Introduction

The emergence of the Ordinals protocol made the creation of NFTs on Bitcoin a reality. Subsequently, a developer known as @domodata embarked on the BRC-20 journey, enabling everyone to issue their own inscription assets in a simple and standardized form directly in Bitcoin transactions. This new asset type ignited a new wave of enthusiasm among Web3 developers and participants. One of the developers, BennyTheDev (the founder’s Twitter account name, referred to as Benny hereafter), was actively involved in BRC-20 and created an improved version of BRC-20 – the Tap Protocol.

What is Tap Protocol?

TAP is a Bitcoin Ordinals protocol that supports OrdFi, aiming to find and track Ordinals. This protocol introduced the TAP token standard, emphasizing simplicity and accessibility. Its key mechanism “tapping” simplifies transaction verification within the protocol. TAP includes Token-Send for efficient large-scale transfers, Token-Trade for simplifying transactions based on text inscriptions, and Token-Auth for third-party issuance of signed redemption inscriptions.

The Development Journey of Tap Protocol

BRC-20 was launched on March 8, 2023, by an anonymous developer named @domodata. Subsequently, Benny created the BRC-20 minting tool LooksOrdinal. On May 3, Benny deployed the BRC-20 token $Trac, which was fully minted in less than 48 hours. In August, he launched the BRC-20 improved version, Tap Protocol, aimed at OrdFi. $Trac then became the governance token of Tap Protocol. Based on Tap Protocol, $Tap and $-Tap tokens were issued later, with $Tap eventually becoming the governance token of the Pipe protocol. In October, Trac Core, Tap Protocol, and Pipe Protocol collectively formed the Trac Ecosystem. On December 6, 2023, Tap Protocol received a $4.2 million investment led by Sora Ventures.

How Does Tap Protocol Work?

As seen in the diagram below, Tap Protocol is a token asset standard created based on the Ordinal protocol and can be considered an improved version of BRC-20.

Source: Trac Ecosystem Medium

In summary, TAP is a multi-asset metaprotocol in the Bitcoin Ordinals ecosystem that enables more complex financial operations directly on the Bitcoin blockchain. It is designed to be more flexible and user-friendly than other token metaprotocols, allowing token staking, exchanges, and liquidity pools without the need for auxiliary layers or complex mechanisms, such as:

• Exchanging and Staking: In the TAP ecosystem, users can easily exchange tokens and stake them to support the network and earn rewards, combining liquidity with incentives.
• Liquidity Pools: TAP supports the creation of token pools that users can contribute to, enabling decentralized trading and earning fees in return.
• Token Authentication: It provides a framework for validating tokens within the platform, potentially used as in-game currency or items.
• TAP Art: Allows linking Ordinals with tokens on the TAP protocol, enabling fractional ownership of valuable artworks. By extending the TAP protocol, the sources of token deployment and ordinal ownership are preserved.
• Multi-Send: Users can send multiple transactions at once, simplifying the process of distributing tokens to various recipients. Dropping tokens in Ordinals has never been easier and more cost-effective than with TAP.
• Multi-Asset Protocol: Lastly, TAP acts as a multi-asset protocol, meaning it can handle various types of assets beyond a single standard, thereby expanding the range of transactions and interactions within the Bitcoin blockchain.

TAP’s external functionality is divided into external and internal parts, working similarly to BRC-20, and easily integrating with current markets and wallets. Internally, it offers additional features to users, which can be expanded through community governance using $TRAC tokens.

These features indicate that Tap Protocol focuses on embedding its token standard into various DeFi functional modules, making it easier to become a cornerstone of Bitcoin DeFi. As related DeFi applications increase, it will attract users to issue Tap Protocol assets, thereby determining the market positioning of the protocol.

