Today's recommendation | A new paradigm for asset issuance - the next wave of Bitcoin metadata protocol has arrived

This year, asset issuance protocols on the Bitcoin chain have become the focus of everyone's discussion. These protocols are all metadata protocols that define an asset by recording some information in a Bitcoin transaction

This year, asset issuance protocols on the Bitcoin chain have become the focus of everyone's discussion. These protocols are all metadata protocols that define an asset by recording some information in a Bitcoin transaction. The difference lies in the different locations and methods of recording, which determine the differences in protocols.

Blockchain is a linked list structure with hash pointers, essentially a database maintained by distributed nodes. Nakamoto decided to use blockchain to record transaction data encrypted by elliptic curve functions and hash functions, thus creating Bitcoin. The key point here is that as long as one can find a way to record the quantity and type of assets transferred from which address to which address in a certain place, and can succinctly verify that the asset source is legal, the asset has not been spent, and the transaction signature is legal, then creating a digital asset is possible.

In the early days of Bitcoin, some people thought that it would be possible to_ Record this information in the return output, so that the security of Bitcoin can be inherited and new assets can be issued directly on the Bitcoin chain without the need for a new chain. This is the Dye Coin Protocol, the first metadata protocol in history. Unfortunately, the concept of the dye coin protocol was too advanced at the time, and there were still doubts about the value of the special coin at that time. At that time, a more convincing approach was to establish another blockchain and find a new "ledger" to record asset transfers.

In February 2023, the emergence of the Ordinals protocol once again opened up people's imagination about the Bitcoin ecosystem. The Ordinals protocol assigns a number to each Cong in the order in which they are excavated, and records any data in the isolated witness field of a Bitcoin transaction, calling it an inscription, and defines the owner of the first Cong output UTXO from this transaction, who owns the ownership of this inscription.

Since any data can be placed in the witness field, it is natural to include textual data that records transaction information in the witness field. This is the BRC-20 series protocol, which puts text data including protocol version number, operation type, name of issued asset, and transfer quantity into the witness field of a Bitcoin transaction input, thereby defining the deployment, engraving, and transfer of a BRC-20 asset.

The BRC-20 agreement has received a warm response, with its main assets including $Ordi, $Sats, etc$ Ordi is the first token of the BRC-20 protocol, which was deployed on March 8th this year and was fully engraved in less than two days, with a total of 21 million tokens. Its market value reached $630 million in May and is currently around $410 million$ The popularity of Ordi has led to the continuous deployment of various BRC-20 assets, with the most representative being $Sats, which was deployed on March 9th with a total of 2100 trillion units and was not fully engraved until September 24th$ Sats had a market value that once surpassed $Ordi, and currently has a market value of around $270 million.

After BRC-20, a series of Ordinals based asset issuance protocols began to emerge, but they did not fundamentally differ, all of which included metadata in the witness field. Its biggest advantage is free deployment, publicly engraved, simple to understand, and high transparency. All information is publicly available on the chain, and everyone can view what they are trading on the chain. This characteristic has created a hot atmosphere for the BRC-20, where "gamblers" have entered, deployed or engraved assets that they believe will rise many times.

On the other hand, the BRC-20 series asset issuance agreements result in very expensive Bitcoin transaction costs, which is naturally good news for large miners. However, for small nodes maintaining Bitcoin status, the BRC-20 series agreements have a serious footprint on the chain and generate a large amount of 546 Cong UTXO, which also increases their operating costs.

Casey Rodarmor, the founder of the Ordinals protocol, tweeted on September 26, 2023, proposing the concept of a new metadata asset distribution protocol called Runes (later renamed Runstone). Casey stated that the original intention of the Ordinals protocol was to create a beautiful "art exhibition hall" in Bitcoin, but the craziness of BRC-20 is harming Bitcoin, and no one can prevent "gamblers" from participating in gambling. Therefore, he proposed the idea of establishing a cleaner metadata asset issuance protocol, so that "gamblers" can continue to "gamble" without creating a large number of UTXOs to increase node burden.

