Lao Bai, the investment research partner of venture capital firm ABCDE, recently analyzed and commented on the Bitcoin ecology (such as BRC-20, Ordinal), starting from the code application of Bitcoin OP_Return, and then discussing the current Bitcoin network in NFT, token Development and restrictions on applications such as distribution. He believes that although the Bitcoin ecosystem is trying to expand its applications, it still has fundamental limitations compared to Ethereum from a technical perspective.

Content Directory

1. BRC20, Ordinal did not appear out of thin air, Lao Bai told you the history

    1.1.The source of technology to open imagination: OP_Return

2. The Problems and Current Situation of Bitcoin Ecology

3. Bitcoin Ecological Development: Segwit (Segregated Witness) Promotes Ordinal Development

4. The Ordinal Controversy and Future

    4.1.Data Space Usage and Defects

5. New Applications of Bitcoin Ecology

6. About ABCDE

BRC20, Ordinal did not appear out of thin air, Lao Bai told you the history

To understand concepts such as BRC20 and Ordinal, one needs some understanding of their technical historical background. Lao Bai briefly introduces it in the simplest way as follows:

In the early days, Satoshi Nakamoto created Bitcoin with the aim of establishing a peer-to-peer cash system. Later, he stated on the forum that as Bitcoin grows, it can take on more roles, such as escrow transactions, bonded contracts, and third-party arbitration.

However, people later discovered that Bitcoin (BTC) has poor performance and high price fluctuations, and it cannot realize peer-to-peer cash transactions, so it gradually moved towards today's "electronic gold" route. This also triggered the subsequent expansion controversy, resulting in the bifurcation of Bitcoin Cash (BCH) and Bitcoin Satoshi Version (BSV). Satoshi Nakamoto's original intention and vision also caused controversy.

The source of technology to open imagination: OP_Return

Lao Bai said that there is a script opcode called OP_Return in Bitcoin, which can hold 80 bytes of various information. Therefore, someone proposed the concept of a Colored Coin in 2012, using OP_Return to mark some content, making Bitcoin from homogeneous to non-homogeneous. However, due to Bitcoin's performance issues, this concept could not be realized.

After that, MasterCoin (later developed into OmniLayer ) appeared in 2013, and on this basis, USDT based on Bitcoin was issued. In 2014, there was also CounterParty, which also used OP_Return to achieve some functions.

As can be expected, these concepts were eventually abandoned (for example, people no longer use Bitcoin as the basis for USDT now). In 2014, Vitalik Buterin, one of the co-authors of Colored Coin, created Ethereum (ETH) out of anger when his proposed Bitcoin upgrade to MasterCoin was ignored.

Subsequently, there have been numerous controversies due to scaling issues, the most famous of which are Bitcoin Cash (BCH) and Bitcoin Satoshi Version (BSV), both of which are taking the route of large blocks. BCH plans to gradually increase the block size, from 1MB to 8MB, and then to 32MB, etc., while BSV is more extreme, directly increasing the block size to hundreds of MB or even 1GB.

In contrast, Bitcoin (BTC) is relatively conservative in this regard, using SegWit (Segregated Witness) technology to separate signature verification from transactions. The original 1MB of data is now divided into 1MB of transaction data and 3MB of witness data, thus achieving "micro expansion".

Lao Bai said that it is worth noting that Segregated Witness has played an important role in the following concepts such as Ordinal and BRC20.

The Problems and Current Situation of Bitcoin Ecology

Lao Bai said that in addition to direct block expansion, BTC’s own technology stack also has many methods, but it is far less popular than Ethereum. After all, supporting smart contracts and not supporting them cannot be compared in terms of technical complexity and feasibility.

Lao Bai also raised a question that Bitcoin is often discussed, that is, there will be no block rewards after a hundred years (there will be very few after more than 10 years). Since there is no block reward to give miners a basic income, what about the security of BTC? Is it possible to convert it into POS and issue additional tokens? Therefore, how to stimulate enough on-chain transactions to bring fee income to miners will be a problem.

Bitcoin Ecological Development: Segwit (Segregated Witness) Promotes Ordinal Development

Lao Bai summarized several current Bitcoin-related network developments:

Pure side chain – Liquid Network, an alliance chain made by the Bitcoin technology company BlockSteam, has about 10 times the performance of BTC and is mainly aimed at large-amount Bitcoin transfers and transaction settlements of institutions.

State Channel – Lightning Network (Lightning Network) is currently the most out-of-the-box technology stack for BTC. It is designed for fast payment of small amounts or even micro-payments, and Walmart, McDonald's, and the like have support. Lao Bai said, but after a few years, the data is really average, with more than 5,000 BTC locked in it, and about 70,000 channels. (Chain News Note: Lightning Network Data )

Disguised side chain – RSK and Stacks, RSK is EVM compatible, using the mechanism of joint mining with Bitcoin to produce blocks, and Stacks is non-EVM compatible, self-developed Clarity language, using a transmission proof called POX to produce blocks. Neither of them really inherits the security or hashing power of BTC, it just looks a little bit like it, and it is not a concept at all with ETH L2

Client-side verification – RGB and Taro are relatively new paradigms, which bind asset issuance under the chain to UTXO on the chain, but transaction verification and data storage are on the client-side, and you only need to use client-side software for verification Just verify the UTXO related to your off-chain assets. You don’t need to check the entire network to reach a consensus like traditional blockchains. New is new, but the development is relatively slow, but Ordinal took the lead

Ordinal (including NFT, BRC20, etc.) – Lao Bai said that this is to stuff things into the 3M witness data of Segwit. Before OP_Return could only stuff 80 bytes, but now with Segwit we can put 3M. Originally, Segwit limited the amount of data in the witness data plug for a single transaction. As a result, the Taproot upgrade at the end of 2021 relaxed the requirements and completely removed the restrictions, so you saw BTC NFT, BRC20 and the like with 3M small pictures. (Chain news note: Segwit explanation )

The Ordinal Controversy and Future

Lao Bai said that Ordinal has caused a lot of controversy, not only among Ethereum and Bitcoin supporters, but also within the Bitcoin community.

