshis. More specifically, they are inscribed on particular UTXOs (Unspent Transaction Outputs), and when these UTXOs are spent, the inscribed data gets transferred, thus achieving the concept of asset transfer.

BRC20 was conceived in March this year by an anonymous developer, Domo. Its concept is to define a specific format of JSON data packets, inscribed on the BTC chain through Ordinals, and managed through off-chain indexing platforms. Deployers can decide parameters like total token amount and name, following a first-come, first-serve basis where a single name can only be registered once. $ORDI is the first BRC20 token deployed by Domo.

Source: https://domo-2.gitbook.io/brc-20-experiment/

When Binance launched the $ORDI token, it mistakenly linked its token website with the Ordinals protocol, which was promptly clarified by Ordinals’ founder Casey. ORDI is just one of the tokens under the BRC20 standard of the Ordinals protocol, with no official connection to Ordinals. Casey has repeatedly criticized the BRC20 standard on Twitter for creating too many junk transactions.

Moreover, BRC20 tokens are also criticized by many for being overly centralized and technically redundant, as most of their functions are confirmed through off-chain indexing, and their transfers are not executed on the BTC main chain.

Atomicals

Atomicals is an optimization of both Ordinals and BRC20. Unlike Ordinals, which was initially designed for NFTs, Atomicals focuses more on fungible tokens. Addressing the over-reliance on centralized off-chain indexing of BRC20, Atomicals utilizes and expands the Bitcoin UTXO model. Each Satoshi’s UTXO represents a specific Atomical token or digital object, allowing decentralized creation and management of complex digital objects and token systems (ARC20) on Bitcoin.

Its features include:

1. Using Bitcoin’s smallest unit, Satoshis, as the basic “ATOM” to represent tokens.
2. Enabling the creation, transfer, and updating of digital objects on Bitcoin.
3. Offering a decentralized and Bitcoin-culture-compliant method of tokenization.
4. Increasing the fairness and decentralization of the minting process through Proof of Work (POW).
5. Aiming to extend Bitcoin’s capabilities to support a wider range of applications, like social media, gaming, and authentication.

RUNE & PIPE

The RUNE protocol is a concept by Ordinals’ founder Casey Rodarmor, who saw flaws in the current fungible token schemes on the Bitcoin network (BRC20, Taproot Assets, etc.) and initiated the idea of creating a UTXO-based fungible token protocol.

Key features and design principles include:

1. UTXO-Based: Rune balances are held by UTXOs, with each UTXO capable of containing any number of any amount of Runes.
2. Transactions and Protocol Information: Outputs containing specific scripts are considered part of the protocol information. These scripts specify the transfer and allocation of Runes.
3. Flexibility: The transfer of Runes is defined by interpreting data pushes in transactions, allowing flexible allocation of Runes to different outputs.
4. Issuance: If there is a second data push in the protocol message, it is considered an issuance transaction, enabling the creation of new Runes.
5. Simplicity and Decentralization: The Runes protocol is as simple as possible, independent of off-chain data, has no native token, and is suitable for Bitcoin’s UTXO model.
6. Symbol Allocation: Runes can have associated symbols, but the protocol does not attempt to avoid symbol squatting to maintain simplicity.

Rune is currently only a design concept that has leaked and has no actual applications yet. PIPE, on the other hand, is a protocol developed by the well-known Bitcoin ecosystem developer BennyTheDev, implementing the technical architecture mentioned in Casey’s article. The PIPE Protocol is an important part of BennyTheDev’s TRAC ecosystem, which includes the BRC20 token $TRAC, Ordinals NFT .Blitmap, and BennyTheDev’s OrdFi ecosystem protocol TAP Protocol, allowing BRC20 to achieve token exchange (Swap) and other DeFi capabilities.

Taproot Assets

Taproot Assets is a protocol launched by the renowned Lightning Network Lab, aiming to create and trade various digital assets on the Bitcoin network and integrate with the Lightning Network. The Lightning Network, as a years-developed Bitcoin derivative protocol, has long been recognized by the Bitcoin community. This update of Taproot Assets expands the Lightning Network from the original peer-to-peer transaction “payment channel” method to point-to-multipoint, thus achieving asset distribution and circulation. Taproot Assets registers Token information in the UTXO output script on the Bitcoin mainnet, and functions like transfer transactions are implemented within Lightning channels. The biggest difference between Taproot Assets and BRC20, ARC20 is in its issuance method: it is not freely minted but requires an owner to mint beforehand and then distribute. This method’s advantage is attracting stablecoins like USDT for deployment, but its downside is that the token distribution method is not as fair and free as BRC20 or ARC20.

Lightning Network Lab, backed by multiple financings and publicly supported by Twitter founder Jack Dorsey, gives Taproot Assets stronger legitimacy and community support compared to the grassroots projects mentioned above, making its future prospects more promising.

Author’s Perspective

dt @19971122:

Beyond the Bitcoin ecosystem, the hype has also swept over public chains based on the Ethereum Virtual Machine (EVM), with ethscriptions leading the way. There’s a fitting analogy: if BRC20 represents those with cars still walking to work, then ETHS is like those carrying their cars on their shoulders. Technically, many believe it’s redundant to go back to experimenting on the Bitcoin chain now that Ethereum smart contracts exist. However, for some geeks, conducting novel experiments on the original Bitcoin chain is a form of romance. For speculators, these experiments offer new opportunities because they represent low-cost chips accompanied by fresh narratives, making them ideal for speculation. Even if considered foolish, consensus is still consensus. When the speculative value becomes the default fair value in many people’s minds, it transcends being just worthless.

For me, the cryptocurrency field is essentially a narrative-driven value space. Most participants are here to make money, so I’m not against speculation. Each bull market comes with its own set of speculations, which is normal. The last bull market three years ago also had many criticisms of NFTs, but that didn’t stop many from getting rich through NFTs. Understanding and moderately participating in speculation, following the so-called narrative, can prevent you from falling behind and living in old mindsets. Clearly understanding this is crucial for making money and continuing forward in this field.

Haotian @tmel0211:

In the Bitcoin ecosystem, innovations like Ordinals, BRC20, Taproot Assets, and BitVM are noteworthy, each with unique merits. It’s important to understand their underlying logic and risks before deciding.

Ordinals, as an example, brings programmable data to Bitcoin, fitting well with miner interests and the network’s decentralized nature. Yet, challenges may arise with liquidity increases, particularly in third-party and CEX index ledgers, leading to potential consensus issues.

Ethereum’s Layer2 solutions, especially Rollups, highlight its role as an arbitration layer, leveraging the main network’s arbitration capabilities. This contrasts with Ordinals, where Bitcoin’s lack of arbitration might hinder long-term stability and consensus.

The belief in Bitcoin’s scaling potential relies on its secure consensus. Without extending this security to new projects, high expectations may be unrealistic.

Ultimately, if the focus is on technical progress rather than just wealth gain, these aspects are crucial to consider. Otherwise, market dynamics will dictate the outcome.

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