Original | Odaily Planet Daily
Author | Nanzhi
UTXO
Definition: UTXO (Unspent Transaction Output) is a common data model in blockchain technology. UTXO is a way of recording the state of a transaction output that keeps track of each unspent transaction output to determine which Bitcoins belong to which address.
Simple understanding:
Each UTXO is like a banknote, it has a specific denomination (number of Bitcoins) and has a lock attached to it that can only be opened by a private key (key). When you want to send Bitcoin, you need to select some banknotes, merge them into a new one, and relock it with the recipient's lock. This is basically how a Bitcoin transaction works.
Example: If you have two UTXOs, one worth 10 bitcoins and the other worth 20 bitcoins, you can merge them into a new UTXO with a total value of 30 bitcoins, and then re-lock it with the recipient's address. In this way, you have completed a transaction, sending 10 bitcoins and 20 bitcoins to the recipient, and generating a new UTXO.
For example, Cathy in the figure below obtained a UTXO of 10 BTC from Bob and a UTXO of 20 BTC from Alice. Her "balance" can be understood as 30 BTC, and Cathy can disassemble, combine and send these UTXOs to the outside.
One thing to note here is that external transfers are not about "taking out" a portion of funds from an individual's balance and then transferring them out, but about splitting them into one or more UTXOs and "transferring" the funds that are not transferred out to oneself. This is crucial to understanding Ordinals.
ordinals
serial number:
Definition: The total number of bitcoins is 21 million, and each bitcoin contains 100 million Satoshis (sats). The Ordinals protocol numbers these sats according to the order of output and transactions.
The first block reward of the Bitcoin network is 50 BTC, which is 5 billion sats, and these 5 billion sats are numbered in sequence, namely sats 1, sats 2, and so on to sats 5 billion. After that, the bitcoins and corresponding sats produced in each block are also numbered in sequence.
Note that when they are first produced, each sats is homogeneous, and it is impossible to specify which sats is number 1 or number 2 until they are split by UTXO.
Here, we assume that Alice holds 50 BTC from the genesis block, and the transfer is as follows:
After Alice transferred BTC to Bob, the first 3 billion sats and the second 2 billion sats were distinguished, and then continued to be split with new UTXOs; in the end, Cathy owned sats 1 to 1 billion, and sats 3 billion to (5 billion - 1); and the 5 billionth sats went to Daniel's account.
Segregated Witness
Segregated Witness, commonly referred to as SegWit, is an upgrade to the Bitcoin protocol that aims to address some issues related to Bitcoin transactions and network scalability. The main change of SegWit is to store the signature data (also known as witness data) in the transaction data separately from the transaction data itself, making Bitcoin transactions more efficient and secure, and improving the scalability of the network.
Taproot
Taproot is a major Bitcoin protocol upgrade designed to improve privacy, scalability, and smart contract capabilities of the Bitcoin network. The upgrade was activated in November 2021. Taproot scripts have very few restrictions on their content and also receive a witness discount, making the storage of inscription content relatively economical. Taproot is the latest stage of Bitcoin scaling after Segregated Witness, creating the conditions for the emergence of Ordinals.
Inscription
In short, Inscription is the process of "storing" (engraving) content on the Bitcoin network through Segregated Witness and binding it to a specific serial number of sats, making it transferable and tradeable. In the early days, there were cases where key sats were mistakenly transferred and assets were lost (in fact, they were transferred to the recipient's sats, although the original intention may have been to transfer a BTC), and the current tools have basically automated this process, avoiding the mistaken transfer of key sats.
Rare
Defines the rarity of certain serial numbers of Satoshi according to the order of production
uncommon: the first satoshi of each block
rare: the first satoshi of each difficulty adjustment period
Epic: The first satoshi of each halving period
legendary: The first satoshi of each cycle
Mytic: The first Satoshi of the Genesis Block
BTC NFT
Inscription can upload any file of the required size (4 MB) to the Bitcoin network. Currently, the types mainly include images, text, video and audio. The images form BTC NFTs, and the main differences from traditional NFTs are:
BTC NFTs are always immutable, while traditional NFTs usually have the right to be modified and adjusted;
BTC NFT creators must pay fees proportional to the size of the content, while traditional NFTs are usually stored on IPFS at extremely low costs;
Major early BTC NFT projects include: TwelveFold, Bitcoin Punks, Bitcoin Wizards, etc.
