Uniqueness of BRC20, Atomicals, RUNE, Taproot Assets, and other protocols explained in one article’.

Exploring the Distinctive Features of BRC20, Atomicals, RUNE, Taproot Assets, and Other Protocols All in One Article

Author: dt X Haotian; Source: DODO Research

With the market trend driven by Bitcoin spot ETF, the most significant increase is definitely a large number of BTC ecological-related protocols. Last week, Binance launched the $ORDI token, which has the most community consensus, in the BTC Ordinals BRC20 protocol. The BRC20 sector and other derivative protocols built on BTC have instantly filled with FOMO sentiment. BRC20, Atomicals, RUNE, PIPE & Taproot Assets, and various related protocols are flooding my Twitter feed. So what are the differences between these protocols?

In this week’s CryptoSnap, DODO Research X Haotian (@tmel0211) will introduce the unique features of these protocols in the simplest and easiest to understand way.

Ordinals BRC20

Ordinals is a project initiated by developer Casey Rodarmor. After the Bitcoin SegWit upgrade, it allows more information to be included in a single block through the separation witness data. Then, with the Taproot upgrade, by introducing a new scripting support method, it improves the flexibility and functionality of Bitcoin scripts. Based on these two major updates, Ordinals emerged earlier this year. Ordinals actually inscribes data (such as images, texts, audios, etc.) on Bitcoin’s satoshis, or more specifically, on specific unspent transaction outputs (UTXOs). When this UTXO is spent, the associated inscribed data is also transferred, thereby achieving the concept of asset transfer.

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BRC20 was conceived by anonymous developer Domo in March this year. Its concept is to establish a set of specific formatted JSON data packets and inscribe them on the BTC chain through Ordinals. It reads and manages accounts through off-chain indexing platforms. Deployers can decide the total number of tokens, names, and other parameters and follow the first-come, first-served principle. Each unique name is only allowed to be registered once, and $ORDI is the first BRC20 token deployed by Domo.

BRC20 Token Deployment Format Standard Source: https://domo-2.gitbook.io/brc-20-experiment/

When Binance listed the $ORDI token, it mistakenly linked the token’s official website introduction to the Ordinals protocol, which was severely clarified by Casey, the founder of Ordinals. ORDI is only one of the tokens under the BRC20 standard of the Ordinals protocol and is not associated with the official Ordinals. Casey has even criticized the BRC20 standard for creating too many junk transactions on Twitter.

In addition, the BRC20 token has also been criticized by many people because most of its functions are confirmed through off-chain indexing, and its transfers are not executed on the BTC main chain. Many consider it too centralized and unnecessary in terms of technology.

Atomicals

Atomicals have made more optimizations for Ordinals and BRC20. Unlike Ordinals, which was designed specifically for NFTs, Atomicals focuses more on fungible tokens. Addressing the shortcomings of BRC20’s excessive reliance on centralized off-chain indexing, Atomicals utilizes and expands the Bitcoin’s UTXO model. Each satoshi’s UTXO represents a specific Atomical token or digital object, allowing decentralized creation and management of complex digital objects and token systems (ARC20) on Bitcoin.

Its features include:

• Using the smallest unit of Bitcoin called “Satoshis” as the base “ATOM” to represent tokens.

• Enabling the creation, transfer, and updating of digital objects on the Bitcoin network.

• Providing a decentralized and Bitcoin-compatible method of tokenization.

• Increasing fairness and decentralization in the minting process through Proof of Work (POW).

• Aiming to expand the functionality of Bitcoin to support wider applications such as social media, games, and identity verification.

RUNE & PIPE

The RUNE protocol is an idea conceived by Casey Rodarmor, the founder of Ordinals. It arose from the observation that the existing tokenization schemes (such as BRC20, Taproot Assets, etc.) on the Bitcoin network have their own flaws. The idea was to create a UTXO-based tokenization protocol.

Summary of key features and design principles:

• Based on UTXO: Balances of Runes are held by UTXOs, and each UTXO can contain any amount of Runes.

• Transactions and protocol information: Outputs with specific scripts are considered part of the protocol information. These scripts specify how Runes are transferred and allocated.

• Flexibility: The transfer of Runes is defined by interpreting data pushes in transactions, allowing for flexible allocation of Runes to different outputs.

• Issuance: If there is a second data push in the protocol message, it is considered an issuance transaction, allowing for the creation of new Runes.

• Simplicity and decentralization: The Runes protocol strives to be as simple as possible, relying on on-chain data, having no native token, and being compatible with Bitcoin’s UTXO model.

• Symbol allocation: Runes can have associated symbols, but the protocol does not attempt to prevent symbol squatting to maintain simplicity.

