Introduction: On March 9, 2024, BRC-20, an experimental asset protocol, celebrated its first anniversary. In this short year, people have witnessed the birth of the Ordinals protocol and the release of the BRC-20 protocol. The subsequent summer of inscriptions and the continuous emergence of emerging protocols have brought the desert-like BTC ecosystem back to life.
From a technical perspective, the current asset issuance schemes in the BTC ecosystem can be divided into two factions: UTXO-bound and non-UTXO-bound. The main difference lies in whether the data of the inscription assets is directly related to the UTXO on the Bitcoin chain. Union. According to this distinction, BRC-20 is a non-UTXO-bound asset, while ARC-20 under the Atomics protocol is the first UTXO-bound asset.
This article will objectively analyze the history, current situation and future development of the Atomicals protocol from two aspects: the emerging concepts and technologies brought by the Atomicals protocol and the development direction of the entire Atomicals ecosystem. Through this article, readers will more easily understand why we call the Atomicals protocol "a unique BTC ecological revolution."
Text: The birth of the Atomicals protocol was quite dramatic. When the Ordinals protocol was first released, founder Arthur wanted to develop a DID project on top of it. However, during the development process, he found that the Ordinals protocol had many limitations and was not conducive to supporting some of the features he wanted to achieve.
So, on May 29, 2023, Arthur posted the first tweet about the conception of the Atomicals protocol on Twitter. After several months of development, the Atomicals protocol was launched on September 17, 2023.
Later, the Atomicals protocol derived four major concepts, including Dmint, Bitwork, ARC-20, and RNS, and will launch AVM and split solutions in the future. In the following, we will explain the principles of these typical product innovations to help everyone understand the innovation of Atomicals more quickly.
Bitwork: Non-exclusive PoW
The Atomicals protocol adds PoW to the token minting process. This link is called Bitwork. The principle is similar to Bitcoin mining and is designed to limit flow and prevent witches.
Let's first look at the principle of Bitcoin mining: miners continuously provide different input values to a given algorithm locally, trying to make the output value meet the requirements of the Bitcoin protocol. Miners may get lucky and get a result that meets the conditions. At this time, the corresponding output value and input value are written into the block as a "letter of commitment" and used as a chip to obtain mining rewards. Next, as long as this new block is recognized by the vast majority of nodes in the network, the miner can get BTC rewards.
(Simplified schematic diagram of Bitcoin mining)
In the Atomicals protocol, you need to follow a similar process to obtain input and output parameters that meet the restrictions before you are eligible to mint tokens. Similar to Bitcoin, Atomicals can also dynamically adjust the mining difficulty. For example, the protocol can specify in advance:
Miners who want to get rewards need to find a set of parameters that, after being input into a given algorithm, satisfy the following conditions for the output value: the first four digits are all 6, and the fifth digit is greater than 10 (hexadecimal). At this time, the restrictions are relatively loose. However, the Atomicals protocol can periodically change the restrictions, such as requiring the first five digits of the output value to be 6, which tightens the restrictions and increases the difficulty of mining for miners.
(Bitwork condition example diagram)
There is an essential difference between Bitwork and Bitcoin mining: Bitcoin mining is exclusive, while Bitwork mining is non-exclusive. For example, if blocks 99 and 100 appear in the Bitcoin network, different mining pools will compete for the right to record the 101st block. In the end, only one mining pool will recognize the 101st block, and the blocks submitted by other mining pools will be "invalidated". This is the exclusivity of Bitcoin mining.
Obviously, cruel and exclusive competition is not conducive to the survival of individual miners. Many small miners will eventually contribute their mining machines to large mining pools, which will act as a "whole" that gathers a large amount of computing power and compete with other mining pools. There is no doubt that this will make the computing power within the Bitcoin network tend to be highly centralized, which is even clearly mentioned in the Ethereum white paper.
In stark contrast to Bitcoin mining, ARC-20 mining under the Bitwork protocol is non-exclusive, which means that there is no strict competition between different miners. As long as the current amount of Atomicals assets minted does not exceed the prescribed total amount, the mining results (token minting statements) given by miners through the Bitwork mechanism will eventually be included in the historical records of the protocol.
Let's imagine the following scenario: suppose an ARC-20 asset that follows the Bitwork protocol begins to be issued, allowing users to mint it in the form of mining. Someone gives a relatively low gas, but there are many people participating in the asset minting, and the gas fee immediately soars. The minting request that gave a low gas will be stuck and cannot be uploaded to the chain. However, as long as the ARC-20 asset has not been minted, then after the gas fee drops, the mint request will still be recognized and trigger the minting behavior.