Tap Protocol vs BRC-20

While minting with tools like Unisat only requires basic names and quantities, the actual code is significantly different. BRC-20 standardizes various fields, as shown in the diagram below:

Users can only use deployment, minting, and transfer commands. During these operations, users fill in the standard fields and engrave them into the transaction. For example, an ordi transfer requires the following command:

{ “p”: “brc-20”,”op”: “transfer”,”tick”: “ordi”,”amt”: “100”}

Deployment

As shown in the diagram, on the left is Tap Protocol and on the right is BRC-20. Compared to BRC-20, Tap Protocol has added the fields: [BASE26 ENCODED TICKER], [OUTPUT], and [DECIMALS], which represent:

[BASE26 ENCODED TICKER]: Human-readable token name, encoded according to general rules, far exceeding Brc-20’s four-character limit.

[OUTPUT]: Unsigned integer index of an output containing beneficiary address/public key. Compared to BRC-20, Tap Protocol allows direct input of related addresses during minting, achieving the effect of determining ownership at the time of initial deployment.

[DECIMALS]: Similar to the common ERC-20 standard, up to 8 digits, allowing for more precise token design.

Minting

Compared to BRC-20 on the left, minting in Tap Protocol on the right mainly adds the mentioned [OUTPUT] field, allowing minters to directly mint to third-party wallets, equivalent to minting operations with transfer functionality.

Transfer

Compared to BRC-20, Tap Protocol operations on the right are more complex, where [xxxx quadruple] represents the quadruple of Tap Protocol Token after transfer. These fields allow specifying change addresses (and limited multi-sending) in a single transfer. Simply put, it better adapts to Bitcoin’s UTXO architecture and enables multi-sending functionality.

Overall, while BRC-20 was widely used by early adopters due to its simplicity, Tap Protocol offers richer functionality.

Trac Ecosystem

Besides Tap Protocol, the Trac Ecosystem also includes Trac Core and Pipe Protocol.

Trac Core

Trac Core aims to serve the entire Bitcoin ecosystem, filtering, organizing, and simplifying access to the massive data of Bitcoin. It retrieves updated data from the blockchain, methodically organizes them, and immediately uses them for search and analysis through APIs, refreshing this information continuously with the blockchain’s activity.

Trac Core also embodies the role of a Bitcoin oracle, establishing a reliable channel for the world outside the blockchain. It acquires necessary data from external sources to input into the blockchain, crucial for operations that depend on accurate and secure data from outside closed environments. According to the documentation, Trac Core will be an open-source version, focusing on decentralized transportation of relevant Bitcoin and ordinal data.

Pipe Protocol

Pipe uses UTXO (Unspent Transaction Outputs) to monitor transactions. Each user’s balance is the total of UTXOs they can spend, and spending these UTXOs creates new UTXOs for the recipient and changes. This model ensures security against double-spending and provides enhanced privacy and efficiency.

Moreover, Pipe extends the functionality of the Bitcoin UTXO system, incorporating advanced features for digital art and collectibles:

• Art: Pipe supports transactions related to buying, selling, or transferring digital artwork.
• NFTs: It enables the creation and management of NFTs representing unique digital items or artworks.
• Inscriptions: Users can inscribe data into Bitcoin transactions, useful for adding details or authenticity to digital art.
• Transfers: Pipe implements UTXO transfers, representing various assets, including digital art and NFTs.
• UTXO: Pipe brings advanced digital assets and NFT functionalities into Bitcoin using its basic UTXO architecture.

How to Mint, Transfer and Trade Tap Protocol Assets?

Minting

Issuing Tap assets can be done using OrdinalsWallet. After accessing the site, click on the top right corner to learn about the wallet, choose the BTC network to enter [Inscribe], and then select [Mint] for the minting page. Users only need to enter the asset name in [Tick], the minting amount in [Amount], and click [Submit] to mint.

Source: https://ordinalswallet.com/inscribe

Next, users will enter a fee estimation interface. They can choose to mint multiple times, and the site will estimate the corresponding fees. Finally, clicking on [Inscribe] will pay the fee for the inscription.

Source: https://ordinalswallet.com/inscribe

Transfer

Transferring also requires accessing the [Inscribe] page on the website, selecting [Transfer], and entering the asset name and transfer amount, following the steps for the operation.

