Forwarded the Original Title ‘比特币生态知识金字塔，测测你在第几层’

With the birth of the Runes protocol and the explosion of the third round of the Bitcoin ecosystem, more and more communities are turning their attention to the Bitcoin ecosystem. However, the biggest confusion for most newcomers is still that the “Bitcoin ecosystem threshold is too high”. Therefore, BlockBeats has organized the various terms of the Bitcoin ecosystem into five knowledge levels, revealing the Bitcoin ecosystem layer by layer.

Entry Level: Topics familiar to most beginners in the Bitcoin ecosystem

1. Ordinals

The Ordinals protocol focuses on minting NFTs on Bitcoin’s smallest unit—satoshi, using Bitcoin’s Taproot upgrade, allowing each satoshi to represent a unique digital asset. Ordinals leverages the inherent characteristics of the Bitcoin blockchain, allowing each satoshi to uniquely represent a digital asset, bringing functionality similar to Ethereum’s NFTs to the Bitcoin network without needing any additional layers or tokens.

2.Casey Rodarmor

Casey Rodarmor（@rodarmor) is a programmer and Bitcoin developer, as well as the creator of the Ordinals and Runes protocols. Through the development of the Ordinals protocol, Casey has provided a new way to directly store and transfer non-monetary data (such as digital artwork) on the Bitcoin blockchain. It can be said that without Casey, there would be no Bitcoin ecosystem.

Image source: Ordinals summit 2023

3.BRC-20

BRC-20 is an experimental standard for creating and transferring fungible tokens on the Bitcoin network. It was introduced by an anonymous developer, Domo, in March 2023, aiming to mimic Ethereum’s ERC-20 standard. Unlike ERC-20, which uses smart contracts, BRC-20 tokens are created by engraving JSON data on satoshi, the smallest unit of the Bitcoin network.

4. Domo

Domo (@domodata) is the creator of the BRC-20 protocol. Since developing BRC-20, Domo has remained anonymous and has also created a foundation, Layer 1 Foundation, to assist with BRC-20 governance.

Image source: Ordinals summit 2023

5.Runes

Runes is a new Bitcoin protocol developed by Casey Rodarmor, the creator of Bitcoin Ordinals. Unlike Ordinals, which is used to issue NFTs, Runes is used to issue fungible tokens on the Bitcoin network. It allows users to directly create, mint, and transfer tokens within Bitcoin’s UTXO model, without relying on any centralized services or intermediaries. Runes has optimized the BRC-20 protocol by combining the original minting and listing transactions into one.

6.Atomicals

The Atomicals protocol allows the creation and management of digital assets named ARC-20 on the Bitcoin blockchain. These assets use the UTXO model and can store multiple files, making them suitable for more complex application scenarios. Unlike BRC-20 and Ordinals, Atomicals’ AVM design provides greater flexibility and scalability, offering smart contract-like functionality and supporting more complex digital asset management. Compared to Casey and Domo, Arthur, the author of the Atomicals protocol, is more anonymous, never appearing in person or at offline events, and has only accepted a few audio interviews.

7. Mining fees

These are fees paid to miners by users when conducting Bitcoin transactions, to have their transactions included in a block. Mining fees are transaction fees in the Bitcoin network, ensuring the economic incentive for miners to support the network’s operation and security.

Second Level: Topics familiar to most players in the Bitcoin ecosystem

1. Bitcoin Halving

Bitcoin halving refers to the event of halving Bitcoin mining rewards, which happens once every 210,000 blocks, approximately every four years. The primary purpose of halving is to control Bitcoin’s issuance, a part of Bitcoin’s design, to simulate the gradually decreasing extraction speed of scarce resources (like gold). Halving directly affects the incentive structure of miners and is believed to have a significant impact on Bitcoin’s price. The most recent halving was on April 20th, 2024, and the next one is expected in February 2028, when the block height will reach 1,050,000.

2. Satoshis

“Satoshis” is the smallest unit of Bitcoin, with 1 Bitcoin equal to 100,000,000 Satoshi. Because Bitcoin’s value can be very high, Satoshi provides a smaller currency unit, making micro-transactions possible.

3. Hash Rate

The Hash Rate refers to the number of times all mining devices in the network attempt to solve block hashes per second, usually expressed as hashes per second (H/s). The hash rate is a key indicator of the security of the Bitcoin network, with a higher hash rate meaning higher computational difficulty and security.

4.POW

The full name is Proof of Work. This is a cryptographic algorithm used to prevent network service abuse (like spam or distributed denial of service attacks). Bitcoin’s proof of work requires miners to solve a complex mathematical problem, the difficulty of which is automatically adjusted to ensure a new block is produced approximately every 10 minutes across the network. Miners who successfully solve the problem can add a new block to the blockchain and receive new Bitcoin as a reward. This process not only protects the network from attacks but also facilitates Bitcoin’s currency issuance and circulation.

5. UTXO

The full name is Unspent Transaction Outputs, which refers to unspent transaction outputs, representing Bitcoin amounts in the network that can be used as inputs for new transactions. Bitcoin’s transaction model is based on UTXO, where each transaction begins by referencing the output of previous transactions as its input and ends by creating new UTXOs, which can be used by future transactions.

6. Lightning Network

The Lightning Network is a ‘second-layer’ payment protocol built on top of the Bitcoin blockchain, designed to enable instant, high-throughput micropayments. The Lightning Network reduces transaction congestion and fees on the blockchain by creating a network of payment channels, making small payments economical and fast.

