What is the Bitcoin Inscription Asset? Comprehensive introduction to Bitcoin Inscription Assets

Abstract

php editor Xinyi introduces to you the Bitcoin inscription asset. The Bitcoin inscription asset refers to a new type of digital asset that binds Bitcoin with other physical or digital assets. By binding Bitcoin to a physical or other digital asset, a unique inscribed asset can be created on the blockchain, ensuring its authenticity and immutability. Bitcoin inscription assets can represent various valuable physical assets, such as gold, real estate, art, etc., or they can represent digital assets, such as stocks, bonds, intellectual property, etc. The emergence of Bitcoin inscription assets provides more choices and convenience for the trading, circulation and storage of digital assets, and also provides higher security for the ownership protection of digital assets. A comprehensive introduction to the Bitcoin Inscription asset will be explained in detail below.

The Bitcoin Taproot upgrade provides objective technical support for the birth of inscription assets.

The current mainstream Bitcoin inscription protocols include Ordinals protocol, Atomics protocol, Pipe protocol, and Runes protocol.

The birth of Bitcoin Inscription has many positive meanings, but spam transactions clogging the Bitcoin network are also controversial.

What is Bitcoin Inscription?

Inscribed assets refer to recording information in a specific format on BTC (or other blockchains) and converting the information on the chain into virtual assets through the indexing protocol. These assets can be fungible assets (such as BRC20 assets) or non-fungible assets (such as Bitcoin Frogs and other NFTs). Unlike Ethereum, the issuance and circulation of assets are based on smart contracts, while BTC's inscribed assets are issued and operated based on on-chain information and index specifications.

Why will Bitcoin Inscription be born and explode this year? For Bitcoin, as a public ledger, its main purpose in the past was to record transfer transactions on the network. However, after Bitcoin completed the Taproot upgrade in November 2021, it provides more efficient data storage capabilities as a public ledger, and can upload text and multimedia content at a lower cost, which provides a technical foundation for inscribed assets.

A brief history of the ecological development of Bitcoin inscriptions

At the end of 2022, Bitcoin core contributor Casey Rodarmor proposed the Ordinals protocol, which introduced the combination of ordinals and inscriptions. concept, bringing the first NFT (non-fungible token) project to the Bitcoin network. Through this NFT protocol called "Ordinals", users can create Bitcoin versions of digital artifacts, such as JPEG images, PDF files, video or audio content, on the Bitcoin network. The launch of this protocol adds more functions and application scenarios to the Bitcoin network.

On March 8, 2023, an anonymous developer named @domodata launched BRC-20 based on the Ordinals protocol, and the Bitcoin ecosystem Meme token speculation entered the fast lane. Following the release of Ordinals, another anonymous developer launched Atomics Protocol in September. In addition, since Casey has always disliked the BRC-20, thinking that it brought too many garbage inscriptions. Less than a week after Atomics was released, on September 26, Casey created Runes, a Bitcoin-based fungible token protocol. Like Atomiclas, an important improvement over BRC-20 is that Runes is based on UTXO technology. Casey believes that creating a good homogeneous token protocol for Bitcoin may bring significant transaction fee income, more developers and users to Bitcoin.

In addition, since the launch of BRC-20, BRC-20 transactions have accounted for the majority of the Ordinals protocol. Subsequently, community developer named Beny successively launched the BRC-20 generation tool LooksOrdinal (no token), the improved version of BRC-20 TapProtocol positioned at OrdFi, and the improved version of Pipe of Runes.

Technical Principles of the Mainstream Bitcoin Inscription Protocol

Ordinals inscription content is completely on the chain and is stored in the spend script of the taproot script-path spend scripts script path. Taproot scripts have very few restrictions on their content and also receive witness discounts, making storage of inscription content relatively economical. Taproot upgrade is an important technical condition for the birth of Ordinals. Taproot is the latest stage of Bitcoin expansion after Segregated Witness segwit. It mainly includes three technical concepts - P2SH, MAST and Schnorr. The result is to enable complex transactions such as multi-signature Transactions, timelock transactions, look like normal Bitcoin transactions. In essence, Ordinal Inscription builds a simple accounting layer on the Bitcoin network with the help of a script tapscript that will never be executed to count and record assets and data.

Ordinals & BRC 20: The implementation of Ordinals uses the most basic functions of BTC, and the transfer of NFT is also completely processed by the BTC network, so it is very consistent with the philosophy of the BTC fundamental community. On the basis of Ordinals, the BRC 20 protocol was born. Its transfer is not executed on the BTC main chain and must be split into two-step BTC transaction execution (that is, first aggregation in the sequencer and then transfer). The additional complexity makes it A large number of junk transactions were generated. Therefore, it is not as accepted by the entire BTC community as Ordinals, and has been full of dissent since its birth.

Atomicals Protocol is another derivative protocol that engraves data on UTXO to implement Token. Different from Ordinals, which were originally designed for NFT, it rethinks how to issue tokens on BTC in a decentralized, non-tamperable, and fair manner from the bottom up. Atomics uses sat, the smallest unit of Bitcoin, as the basic "atom." The UTXO of each sat is used to represent the Token itself, 1 token = 1 sat. When verifying an Atomics transaction, you only need to query the UTXO corresponding to sat on the BTC chain. Compared with BRC 20, ARC 20 transactions greatly reduce the need for third-party sequencers, greatly improving the decentralization of the entire system.

Rune & Pipe: The design of Rune is influenced by ARC 20, and it chooses to write Token data directly in the UTXO script, which includes the Token ID, output and quantity. The implementation of Rune is very similar to ARC 20, transferring token transfers directly to the BTC mainnet for processing. The difference is that Rune writes the number of Tokens in the script data, which gives it higher accuracy than ARC 20.

The potential impact of Bitcoin Inscription on Bitcoin

For Bitcoin, the inscription hype has had a great impact and controversy on Bitcoin. All data of Ordinals inscriptions are stored on the chain and do not rely on external storage such as IPFS or AWS. It is truly decentralized; however, storing images on the chain will occupy the space of other normal Bitcoin transactions, which "pollutes" "Bitcoin, the financial transaction system, takes up valuable storage space for normal transfer transactions.

Looking further, with the emergence of Bitcoin inscription tokens, Bitcoin network transactions have become active again, and miners’ transaction packaging fees have increased significantly, which has increased the security budget of the Bitcoin network. GLassnode data shows: Bitcoin Inscription has definitely been Bitcoin’s net income since the beginning of 2023, accounting for 25% of current miner fee income, and users are obviously willing to pay a premium. Intotheblock data shows that Bitcoin’s current new adoption rate has reached a new yearly high of 67.62%, indicating a surge in new market participants. The reason for the large influx of users and their willingness to pay high transfer fees is mainly due to the wealth creation effect brought about by the hype of Inscription Tokens. As a large number of transactions occurred, Inscription Token transactions began to clog the Bitcoin network. On November 8, the average Bitcoin transaction fee rose to $7.168, setting a new high in 6 months.

Summary

In the short term, the hype of Inscription Tokens has enhanced the prosperity of the Bitcoin ecosystem. As a result, online transactions have become more active, and miner fees have increased significantly. Previously, due to the The problem of a large loss of miners due to reduced rewards has been temporarily resolved. In addition, as new Bitcoin protocols continue to pour in, many speculators have begun to come in to make money, and Bitcoin is expected to prosper further. However, at present, many Bitcoin inscription tokens have no practical value and are relatively highly hyped. The Bitcoin network has become congested due to spam transactions, and doubts are growing.

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