Rune currently exists only as a conceptual design, with no actual applications. PIPE, on the other hand, is a protocol implemented by BennyTheDev, a renowned developer in the Bitcoin ecosystem, based on the technical architecture mentioned in Casey’s article. The PIPE Protocol is an important component in BennyTheDev’s TRAC ecosystem, which, in addition to PIPE Protocol, includes the BRC20 token $TRAC, Ordinals NFT.Blitmap, and the OrdFi ecosystem protocol TAP Protocol developed by BennyTheDev for BRC20, enabling token exchanges (Swap), and other DeFi functionalities.

Taproot Assets

Taproot Assets is a protocol launched by the esteemed Lightning Labs. Its goal is to create and trade various digital assets on the Bitcoin network, integrating with the Lightning Network. The Lightning Network has been a well-established Bitcoin derivative protocol for many years, recognized by the Bitcoin community. With the update of Taproot Assets, the Lightning Network expands from its original point-to-point “payment channel” mechanism to point-to-multipoint distribution, enabling the circulation of assets. Token information is written into the UTXO output script of the Bitcoin mainnet as registration, while transfer transactions and other functionalities are implemented within the Lightning channels. The biggest difference between Taproot Assets and BRC20 or ARC20 is that the issuance is not freely minted but requires a pre-minted owner for distribution. This approach has the advantage of attracting stablecoins like USDT to deploy, but the downside is that token distribution is not as fair and free as in BRC20 or ARC20.

With multiple rounds of funding and public support from Jack Dorsey, the founder of Twitter, Taproot Assets of Lightning Network Lab is more robust in terms of legitimacy than grassroots projects. Such background and support have made many in the community optimistic about the future of Taproot Assets.

Author’s viewpoint

DT @19971122:

Besides the Bitcoin ecosystem, speculative frenzy has also swept through public chains based on the Ethereum Virtual Machine (EVM), led by ethscriptions. Some comments metaphorically compared it to BRC20 representing people who still walk to work, while ETHS represents people with cars choosing to carry their cars on their backs while walking to work. Technically, many believe that conducting experiments on the Bitcoin chain after having Ethereum smart contracts seems unnecessary. However, for some geeks, conducting various novel experiments on the original Bitcoin chain is a kind of romance. For speculators, these experiments provide new opportunities as they are low-cost chips and come with innovative narratives, making them ideal speculation targets. Even if considered foolish by some, it is still consensus. When the speculative value becomes the default fair value in the minds of many, its value is no longer limited to being seen as worthless.

Personally, I see the cryptocurrency field as fundamentally driven by narratives. Most participants stay in this circle to make money. Therefore, I am not against speculation. Each bull market is accompanied by new speculation, which is a normal phenomenon. The bull market three years ago was also filled with criticism of NFTs, but that did not prevent many from getting rich through NFTs. Understanding and participating moderately in speculation, following the so-called narrative, can prevent you from falling behind the times. It is crucial to have a clear understanding of this point in order to make money and continue to progress in this field.

Haotian @tmel0211:

Regarding the current narrative frenzy in the Bitcoin ecosystem, whether it’s Ordinals, BRC20, Taproot Assets, or even BitVM, there are merits to each of them. My viewpoint is to understand the underlying evolutionary logic and potential risks of each narrative, and make a “clear” decision.

Take Ordinals as an example. As an indexer, its micro-innovation gives Bitcoin ecosystem data the “programmable” characteristic, and the data is decentralized within the Bitcoin network, which also aligns with the interests of miners. This is a very good narrative. But the problem of low liquidity for third-party indexed ledgers and indexed ledgers built by major centralized exchanges has not yet surfaced. When liquidity becomes significant, the delay friction between ledgers and the “consensus challenges” between indexing platforms will become the biggest problems. Without evaluating the current wealth effect, there are still many obstacles to overcome in the Ordinals narrative from a future technical logic perspective.

The reason why there are multiple Layer2 solutions for Ethereum, but Ethereum’s core arbitration layer DA is not lost. If Ethereum completely abandons its verification and computation capabilities and only serves as a data bulletin board, it will naturally be difficult to fully leverage the absolute security value of Ethereum’s arbitration layer. This is exactly why many Layer2 solutions, like Rollup, have emerged. Because the arbitration capabilities of the main network still exist.

Let’s take a look at Ordinals. If the Bitcoin network cannot provide absolute security, the off-chain indexing and accounting consensus will have difficulty entering a “stable” state for a long period of time. The very thing that may undermine the Ordinals consensus is perhaps Ordinals itself. After all, the Bitcoin network lacks arbitration and interpretational capabilities.

In fact, people believe in the potential direction of Bitcoin’s scalability and value the absolute security consensus of the Bitcoin network. If Bitcoin cannot apply its security function to other solutions, how can we have high expectations for those solutions?

Of course, if we are envisioning boundless possibilities, then the above technical logic is worth considering. But if it’s not related to the technological prospects and we’re just hoping to gain some wealth effect, then it falls outside the scope of my evaluation; we’ll leave that to the market.

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