In a nutshell, Bitwork only looks at the remaining mintable amount of the asset, not the order of minting requests. Under the Bitcoin mining protocol, miners who submit blocks late will most likely be eliminated by other miners.
There is no doubt that Atomicals has lowered the threshold for participation of miners/asset minters. The traditional PoW public chain is subject to the huge difficulty of mining, and the right to produce blocks is basically monopolized by several major mining pools. Individual miners have only a very low probability of successfully mining. Bitwork's improvement measures have greatly weakened the position of centralized mining pools, making it more conducive to the participation of individual miners and making asset distribution more fair.
Considering that PoW itself is a fairer asset distribution scheme than PoS and ID0, the Atomicals protocol further increases the fairness of asset distribution, with both the value injection of physical resources and the existence of random luck (mining is a process of hitting the jackpot). This further promotes the development of the "Fair Launch" concept.
ARC-20: More like dyed coins than inscriptions
In fact, many people have misunderstandings about the ARC-20 concept included in the Atomicals protocol, thinking that it is also an inscription protocol. But in fact, ARC-20 is closer to colored coins. It uses the smallest unit of Bitcoin, sat, as the basic "atom". The number of Sats corresponding to each Bitcoin UTXO represents the amount of ARC-20 assets bound to it, 1 sat = 1 Token.
Here we take an ARC-20 named "TEST" as an example to explain its operation principle.
First, the token issuer of TEST must determine which Bitcoin block to use as the "Genesis Block" of TEST, and record the initialization information in a Bitcoin UTXO transaction script in the Genesis Block. These initialization information include token symbols, total supply, etc. This process is actually equivalent to coloring, coloring the Sats in the existing Bitcoin UTXO into a form bound to ARC-20. The sats balance of this Bitcoin UTXO is equivalent to the amount of ARC-20 assets.
The issuer of the TEST token can use the function of the Taproot locking script to set some restrictions. Only those who meet the restrictions can transfer a part of the Sats from the Bitcoin Sats controlled by the locking script. As mentioned earlier, these Sats are dyed. If you take a part of the Sats locked by the issuer, it is equivalent to obtaining an equal amount of TEST tokens.
After successfully obtaining TEST tokens, the above-mentioned asset minters can directly transfer these ARC-20 tokens to others. This process is almost the same as the normal transfer on the Bitcoin chain, which is to split the Bitcoin UTXO in hand and transfer one or several of them to others. The number of ARC-20 tokens corresponds to the Sats balance of each of these split Bitcoin UTXOs.
Based on this feature, the transfer of ARC-20 tokens does not require the inscription information related to the Transfer instruction to be engraved first like BRC-20, which saves transfer costs and reduces the additional data size generated on the BTC network.
To summarize, ARC-20 assets mainly have three operations: deployment, minting, and transfer:
When deploying ARC-20, the asset issuer needs to set the token name, total amount, difficulty setting, genesis block and other information, and configure the corresponding Taproot locking script.
When a user mints ARC-20, they write the claim information (the data that needs to be submitted to mint tokens) into the locking script of the aforementioned UTXO, and then take out the corresponding ARC-20 assets (dyed sats).
When transferring ARC-20 later, users no longer need to deposit any data into BTC. They only need to transfer the aforementioned UXTO to other people. The recipient only needs to trace the Bitcoin UTXO to confirm that it is associated with the ARC-20 asset.
Similar to the "one-time seal" featured in the RGB protocol, the security of ARC-20 transactions is fully guaranteed by the BTC mainnet. When anyone tracks historical transaction records and calculates the current ARC-20 asset balance, they do not need to read data from the off-chain storage module. They only need to check the Bitcoin UTXO related to ARC-20 dyeing. This is the biggest difference between it and the BRC-20 protocol, which often has a strong reliance on off-chain indexers and off-chain storage layers.
For ARC-20, we only need a lightweight indexer (or wallet client) to help us identify which ARC-20 asset minting and transfers are triggered on the Bitcoin chain.
Of course, the design of one coin per satoshi has some flaws that cannot be ignored, because the Bitcoin mainnet has a restriction to prevent "dust attacks", and a single transfer must transfer at least 546 Sats to the recipient at one time, that is, every time you transfer the dyed Bitcoin Sats, you must transfer at least 546 Sats, which may be unacceptable to most people. In addition, since each ARC-20 token must be bound to one Sats, the minimum split precision of the ARC-20 asset balance is 1, and it cannot be subdivided to a smaller level.
