New strategy for Bitcoin Layer 2: Market positioning of RGB++, disruptive progress or market adaptation?

In today’s rapidly developing cryptocurrency field, Bitcoin Layer 2 solutions are becoming the new favorite in the market. In particular, the latest innovation of CKB (Nervos Network), the RGB protocol, has attracted widespread attention. RGB not only drove the value of CKB to soar through its innovative asset issuance mechanism at the beginning of this year, but also achieved an astonishing monthly increase of more than 300% in just a few months.

Bitcoin’s price fluctuations have provided a stage for multiple Layer 2 projects to showcase their technology, and CKB’s performance is particularly outstanding. In the popular track of Bitcoin Layer 2, CKB relied on its unique isomorphic binding mechanism and strong background (supported by the famous public chain Nervos) to successfully bind the UTXO of the original Bitcoin chain to the Cell on the CKB chain. , thus leading a new trend in the market.

In addition, the RGB protocol was further elaborated in the Twitter Space hosted by Trustless Labs on February 22 this year. At this event, Cipher, the main author of RGB and co-founder of CKB, and Baiyu, the ecological leader, shared their in-depth insights into Bitcoin Layer 2 and the future plans for RGB assets and CKB ecological construction.

This article will detail how the RGB protocol works, its place in the market, and how it may change the way we understand and utilize Layer 2 solutions.

Solving the expansion pain points of Bitcoin, RGB achieves significant performance improvements and interoperability advantages through isomorphic binding

In-depth analysis: the logic and challenges behind choosing the RGB protocol

The original intention of the team to develop the RGB protocol stems from an in-depth analysis of the market competition for Bitcoin's second-layer solutions. They pay particular attention to the competition for new protocols on the Bitcoin layer, distinguishing two types of protocols: those that exploit the properties of UTXO, and those that do not involve UTXO. The team chose the first type, specifically choosing protocols with UTXO characteristics such as Atomics, RGB, and Taproot Assets.

There are many reasons for selecting the RGB protocol as the basis for development. First of all, team member Cipher has a great interest in the RGB protocol and has conducted in-depth research with Teacher Ajian. The RGB protocol is known for its elegant design and strong scalability for Bitcoin, but despite such advantages, the protocol suffers from multiple technical and product issues in practical applications (such as interactive operation issues, data availability issues, Interoperability issues, smart contract/script execution environment issues, etc.) and failed to achieve large-scale adoption.

CKB team’s second-layer solution for Bitcoin

RGB is an asset issuance protocol belonging to the first layer of Bitcoin, and is at the same level as other first-layer asset issuance protocols such as Ordinals, Runes, and BRC20 . Its design and technical advantages reflect the CKB team’s long-term accumulation in Bitcoin second-layer solutions. Compared with the traditional RGB protocol, RGB avoids the need to exchange transaction history and data through the P2P network and moves all intelligent components, such as virtual machines, smart contracts, etc. directly to the chain, thus greatly simplifying off-chain logic and accelerating development process.

Use the CKB technology platform to implement on-chain processing of the traditional RGB protocol

The core of the RGB protocol is to combine the complex tasks that need to be processed on the client side in the traditional RGB protocol Logic is moved to on-chain processing. This transformation benefits from years of accumulation of CKB's technology platform, including independent P2P networks, shared data, virtual machines that can verify transactions, and non-interactive operating experience. Through this isomorphic binding mechanism, RGB maps Bitcoin's UTXO to CKB's Cell, and uses script constraints on the CKB chain and Bitcoin chain to verify the correctness of state calculations and the validity of ownership changes.

Three powerful tools to start transaction innovation

The main advantages of RGB include: non-interactive nature of transactions—RGB uses CKB’s data hosting and computing platform features to allow both parties to the transaction to communicate through asynchronous, non-interactive transfer, which greatly improves the user experience; transaction folding—by corresponding multiple CKB transactions to one Bitcoin RGB transaction, it improves the performance of the low-speed, low-throughput Bitcoin chain; and BTC assets and CKB chain Direct interoperability of assets - through the mapping association between UTXO and Cell, direct interaction between Bitcoin assets and assets on the CKB chain is achieved without the need for complex cross-chain mechanisms.

