Bitcoin Ecosystem Comprehensive Depth Analysis

The Bitcoin ecosystem has become vibrant since 2023, driven by the Ordinals protocol and BRC-20, allowing Bitcoin, which was originally only a store of value and medium of exchange, to also serve as a platform for asset issuance, greatly expanding the use cases of Bitcoin.

This article will delve into the historical development of the Bitcoin ecosystem and the three core directions within the ecosystem: asset issuance protocols, scaling solutions, and infrastructure, analyzing the current state, advantages, and challenges of their development, and exploring the future of the Bitcoin ecosystem.

1. Why do we need the Bitcoin ecosystem

Bitcoin, as the earliest blockchain, holds the highest recognition and trust among the public and investors. Its degree of decentralization is high, and the founder, Satoshi Nakamoto, has vanished; the entire chain is driven by the community's development. Additionally, innovative Fair Launch venues like inscriptions have emerged within the Bitcoin ecosystem, granting retail investors more voice.

These characteristics mean that although BTC is weaker than Ethereum in terms of TPS and block time, there are still many developers who hope to introduce smart contracts and carry out application development on it.

2. Analysis of the Current Development Status of Bitcoin Ecological Projects

1. Asset Issuance Agreement

Currently, there are mainly the following types of protocols:

• Ordinals & BRC-20: By numbering Satoshi and attaching content, it achieves functionalities similar to NFTs. BRC-20 implements ERC-20 token functionalities based on Ordinals.

• Atomicals & ARC-20: Indexing by UTXO, embedding content in UTXO.

• Runes & Pipe: Engrave Token data in the UTXO script, Token transactions rely on the Bitcoin network.

• BTC Stamps & SRC-20: Store data in BTC's UTXO to ensure data permanence.

• ORC-20: An upgraded version of BRC-20 that provides greater flexibility and richness in economic models.

• Taproot assets: A protocol directly integrated with the Lightning Network.

2. On-chain Scalability

Mainly includes SegWit upgrade and Taproot upgrade:

• SegWit Upgrade: By reorganizing the transaction data structure and separating the transaction signature data, it effectively increases the block capacity.

• Taproot Upgrade: Introduces Schnorr signatures, new script types, etc., improving privacy and smart contract functionality.

3. Off-chain scaling: Layer2

Main types include:

• State Channel: Like the Lightning Network, it builds communication channels off-chain for high-frequency trading.

• Sidechains: such as Rootstock, Stacks, etc., independent blockchain networks running in parallel with the main chain.

• Rollup: Such as Merlin Chain, B² Network, etc., transferring computation and data storage from the main chain to the Rollup layer.

• Others: For example, the RGB protocol operates smart contracts in client-validated mode.

4. Infrastructure

Mainly includes:

• Wallet: Wallets like Unisat that support Ordinals and BRC-20.

• Decentralized Indexing: Projects like Trac Core are dedicated to addressing the centralization issues of BRC-20 indexing.

• Cross-chain bridge: such as Polyhedra Network, improves Bitcoin interoperability.

• Staking Agreement: Platforms like Babylon allow BTC to be staked on PoS chains for returns.

3. Challenges and Limitations of Bitcoin Ecosystem Development

1. BRC-20 needs to solve the problem of decentralized indexing.

2. Current expansion is still in a very early stage and cannot support large-scale applications.

3. The Bitcoin ecosystem needs to find its own native scenarios; it is difficult to break through by merely copying existing applications.

4. Summary

The explosive popularity of inscriptions has caused users and builders to refocus on the Bitcoin ecosystem. In the future, the Bitcoin ecosystem needs to seek native application scenarios around its asset attributes, focusing on aspects such as asset security, issuance, and returns, rather than simply replicating the development path of Ethereum. Currently, the Bitcoin ecosystem is still in its early stages, and there are still huge opportunities and exploration space for teams that truly want to innovate.