At the same time, we have noticed that many people are still confused about the difference between the ARC-20 indexer and the BRC-20 indexer. Here we will explain it in detail:
The ARC-20 indexer is simpler and lighter than the BRC-20 indexer. We can think of BRC-20 as a paper check and ARC-20 as a hard coin. The BRC-20 standard allows users to fill in any number of BRC-20 assets on this check, which is why the BRC-20 protocol uses 3 different index transactions to ensure the accuracy and security of BRC-20 assets; and no matter how ARC-20 is traded, it is like directly transferring ready-made coins. When we calculate the balance of ARC-20 assets, it will be much easier than calculating the balance of BRC-20 assets, and the workload of the ARC-20 indexer will be much less than that of the BRC-20 indexer.
ARC-20 transaction index is more convenient than BRC-20 transaction index in asset merging. We can simply understand that BRC-20 asset merging is to replace three checks worth $1,000 with a new check worth $3,000. In theory, the original three checks should be destroyed, but because they have been recorded on the chain, they cannot be directly erased, causing data pollution; many times when withdrawing coins from exchanges, you will always encounter some inexplicable inscriptions.
The ARC-20 asset merger is to package three coins into one transaction and send it out. Many times when withdrawing coins from the exchange, you will always encounter some inexplicable inscriptions, but the ARC-20 transaction index will not pollute the sats data because it has a different workflow.
Dmint: A new way to issue NFTs
In the Atomicals protocol, NFT collections are called "Containers" and are issued in a decentralized manner called "Dmint". The specific process of NFT issuance following the Dmint protocol is divided into four steps: NFT data preparation, container configuration, NFT project verification, and NFT casting.
For NFT project parties, the focus of work can be on the preparations before NFT issuance, which requires the collection of all NFT data, configuration of Dmint data, etc. At the same time, NFT issuers that follow the Dmint protocol will aggregate all NFT data into a Merkle Tree, the Merkle root of which will be published on the chain, and the complete NFT metadata will be stored off-chain.
When the NFT minter selects the NFT to be minted, he will obtain its off-chain metadata. The minter then presents the Merkle Proof to the outside world to prove that the NFT data he has obtained is indeed associated with the Merkle Tree originally constructed by the issuer, that is, it exists in the NFT data set declared by the NFT issuer to the outside world.
In the process of minting NFTs, the Atomicals protocol provides advanced options for the project's founding team, such as setting mint payment rules and allowing NFT minters to mint some limited edition NFTs. This not only requires minting through the aforementioned Bitwork method, but also requires paying some tokens to the designated address to take effect.
Source：https://docs.atomicals.xyz/collection-containers/dmint-guide
It can be said that after combining with Bitwork, Dmint introduced a decentralized minting mechanism for NFTs on the Bitcoin chain. At this time, all minters need to participate in the NFT minting process through "mining" in the form of lottery draws. The method used by script scientists to initiate flood transactions through automated codes is difficult to implement.
With the combination of Bitwork and Dmint protocols, both homogeneous and non-homogeneous tokens in the Bitcoin ecosystem have the soil for Fair Launch.
Through Dmint, the Atomicals protocol strengthens the security and uniqueness of NFTs, provides flexible management options, and allows project owners to freely control their NFT collections on the Bitcoin blockchain. This not only opens up customized options for creators to meet diverse creative needs, but also provides a convenient on-chain operation solution for the casting, transfer and update of digital assets, greatly enhancing the flexibility of static and dynamic digital assets.
In addition, the Bitwork mining mechanism introduced by Dmint provides everyone with an equal one-time minting opportunity, fundamentally eliminating the possibility of script-automated minting and market competition related to gas fees.
RNS: unlimited expansion of domain names
As mentioned earlier in this article, Arthur originally wanted to do a DID project on the Ordinals ecosystem. This project is RNS — Realm Name System, also known as Realm.
Realm names start with a plus sign + and have at least one alphabetic character, such as +alice and +agent007, which are both valid DID identifiers. Compared to traditional domain names and ENS, Realm has higher scalability and flexibility while retaining decentralization.