Runstone is a replica of the early coloring coin protocol, which records metadata defining assets into the op of a Bitcoin transaction_ In the return output. Op_ Return is a special Bitcoin script operation code, op_ Any instruction after return will not be executed, therefore it contains op_ The returned UTXO is considered never to be expendable, and can also be removed from the UTXOset to reduce node maintenance costs. Therefore, it is possible to_ The return output records any information (this output does not include Bitcoin), and the footprint on the chain is relatively clean, with a relatively small burden on nodes.

The concept of Runestone has sparked intense discussion, but unfortunately, it has not yet been implemented to this day. However, the founder of TRAC, Benny, quickly implemented a similar asset issuance protocol called PipeProtocol, which is also a method of storing data in OP_ Return the metadata asset issuance protocol in the output. The Pipe protocol inherits Casey's desire to create a clean footprint asset issuance protocol on the chain, as well as the core concept of the BRC-20 protocol, which is free deployment and public engraving. And this is not part of Runestone's plan. Obviously, Casey believes that free deployment and public engraving are the main culprits causing blockchain congestion in Bitcoin. Therefore, in Casey's vision, Runstone will be an asset issuance agreement led by the project party through air drop, but the market clearly prefers such methods.

The first token of the Pipe protocol, $Pipe, was deployed on September 28th, with a total of 21 million tokens and a current market value of around $30 million$ Although Pipe adopts the form of public inscription, it is currently one of the few tokens with the project owner. The TRAC team stated that $Pipe will be governed by $Tap, which is the first token of another BRC-20 like asset issuance protocol TAP developed by the TRAC team, and $Tap will be governed by $Trac, which is a BRC-20 token.

The biggest weakness of protocols such as Runestone and Pipe is OP_ The limited storage space for returns does not have a significant impact on homogeneous assets, but there are significant constraints on non homogeneous assets.

Attempts to issue assets on the Bitcoin chain have always been made, and for some highly idealistic cryptopunks, they do not believe that it is necessary to issue speculative assets on the Bitcoin chain for "gamblers" and miners to revel. They strive to avoid the impact of asset issuance protocols on the normal use of the Bitcoin network, and in order to achieve this, they spend more time developing more complex technologies.

The Bitcoin Lightning Network Development Team, LightningLabs, began developing the Lightning Network Stable Coin Protocol called Taro in April 2022 and renamed it TaprotAsset in May 2023. Subsequently, on October 19, 2023, TaprotAsset officially launched its first main network version. The vision of LightningLabs is to combine the Lightning Network to issue stable currency assets, thereby achieving global foreign exchange trading and replacing the retail transaction payment system dominated by fiat currency in some regions.

The TaprotAsset protocol is also a metadata asset issuance protocol, but TaprotAsset neither stores data in the witness field of transaction input nor in the op_ Returning output. In fact, TaprotAsset does not directly store data on the chain, but rather promises the data into a script path of P2TR type UTXO. Therefore, from the results, it can be seen that a deployment and transaction of TapootAesst hardly leaves any footprints on the chain, as in the eyes of observers, this is just a regular Bitcoin transaction that transfers money to the Tapoot address.

So is it safe like this? The answer is yes, because every time TapootAsset is transferred, a Merck proof of metadata needs to be submitted. If there are double flowers or unexpected changes, the resulting root hash value will also be different from the expected value, which will be rejected.

Due to technological complexity, there are currently not many assets issued through the TaprotAsset protocol, among which the most closely watched is the NostrAssetsProtocol, which is a Bitcoin ecosystem project that combines the Nostr protocol, TaprotAsset protocol, and lightning network. There are two types of initial tokens, $Trick and $Treat, each with 210 million tokens. Currently, only 20% are released through air drops, while the rest are currently retained by the NostrAssets team$ Trick and $Treat are assets issued through the TapootAsset protocol, and the NostrAssets team has stated that in the future, they will develop a publicly engraved way for people to freely deploy and engrave TapootAsset protocol tokens on the project platform.

However, TaprotAsset is not a perfect solution as it is technically too complex, which is not conducive to user understanding and trust, and may have unexpected vulnerabilities. Moreover, the verification cost index of TaprotAsset has increased, which is a significant cost for both users and third-party institutions. Most importantly, TapootAsset does not store metadata on the chain, so users need to save this metadata locally or have it stored in a universe similar to a third-party organization.