On the one hand, Ordinal has indeed stimulated transactions on the chain, and once increased the proportion of fee income from 2% to 74%. Bitcoin has become expensive and crowded, and miners should not be too happy. On the other hand, many Bitcoin advocates feel that the Bitcoin network is filled with small pictures or useless "inscription garbage", which is not what BTC should be. (Chain News Supplement: Why did BRC-20 and Ordinals cause controversy? )

So the focus of the debate is actually very simple - how should the 3M data space be used? What would make the most sense to stuff inside?

Data Space Usage and Defects

Lao Bai said that how to properly use the data space, there are currently and in the future the following methods, but there are also technical and logical flaws. If the use is for hype, it is another matter.

NFT – BTC NFT focuses on a pure chain. Many NFT chains on ETH only store a link to Arweave or IPFS. But if you think about it, is it really that important whether that small picture is on the ETH or BTC chain? At least ETH has fired NFT for the past two years, and no one really cares about this kind of thing. Small pictures placed in this 3M segregated witness space are really more valuable than those placed on AR or IPFS? A bit far-fetched. (Chain News Supplement: Where is the ontology of NFT? )

BRC20/ORC20/SRC20/BRCXXX – BRC20 has a lot of restrictions and is inconvenient, so everyone came up with ORC20, which is more powerful and flexible, and BRCXXX is waiting for it... But the more powerful XRC is, the more powerful it is. Like ERC, what are you talking about? Anyway, it does not support smart contracts. No matter how hard BTC is, it is impossible to use it better than ETH and other smart contract-based public chains in terms of functionality. (Chain News Supplement: OKX Proposes "BRC-30" Proposal )

DA (data availability, Chinese: Data Availability) – Lao Bai said: "This is what Celestia Rollkit is doing. Technically, the DA layer can be thrown into the 3M. The problem is that your DA does not take up both speed and capacity. Advantages. ETH will be upgraded in Cancun immediately. At that time, one block every 12 seconds, hang 1M data (after two years, the full version of Danksharding can hang 16M), 5M per minute, 50M in 10 minutes. BTC is 3M per block in 10 minutes, and It has to compete with BRC for space, which is small and expensive.”

In short, you find that no matter what you put in it, Ethereum can do it better

Lao Bai said: "As I said before, there is a latitude difference between whether there is a smart contract. No matter how hard this 3M space is, the ceiling is ETH. You insist that BTC is more OG or safer than ETH, it is not impossible, the problem That is, do you really need to increase the security level from ETH to BTC? What’s more, there are two opinions about which is safer after ETH is transferred to POS or BTC.”

New Applications of Bitcoin Ecology

Lao Bai finally compiled several new applications of the Bitcoin ecosystem:

1. Time stamp server – this is what Babylon of the Cosmos ecology is doing. It uses the Bitcoin network as a time stamp server to help the PoS chain prevent long-range attacks (English: Long range attack ), which can be regarded as "borrowing" the security of Bitcoin To serve some PoS chains, but this is only an enhancement, not a complete replacement of these PoS's own verification and consensus mechanisms.

2. DA – as above paragraph

3. EVM compatibility/equivalence – In fact, RSK is also EVM compatible, but it has not been done well. The joint mining mechanism is now "not very advanced". At present, some new teams are exploring this direction in the primary market. ETH pledges BTC to become a node to do EVM equivalent, and there is a case of bifurcating OP and then implementing "BTC-based Optimisic Rollup" through some form of BVM (Bitcoin Virtual Machine).

4. Zk+BTC – this is what ZeroSync is doing, and it is more public financial style. Generate ZK proofs for the Bitcoin network through ZK-STARK, and verify the latest status of the blockchain in real-time, without spending hours or even days synchronizing all transaction histories of all BTCs. Currently, block headers and transaction data can be synchronized. Proofs and proofs of signed messages are still under development.

Lao Bai commented: "In short, the BTC ecology is a particularly tangled ecology. On the one hand, once something new comes out, it can indeed be speculated. After all, it is the originator of the blockchain. On the other hand, many things cannot stand the scrutiny of technology and the test of time. It's a bit like the earliest Ford cars. The latter ones are all turbocharged or even hybrid. With pure electric technology, you can expand the cylinder at most to increase the displacement. It really can't catch up."

He went on to say that the security issues and computing power of the Bitcoin network are also very real concerns in decades to come. We must quickly find a direction and make good use of the 3M space of Segregated Witness to stimulate transactions on the chain. The most ideal is some native applications of the Bitcoin network, which are not available in other ecosystems or are most suitable for Bitcoin. However, it is logically found that no matter what direction, ETH seems to be able to do it, and it does. Better yet, tangled.

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