The most popular BTC NFT series include: Bitcoin Frogs, Ordinal Maxi Biz, Goosinals, etc.
BRC-20
BRC-20 is a token standard proposed by Domo on March 9, 23, which engraves a specific text on the blockchain and "treats" it as a token. Its standard format is as follows:
BRC-20 can be understood as a "slip" recorded on the chain, where users record what operations they have performed, such as deploying tokens, transferring tokens, etc. Then a centralized (or decentralized) organization collects, organizes, and calculates the slips, and ultimately derives token holding and transaction data.
The value of BRC-20 tokens comes more from "consensus" rather than utility. When more users recognize its value, "notes" are upgraded to "banknotes". Just like the value creation process of BTC, it was also considered worthless data in the initial stage, and its value was increased through the cohesion of consensus.
Recursive inscription
A major limitation of Bitcoin inscriptions is that the single storage capacity is only 4 M. For example, the BRC-721 protocol uses third-party storage to solve this problem (refer to traditional NFTs). Recursive inscriptions were proposed by Casey, the founder of Ordinals. They allow the use of special syntax to reference the contents of other inscriptions, which can form complex and large files. And with only a few lines of code modifications, a new NFT series can be created.
Current popular protocols
Taproot Assets
Taproot Assets (formerly Taro) is a Taproot-powered protocol for issuing assets on the Bitcoin blockchain. It allows the creation of assets that can be transferred over the Lightning Network, enabling instant, high-volume, and low-fee transactions.
Lightning Labs developed “Taproot Assets” to make Bitcoin a multi-asset network in a scalable way while staying true to Bitcoin’s principles. Taproot Assets relies on Bitcoin’s latest upgrade, Taproot, to implement a new tree structure that allows developers to embed arbitrary asset metadata in existing outputs. It uses Schnorr signatures for increased simplicity and scalability, and importantly, it can handle multi-hop transactions over the Lightning Network.
Atomicals Protocol
The Atomicals protocol is a simple and flexible protocol for creating, transferring, and updating digital objects (traditionally called NFTs) on UTXO blockchains such as the Bitcoin network. Atomicals (or "ATOMs") are a controlled way of creating, transferring, and updating digital objects.
Unlike Ordinals, which was originally designed for NFT, it rethinks from the bottom up how to issue tokens on BTC in a centralized, tamper-proof, and fair manner.
Atomicals uses the smallest unit of Bitcoin, sat, as the basic "atom". Each sat's UTXO is used to represent the Token itself, 1 token = 1 sat.
When verifying an Atomicals transaction, you only need to query the UTXO of the corresponding sat on the BTC chain. The atomicity of ARC 20 Token is consistent with the atomicity of BTC itself, and the calculation of ARC 20 transfers is completely processed by the BTC basic network. Therefore, compared with BRC-20, ARC-20 transactions have greatly reduced the demand for third-party sorters, greatly improving the decentralization of the entire system.
BRC-420
Official documentation: The BRC-420 protocol introduces a method for managing digital assets in the metaverse, providing creators with a comprehensive system to manage, share, and profit from their creations through recursion, licensing, and royalties. Its features include:
Based on the recursive function, complex and recursive digital asset formats can be realized, supporting various recursive asset formats (2D, 3D).
Integrate with blockchain to enable automatic royalty transfer, linking usage rights with royalties to benefit creators.
There are still many new things emerging in the Bitcoin ecosystem, and Odaily Planet Daily will continue to pay attention to them. Readers interested in the Bitcoin ecosystem are also welcome to add the official WeChat account (Odaily 2018 or odaily 001) to join the community.