Analyzing the innovative mechanism of RGB and looking forward to the future development path of Bitcoin Layer 2 technology

The core mechanism and challenges of the RGB protocol

The RGB protocol is a unique P2P asset protocol. Operating off the Bitcoin chain, its computing system is similar in some respects to payment channels. It requires users to run the client and personally verify the transfer behavior related to themselves. This method is called "interactive transfer". Even as the recipient of assets, the user needs to confirm that the sender's transfer statement is correct before the statement can take effect. The advantage of this approach is enhanced privacy protection, because unlike the broad-node consensus protocols adopted by traditional blockchains such as Bitcoin and Ethereum, the RGB protocol protects the privacy of each transaction through "client-side verification."

However, this design of the RGB protocol also brings significant challenges. The lack of a common consensus process means that different clients may hold inconsistent data, creating "data silos." In addition, users must verify the historical source of each transaction to confirm the legality of the transaction and the authenticity of the assets, which increases the operational complexity for users and may limit the widespread adoption of the protocol.

Innovation and Advantages of RGB Protocol

In contrast, the RGB protocol significantly improves user experience and system efficiency while maintaining the privacy advantages of the original RGB protocol. RGB combines Bitcoin's UTXO with CKB's Cell through the "isomorphic binding" mechanism to achieve on-chain management of assets and transaction information. This mechanism allows all relevant verification logic to be executed directly on the CKB chain, rather than just on the user's local client. This not only simplifies the process for users to verify assets and transactions, but also solves the problem of data inconsistency through centralized on-chain verification.

Another big advantage of RGB is the non-interactive nature of transactions. In the RGB protocol, if Alice wants to transfer money to Bob, she must send the transaction information to Bob for him to personally check and verify. In RGB, this process is automatically completed by the CKB chain, and users do not need to manually intervene, which greatly simplifies the transaction process and improves efficiency. In addition, RGB utilizes the computing power of the CKB chain to allow the execution of more complex smart contracts and extended functions, which not only strengthens the functionality of the protocol, but also provides developers with more room for innovation.

In summary, RGB, on the basis of maintaining the privacy advantages of the RGB protocol, greatly improves the convenience of transactions and data consistency through centralized processing and verification on the chain, and solves the problems in the traditional RGB protocol. main pain points. These improvements not only enhance the user experience, but also lay a solid foundation for RGB's widespread adoption and future development.

RGB debuts: Can it stand out in the fierce Bitcoin L2 competition?

Market Potential and Strategy

The current Bitcoin second-layer solution (L2) is growing rapidly, and various projects such as BounceBit, Merlin Chain, and B^2 have accumulated considerable total investment. Value Locked (TVL). Faced with this explosive growth, how does RGB break into this market? The key lies in its unique market positioning and strategic deployment. RGB not only exists as an NFT and FT issuance protocol, but also fully utilizes the technical advantages of the CKB chain to provide a seamless transaction experience. Although operations on the Bitcoin mainnet may face higher gas fees and slower transaction speeds, the RGB protocol optimizes these operations by directly utilizing CKB's Dex for asset transactions.

Integration strategy on the CKB second-tier chain

On the CKB second-tier chain, RGB focuses on the issuance of native assets and the support of cross-chain assets. Bitcoin and Ethereum assets can be safely transferred to CKB through advanced bridging technology, and we work with multiple large institutions to ensure the security and reliability of transactions. In addition, the assets we launch on CKB follow unified standards, such as the FT standard XUDT and NFT standard, which have been applied on the main network. We also plan to launch specific trading platforms, such as Omega Market, to support the issuance and trading of CKB’s native inscription assets.

Challenges and uncertainties faced

Although RGB has obvious advantages in technology and market strategy, its development process is not without challenges. The development of the original RGB was affected by many factors, such as the need to be built on the Lightning Network but the existing Lightning Network standard does not fully support the RGB protocol. In addition, the improvement of RGB development tools and virtual machines (AluVM) also takes time, which may lead to slow development progress and missed market cycles.

To sum up, RGB not only carries the hope of technological innovation, but also faces multiple challenges in practical applications. As we continue to push the technology frontier and strive to overcome these challenges, can RGB hold its own in this competitive market?

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