Third Level: Topics familiar to experienced Bitcoin ecosystem OGs

1. Nostr

Nostr is a simple decentralized social network protocol that uses key pairs to allow users to create and manage their own identities, and communicate through events (such as posts, contact information, and other social interactions). The founder is Fiatjaf (@fiatjaf). Although this protocol has no direct connection with Bitcoin, it has received widespread attention from Bitcoin supporters as it represents a decentralized and anti-censorship method of communication. In April 2023, a Lightning Network ‘hosting solution’, the Nostr Assets Protocol, also adopted the name Nostr.

2. BIPs

BIPs, short for Bitcoin Improvement Proposals, are design documents driven by the Bitcoin community, proposing new features, information, or environmental improvements for review by the Bitcoin community. BIPs are an essential part of the Bitcoin development process, providing a formal way to improve the Bitcoin network.

3.Mempool

The Mempool, short for Memory Pool, refers to the collection of all unconfirmed transactions stored on a Bitcoin network node. When a transaction is sent to the Bitcoin network but has not yet been included (confirmed) by any block, the transaction is in the Mempool. Miners select transactions from the Mempool to create new blocks, typically prioritizing transactions with higher fees.

4. Rare Satoshi

Rare Satoshis is not an official term in the Bitcoin network but emerged after the birth of Ordinals. It refers to unique Satoshis related to specific block times in Bitcoin, which have a collection value. Each Bitcoin is composed of one hundred million Satoshis. The scarcity and specialty of Satoshis can be determined by ordinal theorists, giving Satoshis special meaning, whether it’s the Bitcoin mined by Satoshi Nakamoto, the first Satoshi in a block, or the Satoshi used to buy pizza. Related reading: Rare Satoshis: The next hype narrative after BRC-20, are you ready?

5. Bitcoin Full Node

A Bitcoin Full Node is a complete client that runs the Bitcoin protocol and maintains a full copy of the blockchain data. Full nodes validate all transactions and blocks, ensuring that transactions and blocks comply with Bitcoin’s rules. Bitcoin Full Nodes are vital to the health and decentralization of the network. They help distribute the power of the network, ensuring that no single entity can control or tamper with Bitcoin’s transaction history. Full nodes also increase the network’s security because the more nodes that verify transactions, the harder it is to manipulate the entire system.

Fourth Level: Diving Deeper into the Rabbit Hole

1.Index

In the context of Bitcoin, “index” typically refers to the structure used for rapid data retrieval in the blockchain database. For example, the transaction index (txindex) is an optional feature that allows nodes to create an additional database to store metadata for each transaction, including their location in the blockchain. By enabling the transaction index, nodes can access information from any transaction faster, which is very useful for the development of applications and services, especially those that require extensive blockchain data queries.

2.OP_RETURN

OP_RETURN is an opcode in the Bitcoin scripting language that allows a small amount of data (currently up to 80 bytes) to be embedded into a Bitcoin transaction. This data itself cannot be spent, so it will not be part of the input. OP_RETURN is mainly used to add metadata to transactions, which can be used for various applications, such as proving data existed at a certain point in time (timestamping services), adding simple messages, or implementing more complex blockchain layer applications. Since this data is permanently recorded on the Bitcoin blockchain, it provides developers with an immutable data storage option.

3.Schnorr Signatures

Schnorr signatures are a type of digital signature algorithm, proposed by mathematician Claus Schnorr. In Bitcoin, Schnorr signatures were introduced through the Taproot upgrade, intended to replace or coexist with the existing ECDSA (Elliptic Curve Digital Signature Algorithm) signature scheme. Schnorr signatures offer several advantages, including simpler signature aggregation, enhanced privacy, and higher efficiency. Signature aggregation allows multiple signatures to be combined into one, reducing the data volume and lowering transaction costs. In addition, it also improves support for multi-signature transactions, making transactions involving multiple parties look indistinguishable from regular transactions, thereby enhancing privacy.

Fifth Level: The Most Esoteric Bitcoin Ecosystem Knowledge

1. Segregated Witness

Known as SegWit, it is an upgrade to the Bitcoin protocol aimed at resolving transaction scalability issues and transaction malleability problems. Segregated Witness increases the effective capacity of blocks and to some extent reduces the size of each transaction, enhancing network throughput, by ‘segregating’ signature information from transaction data.

2.PSBT

Partially Signed Bitcoin Transactions, or PSBT, is a standard format used to transmit unfinished transactions between different participants for signing. It allows multiple parties to collaborate in creating, signing, and sending transactions without needing to expose their private keys to other participants.

3.RBF

Replace-by-Fee, or RBF, is a mechanism that allows senders to replace their original transaction with a higher fee before the transaction is confirmed by the blockchain. This mechanism is often used to accelerate transaction confirmation or to correct unconfirmed transactions that were mistakenly set with too low a fee.

4. “RBF” Sniper

RBF has produced the ‘RBF’ attack, a sniper strategy for earning profits. Users monitor unconfirmed low-fee transactions, attempting to replace the original transaction by submitting the same transaction with a higher fee rate using the RBF mechanism. This is typically used by mining pools or individual miners hoping to increase profits by extracting higher transaction fees.

5.Taproot

Taproot is a significant upgrade to the Bitcoin network, primarily enhancing privacy and scalability. This is achieved through a combination of MAST (Merkelized Abstract Syntax Trees) and Schnorr signatures. Taproot makes complex transactions on the blockchain look indistinguishable from regular transactions, thereby improving privacy. In addition, it also improves the network’s scalability and efficiency. It can be said that it is because of the Taproot upgrade that the Bitcoin ecosystem was able to start.

Disclaimer：

1. This article is reprinted from [BlockBeats]. Forward the Original Title‘比特币生态知识金字塔，测测你在第几层’. All copyrights belong to the original author [Jaleel，BlockBeats]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
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