Since the launch of the Bitcoin NFT protocol in February, it has attracted a series of attention. Some Bitcoin researchers believe that BRC20 is not the best solution and that Bitcoin Layer2, such as RGB, is a better choice. Brutoshi and 0xHelen, the leaders of Mempool, invited Bitcoin researchers AJian and Jeffrey Hu, the technical director of Hashkey Capital, to the Mempool blog to discuss their views on Bitcoin Layer2, including BRC20.
According to Arjen and Jeffery Hu, the BRC20 protocol is very similar to the previous Omni Layer protocol, both of which embed small pieces of data in transactions using Bitcoin’s OP_RETURN script, thereby writing token information outside of Bitcoin on the Bitcoin chain. First, both protocols write data on the chain and divide the protocol design into two layers. Secondly, their core solution to the double-spend problem is that UTXOs cannot be spent twice. Although Omni Layer has been proven to be impractical, can BRC20, which is highly similar, develop better? In the opinion of our guests, RGB may be a better method.
The RGB protocol proposes a more scalable, privacy-focused, and future-oriented solution. Its core idea is to use the Bitcoin blockchain only when necessary, remove token transfer verification work from the full-chain consensus layer, and place it off-chain, where it is verified only by the receiving client, while using Bitcoin’s decentralized network to prevent double-spending and censorship resistance. Its features include: 1) one-time sealing and off-chain transfer: compared to the Omni protocol, RGB protocol only puts a hash value; 2) self-verification: allowing users to independently verify the contract status on a specific UTXO and verify whether all contract status transitions are safe or not, and then trigger a smart contract system using a Bitcoin UTXO transaction; 3) censorship resistance: RGB does not require the recipient to provide a clear UTXO, but adds a confusion value to the UTXO to ensure the privacy of the recipient.
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Jeffery Hu divides Bitcoin layer2 into four categories: 1) Rollup: compared to Ethereum’s stronger smart contract functionality, Rollkit, Alpen and other Rollup projects on Bitcoin play the role of data availability layer. However, due to Bitcoin’s reputation as the safest chain, this solution also has its advantages in certain application scenarios.
2) State channels: the most typical is the Lightning Network, whose idea is to open a “green channel” outside the blockchain, conduct a large number of high-frequency and small-value transactions off-chain, and finally settle the data on-chain. Issues such as confirmation of off-chain transactions and payment channels are solved through technologies such as RSMC and HTLC.
3) Sidechains: the interaction between sidechains and Bitcoin mainly involves sidechain verification of information on the Bitcoin main chain, followed by subsequent execution. Conversely, Bitcoin’s main chain cannot trust sidechains without verification, or have all miners verify whether the sidechain transaction has occurred. Therefore, generally, it is in the form of a consortium sidechain, similar to a small group or a few members witnessing each other, achieving bidirectional anchoring.
4) Client verification: one type is the reinterpretation layer, such as Ordinals, Omnilayer, and BRC20, which all redefine or reinterpret the meaning of transactions on the existing main chain through these technologies. The other type is the omission layer, such as the Lightning Network, which writes the final settlement or some commitment information on the chain, and many intermediate transactions are completed off-chain using Bitcoin’s security.