In recent months (around April 2023), with the deep exploration of technologies such as Ordinal, Tarproot, and chromatic currency by many developers, a series of protocol products have emerged in the Bitcoin ecosystem, the most famous of which is BRC 20, which is used for various NFTs and homogeneous tokens.
The technical stack of the currency circle can be divided into two categories: how to issue currency and how to use currency.
The BRCxxx series is about how to issue currency.
Ordinal is about how to use currency (Bitcoin), defining each satoshi in UTXO as a new thing.
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The coin-issuing technology developed based on Bitcoin is essentially a chromatic currency, and BRCxxx is also a chromatic currency.
The most successful one is the omni protocol. The stablecoin USDT-omni has been listed on almost all exchanges and wallets. However, it is only the stablecoin USDT-omni that is a short-term successful product, and other functions of the omni protocol, including dex, have failed. Even the USDT-omni stablecoin has almost disappeared now.
The Bitcoin ecosystem has also developed various technologies on how to use currency, and the most successful one is currently the Lightning Network.
The Lightning Network expands the use of Bitcoin and achieves fast and low-cost payments.
Sidechain technology represented by RSK and client verification technology represented by RGB belong to both currency issuance technology and currency usage technology. They have also developed in the Bitcoin ecosystem for a long time, but their influence is minimal.
Bitcoin core developers are actually most concerned about the currency usage technical stack, and they basically have a negative attitude towards the currency issuance technical system.
In the eyes of Bitcoin core developers, various currency issuance methods are scams, pyramid schemes, and junk currency. Chromatic currency schemes based on opreturn have been dealt with by core developers in history, and the actual protocol limits the byte space that Opreturn output can use to limit the development of chromatic currency.
The main work of Bitcoin core developers revolves around how to use currency. I will read the change documentation of every bitcoin core version. I feel that the main work of Bitcoin core developers can be summarized as follows.
1. Maintaining the consensus mechanism.
This is a top-level task, which can be understood as all changes to the Bitcoin protocol and products cannot harm the consensus of the chain, that is, it cannot cause the chain to split.
Technically, all protocol and product changes either use a soft fork or can only make changes above the consensus layer.
Changes involving soft forks are of particular concern to Bitcoin core developers.
The most typical examples are SegWit, Taproot, and Schnorr signature soft forks. These soft forks are typical technical improvements on how to use the currency.
Although maintaining consensus cannot directly be said to be the use of the currency technical system, looking at the specific improvements inside, I found that most of them are changes aimed at reasonable use of the currency.
2. Optimizing the cost of using the currency, including reducing the byte size of node transactions, reducing the demand for block space, reducing the bandwidth demand of the network, and managing miner fees, etc.
Typical developments in this category include RBF (Replace-by-Fee), SegWit, Lightning Network, etc.
3. Optimizing the security and privacy protection of using the currency. This is of particular concern to Bitcoin core developers, and there are a large number of pull requests related to privacy protection. It can be said that privacy is the lifeblood of Bitcoin core developers.
Typical developments in this category include Schnorr, Taproot, threshold signatures, PSBT, CoinJoin, etc.
4. Developing a contractual management cost method for currency.
The ownership of Bitcoin is basically determined by private keys, that is, only private keys can spend UTXO, but this limits the application of Bitcoin. Like Ethereum’s ERC20, because ownership is managed by contract code, the programmability of the code is good, and applications can be varied.
There are also a large number of Bitcoin developments aimed at designing more application scenarios. The most typical and mature one is P2SH. P2SH allows the unlocking script of UTXO to be designed as the hash of any information, which greatly expands the application direction of Bitcoin.
MAST (Merkleized Abstract Syntax Trees) is a direction that has been studied a lot in the Bitcoin ecosystem in the past year. MAST encodes complex Bitcoin scripts into a hashed binary tree, which can enable specific UTXOs to be set as partially redeemable scripts. For example, a UTXO can be set to have three redemption scripts, any of which can be designed according to specific conditions.
Covenants is a technology stack designed to drive the most ambitious bitcoin contract management spending (the largest ambition I’ve seen so far). It can be simply understood as locking bitcoin in a vault, and the way to open the vault can be designed to be very complex.
I guess Covenants is the DeFi of Bitcoin. I think this direction is the one that Bitcoin should pursue the most.
In addition, I think that in the development of BCH technology, Covenants has received more attention and there are already usable protocols and products like AnyHedge.
5. Improvement of Scripts.
Bitcoin’s programmability is based on something called a script engine, which I can’t describe clearly. I simply understand it as a virtual computer composed of a pile of instructions (Opcode), similar to x86, ARM architecture and other things.
The improvement of this type of protocol feels very advanced, and I can’t understand it. Major changes to the bitcoin core often involve the development of new opcodes.
Changes to bitcoin receiving addresses are often part of script improvements, and new transaction formats often bring new address changes. The commonly used bitcoin addresses now begin with 1, 3, and bc1.
6. Before 2017, updates to bitcoin core node software often involved mining issues, but now they are rare.
7. Optimization of the P2P network. I don’t understand this, so I always skip it.
8. Lightning network-related, the lightning network is something that bitcoin core developers attach great importance to, and will often do underlying optimizations in response to the needs of the lightning network.
I think that the development direction of Bitcoin should be more focused on how to use Bitcoin rather than how to issue coins.
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