Today's domain name services or DID projects have great limitations. Most of the domain names provided are used to refer to a single object (i.e. website/wallet address, etc.), and users cannot expand them more deeply. For example, Alice has the Alice.com domain name, which is limited to representing links to different websites or personal information by adding different prefixes such as blog.Alice.com. The domain name cannot be continuously expanded downward, such as Alice.com.blog.text, a domain name with more scenarios.
Here we make a more in-depth comparison between two different forms of domain names: Alice.com/blog/text and Alice.com.blog.text. For example, Alice.com/blog/text1 and Alice.com/blog/text2 open the first page/second page of Alice's blog diary in her room.
Alice.com.blog.text1 and Alice.com.blog.text2 can be understood in two ways:
1. Open two different blog notes in two different rooms
2. Open two different pages of the blog diary in Alice's room.
We can find that the traditional "/" mode limits the operating space very narrowly from the beginning, while the sub-domain mode used by the Realm domain name does not have such restrictions.
The Realm Domain Name Protocol allows any user to issue a sub-domain (SubRealm) under any Realm domain name, manage the domain name ecosystem in a hierarchical/graded manner, and tokenize it. The specific rules are as follows:
Any Realm or SubRealm can publish a SubRealm
All SubRealms can inherit the same characteristics and publish their own SubRealms based on SubRealm
Everyone is the registrant of the Realm they own, and there is no centralized domain name management agency
Theoretically, there is no limit to the number of times a SubRealm can be expanded, which makes the Realm domain name system very imaginative. For example, we can think of the top-level Realm domain name as a forum community, the first-level SubRealm can be various types of posts, and the subsequent second-level SubRealm is the reply to the corresponding post... In this way, the Realm domain name system may bring about a revolution in domain name applications, which will empower domain name applications and bring higher scalability.
AVM: A potential dark horse
Since its inception, the Atomicals protocol has been ambitious beyond asset issuance. After about half a year of development, more and more assets have been compliant with the Atomicals protocol, which has led to a new problem: how to provide more usage scenarios for assets to enhance their liquidity and expand their functionality.
As we all know, Bitcoin does not support Turing-complete programming languages, and it is difficult to build complex DAPPs on it. Inspired by the ideas of BitVM and concerns about the development of the Atomicals protocol, Arthur proposed the idea of AVM. Although the specific details of AVM have not yet been announced, the market has high expectations for it.
According to Arthur, AVM is mainly used to support the implementation of complex logic in the Bitcoin network, such as solving the problem that ARC-20 "one coin, one satoshi" cannot be split. In addition, the current Bitcoin expansion solutions on the market basically have various problems. We expect the release of AVM to bring more vitality to the BTC ecosystem.
According to Arthur, in an optimistic scenario, the first beta version of AVM can be released before Bitcoin halving, and we will then provide a further detailed interpretation of it.
Atomicals Protocol Ecosystem Summary: Opportunities Are Coming
Whether it is the inscription protocol such as BRC-20 or the Atomicals ecosystem, they have fallen into a cooling-off period after experiencing several waves of climax. But we found that the asset issuance on BTC is very different from the asset issuance on Ethereum in the past. The difference between these two ecosystems is more about decentralization and centralization.
The existing assets on BTC have made the concept of "Fair Launch" popular. The Atomicals protocol has increased market users' trust in project assets and reduced the direct manipulation of assets by project parties through Bitwork, Dmint, no pre-mining, and no allocation. To some extent, this is actually the love-hate relationship between centralization and decentralization.
Centralized projects are more efficient and responsive in the early stages of development, and can easily succeed if properly managed. However, decentralized projects, in pursuit of greater fairness and decentralization, require more spontaneous community action in project promotion and marketing. They may face great resistance in their early stages, but once they survive the difficult period, they will soon leave centralized projects behind.
The same is true for the Atomicals ecosystem. The following figure shows the Atomicals ecosystem projects that are currently online and under development. Even though the entire BTC asset market is relatively quiet now and the development of the Atomicals protocol is still in its early stages, there are still many projects that choose to actively connect to the Atomicals ecosystem, which stems from the strong confidence of community members in the Atomicals ecosystem.
The source of this strong confidence comes, on the one hand, from the "Fair Launch" craze brought about by the Ordinals protocol and the BRC-20 protocol, and on the other hand, from the beautiful vision brought about by this overgrown decentralized experiment.
We believe that with the subsequent release of AVM, the Atomicals protocol will be able to achieve programmability on Bitcoin Layer1, develop more AVM-based applications, and write a new chapter for the entire Bitcoin ecosystem.
