Risks and opportunities of Bitcoin ecology (1)

Over the years, my focus on ecology and technology has been mainly on Ethereum, not on Bitcoin. Even when it comes to Bitcoin, I basically only regard it as a value benchmark and value store in the encryption ecology, and pay little attention to and pay little attention to the technological progress and ecological applications in its ecology.

However, the emergence of various protocols in the recent period makes me feel that it is still necessary to let go of the contempt for the Bitcoin ecology that existed in my heart, and go deep into each protocol to understand what they are doing? What exactly are the various new types of assets being built around these protocols? And is it possible for these new types of assets to gather a new consensus to generate new value tokens?

**The value of assets in an ecology generally comes from two main sources: one is the consensus formed purely because of culture, communication, etc. (typically NFT) out of practical use; the other is the direct result of actual use Value (such as some DeFi tokens that can generate equity). **

In this article, we only discuss the first type: to assign value to tokens purely because of the consensus formed by culture, communication, etc.

**At present, the token assets created by various protocols based on the Bitcoin ecology are basically divided into two categories: one is homogeneous assets, similar to Ethereum’s ERC-20 tokens; the other is non-homogeneous Assets, similar to Ethereum's ERC-721 tokens or ERC-1155 tokens. **

For the first type of homogeneous tokens, the most popular ones are of course the BRC-20 standard and the upgraded ORC-20 standard based on the BRC-20 standard. Both types of standards are based on the Ordinals protocol.

There are already a lot of related articles on the Internet about the technical details of these two types of standards and the Ordinals protocol, so I won't repeat the technical details here.

What I am most concerned about is: Are the assets generated by **Ordinals protocol safe? Is it as immutable as widely spread? **

This is the core and fundamental guarantee of the value of all encrypted assets, and traditional Internet digital assets cannot be compared with encrypted assets at all.

**This core and fundamental guarantee technically comes from two aspects: one is the blockchain on which token assets are based, and the other is the protocol for constructing token assets. **

Ethereum ERC-20 tokens rely on Ethereum, and the way to construct assets is an immutable smart contract. These two points guarantee the fundamental technical security of ERC-20 tokens.

The Ordinals protocol relies on Bitcoin, which undoubtedly reassures everyone. But what about its protocol? In fact, there are certain hidden dangers. Its protocol data exists in the witness data, and theoretically the witness data can be deleted through a hard fork.

**So fundamentally there are certain hidden dangers in Ordinals, and this hidden danger comes from the protocol rather than the underlying blockchain. **

Although ORC-20 has made great improvements and enhancements compared to BRC-20, in my opinion there is no fundamental improvement and change, so these two types of standards can basically be regarded as one.

And if these two types of standards can eventually produce assets that are valuable purely because of culture and communication, I am afraid that they will mainly be the early token assets created in the BRC-20 standard, because those early assets occupy the advantage of the sky and are easier to condense consensus.

As for the Bitcoin NFT created by using Ordinals, there is a saying on the Internet: It is said that the data of Bitcoin NFT is all on the chain, while the data of Ethereum NFT (especially the image data) is not on the chain, so Bitcoin NFT is better than Ethereum. The workshop is safer.

This statement is actually somewhat misleading.

First of all, the NFTs on Ethereum now also have NFTs that store pictures in the whole chain. Secondly, many NFT projects on Ethereum do not store data on the chain not because of technical failure, but because it is not cost-effective economically.

The ERC-2569 standard of Ethereum defines how image data is stored in Ethereum: that is, the image is completely stored on Ethereum with a file in SVG format.

This standard was proposed by a domestic geek team. It was submitted to the Ethereum EIP standard library in 2019 and created an NFT whose pictures completely existed on the chain that year. Around 2020, overseas teams began to use this method to create a full-chain storage NFT project and sell it on Opensea.

However, a more milestone event is that Larva Labs, the original team of cypherpunks, also used this method to re-upload all 10,000 punk pictures to Ethereum for full-chain storage in 2021, making these 10,000 cypherpunks The avatar and Ethereum coexist.

But ** no matter what standard storage is used, a basic principle will always remain the same: that is, as long as the amount of data is large, the cost will be high, regardless of which chain. **

In fact, the size of NFT images stored on Bitcoin is also limited to a certain extent, and images that are too large cannot be stored. This is also out of economic cost control.

Therefore, whether storing pictures on Bitcoin or storing pictures on Ethereum, there are no technical obstacles, only economic obstacles.

Encrypted world, welcome to communicate and discuss together!