BRC-20 series and Runestone series

1. The biggest advantage of the Runestone series protocol compared to the BRC-20 series is also the biggest disadvantage of the BRC-20 series - heavy footprint on the chain. BRC-20 generates a large amount of abandoned UTXO, which is because the BRC-20 protocol adopts an account model when maintaining the ledger, which requires the maintenance of how many assets each "account" has. Therefore, the holder needs to engrave a "Transfer" every time they transfer to clarify the quantity that needs to be transferred to the target address. The Runestone series protocol adopts a UTXO model similar to Bitcoin when maintaining the ledger, which marks the number of transfers to the target address and the amount of change given to oneself during the transfer. This design has two benefits: firstly, it greatly reduces the footprint on the chain and reduces the pollution of asset issuance protocols compared to the token chain. Secondly, for offline indexers, the cost of maintaining the ledger is lower and the operation is simpler.

2. The Runstone series of agreements are more conducive to large-scale air drop issuance. This may not necessarily be what 'gamblers' want to see, but it may be what institutional investors are willing to see. However, this is not absolute, for example, the Pipe protocol also supports the form of public inscriptions favored by "gamblers".

3. The BRC-20 series has greater storage space. The BRC-20 series based on the Ordinals protocol stores data in the witness field of the transaction input, and this information can enjoy isolation witness discounts. Therefore, in theory, as long as the data placed in the witness field is large enough, a transaction close to 4MB in size can be created (the largest OrdinalsNFT is 3.94MB in size, and one transaction almost occupies the entire block). Introducing recursive inscription technology can also create larger non homogeneous assets. And the Runestone series will face op_ The size limit of return 80KB greatly limits the issuance of non homogeneous assets through them, and even when issuing homogeneous assets, it is not possible to publish too large transactions at once.

TaprotAsset protocol and the first two series

Taproot AssetTaprotAsset protocol and the first two series

1. Like the first two series, TapootAsset also needs to introduce third-party trust. The first two series require trust chain index, and TapootAsset needs to trust the universe that stores and verifies metadata. However, there are differences among them. The data structure of TapootAsset ensures the simplicity and reliability of Universe verification in design. However, considering the complexity of TapootAsset, which makes it difficult for users to understand and trust, the cost of Universe verification still remains uncertain. Moreover, there has been a significant investment in the construction of off chain indexes for the BRC-20 series. Therefore, it can be inferred that in the short term, TapootAssetUniverse has a relatively high comprehensive cost due to slow construction and slow user acceptance. But in the long run, the overall cost of TapootAssetUniverse may be lower than that of the BRC-20 series.

2. LightningLabs paved the way for TaprotAsset to connect to lightning networks in technical details during development, which is the biggest advantage of the TaprotAsset protocol compared to the previous two series. TaprotAsset can trade in the lightning network, which further reduces its on chain footprint and does not push up Bitcoin network fees. It also allows traders to avoid having to bear high transaction costs. On the one hand, the current BRC-20 series leads to high Bitcoin network rates, and on the other hand, users may have to bear transaction fees exceeding $10 per transaction due to UTXO fragmentation in their wallets when trading BRC-20 series assets.

3. Similar to the Runstone series, the TaprotAsset protocol is more conducive to large-scale air drop releases. But it is not absolute either, for example, Nostr Asset Protocol promises to support public inscriptions.

4. However, the TaprotAsset protocol is not as capable of issuing non homogeneous assets as the previous two series and Ordinals protocols. As Musk acknowledges, both the first two series and the Ordinals protocol write data to the blockchain, with each pixel of each image written to the blockchain. The non homogeneous assets issued through TapootAsset only promise to go up the chain, and the specific data is saved locally or globally. If data is lost for any reason, the promised hash value on the chain will have no meaning.

The main difference between different metadata protocols is the different recording positions, recording methods, and ledger maintenance methods of data in the blockchain. These differences determine the characteristics of different protocols. Protocols that record data in witness fields, such as the BRC-20 series protocol, have sufficient data space but heavy on chain footprints, and their account models generate a large amount of discarded UTXO, which brings burden to nodes. Record data in op_ The return protocol, such as the Runstone or Pipe protocol, has been improved in this regard. The TapootAsset protocol, which promises data on the chain, has the cleanest on chain footprint, but its technology is complex and not conducive to user understanding and trust.