Original Title: "Kernel Ventures: Inscription New Narrative - Can Inscription Run a New Track in the Ecological Empowerment?"

Original Source: Stanley, Kernel Ventures

TL；DR

This article delves into the development trends of the Bitcoin inscription field and the characteristics of various protocols.

· Analyze protocols such as Ordinals, BRC20, Atomical, RGB, and Pipe on the Bitcoin chain and other Pow chains such as Dogechain and Litecoin, as well as on the Ethereum chain Ethscriptions and Evm.ink, and the Solana chain SPL20 protocol. Compare them in terms of fees, divisibility, scalability, and user experience, with a particular emphasis on the low fees and high scalability of the RGB protocol.

·Market and product deduction of the inscription ecology, complete infrastructure of the wallet end, launch of the Bitcoin chain AMM DEX, and there may be more functions in the future, such as lending and derivatives. UniSat opens API interface, which can generate a lot of tool projects.

Overall, this article provides a detailed exploration of the dynamics in the field of Bitcoin inscriptions, and looks forward to the development of inscriptions under ecological empowerment, providing readers with a comprehensive understanding and outlook.

Market Background of Inscriptions

Market Background

Since the appearance of the Bitcoin Ordinals protocol in January 2023, a wave has been stirred up on the Bitcoin chain for BRC20, Ordinals assets, and more. Some call it the "world of retail investors" because of the Fair Launch mode of BRC20 and other inscriptions, where all chips are minted by retail investors themselves, without institutions, project parties, or insider trading. The cost of minting Ordi is about $1 per sheet, and after being listed on Gate Exchange, it rose to $20,000 per sheet. The exaggerated increase in value has continued to drive up the popularity of the BRC20 protocol, attracting numerous Ordinals players to join in, and causing the Gas on the Bitcoin chain to continue to rise, with the lowest confirmed Gas reaching as high as 400 s/vb at its peak, breaking the highest Gas in the past three years.

This article will start by exploring the various on-chain protocols and their respective inscription ecosystems, and will also look ahead to the development trends of inscriptions under the empowerment of the ecosystem.

Data Overview

A 3-year Bitcoin block fee rate chart shows that in May-June and November of this year, the fee rate skyrocketed, which also reflects users' enthusiasm for the inscription protocol. Not only the BRC20 protocol, but various protocols based on the Bitcoin network were also released during this stage, bringing a wave of "Bitcoin Summer".

Bitcoin fees in the past three years, image source: Mempool.space

From the casting data of Inscriptions, the casting quantity appears to be stable and maintained at a high level.

Ordinals Inscription Casting Quantity, Image Source: Dune @dgtl_asserts

Race Analysis

This article will classify each chain and analyze the inscription protocols on their chains.

Bitcoin Chain

Ordinals / BRC20 Protocol

On January 21, 2023, Bitcoin developer Casey Rodarmor launched the Ordinals protocol, which can engrave metadata on the Bitcoin chain and give it a numbered inscription. In March of the same year, Twitter user @domodata released the BRC20 protocol, which evolved token minting into a string-based on-chain process. On November 7, Binance launched the BRC20 flagship $ORDI, which drove $ORDI to a significant increase with a daily increase of nearly 100%.

As the first protocol in the inscription ecology, Ordinals also has many problems:

·BRC20 only supports four-letter tokens, which has significant limitations.

·The name of the casting will be attacked by the Zhi Zi, and the casting transaction is easily preempted.

·Ordinals protocol will cause significant redundant data to the Bitcoin network.

For example: The casting inscription of BRC20, after the casting is completed, can send tokens through the transfer inscription. The original casting inscription becomes invalid, which greatly causes data occupation. This is also one of the reasons why some early Bitcoin geeks do not want to support Ordinals.

Atomical Protocol

The ARC20 protocol of Atomical uses a聪 to represent the deployed token and removes the four-character limit, allowing for more diverse gameplay. A unique project, Realm, where each registered prefix text has the pricing power of all suffixes. In addition to basic functions such as transfer and receipt addresses (payment names), Realm can also be used for building communities/DAOs, identity verification, social profiles, and other scenarios, which fully aligns with our vision for the development of DID.

However, ARC20 and $ATOM are still in the early stages and require further development of wallets and markets.

Realm forging quantity, image source: Dune @sankin

Pipe Protocol

Ordinals founder Casey proposed a Rune implementation specifically for issuing FT, which can directly write Token data in the script of UTXO, including Token ID, output, and quantity. The implementation of Rune is very similar to ARC20, and transfers tokens directly to the BTC mainnet for processing. The difference is that Rune writes the Token quantity in the script data.

Dogechain

Litecoin

Ethscriptions

Evm.ink

Solana Chain

SPL20

The biggest flaw of Solana's Inscription is the same as Eth's, which is its inability to be split. If it cannot be split, it is essentially an NFT, which cannot have the same liquidity and operational convenience as tokens, let alone the vision of future Dex Swap.

The founder of the protocol is the founder of TapPunk on the Tap protocol. The team behind the largest boosting platform, Liberplex, is very proactive. Since its launch, the team has made rapid progress in development, completing operations such as hash indexing and immutable attribute changes. They also live code and answer questions on the official Discord channel. The trading market, Tensor, has also been successfully integrated and is currently progressing rapidly.

The first inscription $Sols has a casting cost of about $5, with a highest price of 14SOL on the secondary market. As of writing, the floor price is 7.4SOL, equivalent to $428. The daily trading volume has exceeded 20,000 SOL, equivalent to about $1.2 million, with an active turnover rate.