Trading

Users can see Tap Protocol assets marked with “TAP” in the [Market] page of Ordinals Wallet. For example, for $gib as shown in the image below, click on the Logo to enter the details page.

Source: https://ordinalswallet.com/collect

Once there, if interested in purchasing, users can click the [Buy Now] button to make the payment.

Source: https://ordinalswallet.com/collection/tap-gib

Current Status and Future Development

Competitive Analysis

In the previous text, we mentioned that Tap Protocol’s direct competitor is BRC-20. Due to BRC-20’s first-mover advantage, most Bitcoin ecosystem assets are still based on this protocol. Recent popular tokens like ordi and sats are also designed based on it. As a rising star, Tap is attracting developers and users with its rich features and good embedding capabilities. Meanwhile, leveraging the Trac ecosystem’s Trac Core and Pipe Protocol, Tap’s application scenarios can be further expanded.

Apart from Tap Protocol, there are several other asset issuance protocols in continuous development, such as:

• Lightning Network: The largest and most influential Layer2 in the Bitcoin ecosystem. More and more companies are entering the Lightning Network ecosystem, which uses specific state channels for off-chain payments and final settlement on the Bitcoin blockchain. However, it cannot issue tokens and is only suitable for high-frequency payments without smart contract functionality, leading to limited user numbers and use cases. Compared to Tap, its business does not conflict as Tap’s main functionality lies in asset issuance and DeFi.
• RGB: Inspired by Peter Todd’s 2016 concept of Single-use seals and Client-Side Validation, RGB introduced smart contract functionality to the Lightning Network. Released in April 2023, GRB v.010 has yet to establish its ecosystem due to technical complexity. Projects like Infinitas, Bitlight Labs, Diba, Bitswap, and Pandora Prime Inc are exploring RGB’s potential. Tether’s CEO also stated that RGB is the best choice for issuing stablecoins on the Bitcoin chain, with Tether considering issuing USDT through RGB. RGB is a potential competitor to Tap Protocol, resembling more of a public chain supporting protocol establishment, while Tap Protocol is more like a module suite and infrastructure supporting developers in building dApps, etc.
• Taproot Assets: Another client-side asset validation protocol, Taproot Assets v0.3 mainnet alpha was released in October 2023, aiming to expand Bitcoin into a scalable multi-asset network. However, its asset issuance is distribution-based, not user-initiated minting, making it more suitable for project-oriented, institutional asset issuance. The new Nostr Assets Protocol based on Taproot Assets introduces assets into the Nostr social protocol. Compared to Tap Protocol, it is more centralized.

Development Status

Currently, Tap Protocol has been adopted by 14+ projects and has over 50,000+ users.

Source: https://trac.network/tap/

Future Development

As part of the Trac Ecosystem, Tap Protocol will continue to grow with the network effect of the ecosystem. With the vast potential of the Bitcoin ecosystem attracting more developers and teams, many asset issuance protocols are emerging. The market for Tap Protocol is gradually shifting from a blue ocean to a highly competitive red ocean. However, Tap Protocol is not only used by multiple applications but also has its own user base, which is expected to greatly assist in future competition.

Conclusion

As an improvement over the Bitcoin Ordinals protocol, Tap Protocol not only demonstrates innovation and flexibility technically but also shows its unique value in practical applications. By simplifying the transaction verification process and introducing the TAP token standard, it offers a more convenient and accessible platform for Web3 developers and participants. Its diverse functions, such as Token-Send, Token-Trade, and Token-Auth, further enhance its potential in the DeFi sector.

With its development and innovation on the basis of BRC-20, Tap Protocol has not only attracted a group of active developers and users but also greatly expanded the transaction and interaction scope of the Bitcoin blockchain through its multi-asset protocol features. This expansion includes traditional financial operations like token staking and exchange, as well as broader applications such as digital art and NFTs. As a part of the Trac Ecosystem, it will benefit from the network effects within the ecosystem and further consolidate its market position through an increasing number of applications and a growing user base. As the Bitcoin ecosystem continues to grow and develop, Tap Protocol is poised to become a key force driving innovation in this field.