Core Comparison

Comparison of mainstream token standards, image source: Kernel Ventures

This chart compares several mainstream token protocols from four dimensions: fee rate, divisibility, scalability, and user base. It is clear from the chart that the RGB protocol has the most optimal fee rate, with transactions being almost costless due to its reliance on the Lightning Network.

·In terms of divisibility, recent protocols such as Solana and EVM cannot be split and are awaiting further development.

Comparison of Protocol Tokens, Image Source: Kernel Ventures

From the analysis of the mainstream tokens of various protocols, it can be seen that the current market value of mainstream tokens is around 600 million US dollars, excluding other small market value currencies. Moreover, Ordi accounts for 80% of the total market value, so there is huge development space for other protocols, and protocols such as RGB are still being improved and have not yet issued tokens.

From the perspective of the number of holders, Pols and Ordi dominate, while other protocol holders are relatively small in number. In addition, the inscription of Eths & Solana has not been split, so we need to wait for the development in the later stage before conducting a holding analysis.

Innovation Points and Risk Analysis

Currently, the biggest use of inscriptions is Fair Launch, which allows users to fairly participate in projects. However, the development of the inscription industry cannot be limited to just Fair Launch.

Recently, the development of the inscription track has shown significant vitality and innovation. The growth of this track is mainly due to the key technological advancements of Bitcoin, such as SegWit, Bech32 encoding, Taproot upgrade, and Schnorr signature. These technologies not only improve the transaction efficiency and scalability of the Bitcoin network, but also increase its programmability.

For example, the smart contract in the RGB protocol, if built on the Lightning Network of Bitcoin, not only has a very high TPS (40 million), but also relies on the largest blockchain ecosystem of Bitcoin.

When it comes to risks, it is important to pay attention to certain Launchpads, such as the recent Ordstater by Rug. Due to the success of MUBI and TURT, many Launchpads have emerged in the market, and some platforms have directly Rug Pulled after IDO. Before participating in a project, please read the white paper carefully, study the background, and avoid blindly following KOL to rush into the project.

The Future Projection of Inscription Ecology

Market Forecasting

Galaxy Research and Mining predicts that by 2025, the market value of the Ordinals market will reach $5 billion, with only 260,000 inscriptions at that time. However, the number of inscriptions has now reached 33 million, an increase of 126 times in just six months. The market value of $Ordi has also reached $400 million, and the market value of $Sats has reached $300 million. It can be seen that the prediction for the entire inscription market is still far underestimated.

Product Deduction

Currently, the trading activities of BRC20 are mainly concentrated on OKX and UniSat. This year, OKX's Web3 wallet, which is the main promotion, has provided a good experience for BRC20 asset trading. The completeness of the wallet-side infrastructure has further smoothed and shortened the path for "Auntie investors" to enter, allowing them to smoothly enter this new market. With the emergence of various protocols, different protocols have appeared in different trading markets and their own trading wallets, such as Atomicals, Dogechain, Litecoin, and so on. However, the wallets currently available on the market are all modified versions of UniSat, based on UniSat's open source. If we compare Bitcoin (POW) with Ethereum, we can compare various protocols to various chains. The essential difference is only in the Chain ID. Therefore, future products may be UniSat's access to different protocols, and can switch between different protocols when needed, directly operating in the wallet, similar to the chain switching of the Little Fox wallet.

Comparison of various protocol wallets, image source: Kernel Ventures

Race Simulation

With the continuous influx of funds into the inscription market, users are no longer satisfied with the speculation of memes and are beginning to turn their attention to inscription-based applications. UniSat also brings innovation to BRC20. Through BRC20-Swap, users can easily exchange BRC20 tokens like AMM DEX. As the first product to improve the liquidity of the Ordinals ecosystem, it is expected to unleash the potential of the Bitcoin DeFi ecosystem, and more features such as lending and derivatives may appear in the future. Recently, UniSat has also opened API interfaces, which is very friendly to small developers and can call many functions, such as automatic batch scanning of orders, monitoring inscriptions and automatically minting, which can generate a lot of tool projects.

The transaction fees on the Bitcoin network are relatively expensive. For second-layer solutions like Stacks and RIF, although the fees have been reduced, there is not enough user base and infrastructure. Therefore, Bitcoin's EVM is a good narrative.

For example, BEVM is a Bitcoin ecosystem Layer2 based on the Ethereum network. The on-chain Native Token is also BTC. Users can cross-chain Bitcoin to BEVM through the official cross-chain bridge on the main network. BEVM's EVM compatibility makes it easy to build applications on EVM chains, and Defi, Swap, and other applications can be migrated from other chains.

However, there are still many issues that need to be considered for Bitcoin's EVM, such as whether the assets transferred across chains can maintain decentralization and prevent inflation, the sequence consensus problem of EVM node, and how to synchronize Txns to the Bitcoin network (or decentralized storage). Because the threshold for Ethereum's layer 2 is relatively low, the security will also decrease accordingly. This should be the primary concern for all those who are interested in Bitcoin's EVM.

Image source: BEVM Bridge

Summary

This article delves into the development trends and characteristics of the Bitcoin script field. By analyzing protocols such as Ordinals (BRC20), Atomical, RGB, and Pipe on the Bitcoin chain, as well as other Pow chains, and Ethereum chain Ethscriptions and Evm.ink, and Solana chain SPL20 protocol, their differences in fees, divisibility, scalability, and user aspects are compared. The conclusion is that divisibility is still a bottleneck, and RGB is more comprehensive and promising among other protocols on the Bitcoin chain.

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