Original title: RGB Protocol, Waiting to Take Off
Original author: DaPangDun (X: @DaPangDunCrypto)
1. Nagging preface
In the recent explosion of the BTC ecosystem, although most of the protocols in various directions are in their early stages and infra is still very imperfect, it still cannot resist everyones enthusiasm for chasing these innovations.
From a long-term perspective, most current projects, tokens or NFTs will eventually die out, but this does not affect the good wealth effect in the early stages of construction.
I have always been concerned about the BTC ecosystem. The reasons are mainly based on the following judgments:
The price of BTC cannot rise forever, so with the halving, the income of miners will not be sufficiently guaranteed. Although there is a dynamic balance, based on the understanding that computing power is the basis for ensuring security, a new narrative must be to solve this problem.
One solution is to build the BTC ecosystem, create more transactions, and provide miners with sufficient packaging transaction fees; the other is to issue additional issuances (although many people say this is absolutely impossible, but I don’t think it is completely impossible) . Relatively speaking, the second one is likely to destroy the consensus of BTC, so the first one is definitely a better solution, and the first one will bring a new narrative.
However, due to problems with the underlying architecture of BTC, the progress of various developments is relatively slow. In the fast-changing and information-heavy crypto world, it is easy to miss the focus. This also made me miss the early stages of the BTC ecological development track. Chance.
I personally think that NFT on the BTC chain will be limited by the size of the block space. I personally prefer to think of the inscription system as an ornament (of course, my perception may be incorrect). Although the two play a very important role in the explosion of the BTC ecosystem (easy to understand, easy to fomo), they are still not the foundation for building a complex ecosystem in my mind.
My eyes are more focused on innovations that I think can change the entire BTC ecosystem, so today I will talk about a protocol that I am more optimistic about:
2. Let’s talk about RGB protocol
2.1 What is the RGB protocol?
In laymans terms, you can understand that this protocol is used to create smart contracts for the Bitcoin network. An important reason for ETHs take-off is the introduction of smart contracts, and then gradually built a large and diverse ecosystem. Various assets, financial models, etc. were introduced through contracts (my personal understanding is funtion), and even Hooking into the real world (current RWA).
So if we introduce smart contracts into the BTC system, can a lot of interesting things be produced?
sure! (I don’t agree with the view that BTC only has stored value)
However, because the code structure of BTC is very different from that of ETH, it is very difficult to build contracts on it, so crypto native innovation is required.
2.2 UTXO model
Before talking about this, let’s first take a look at the Bitcoin account model (because if we don’t talk about this, there will definitely be people who don’t understand it later)
The traditional model we are familiar with has accounts and balances. When trading, it is how many tokens go from A to B. Thats OK.
But the UTXO model is different. It has no account or balance, only transaction information.
When it comes to transactions, there are two ends: input and output. But this transaction is different from the transaction in our traditional thinking. See the picture below:
You are Bob, you have 1 BTC, then it is reflected in a UTXO, and now you transfer 0.5 BTC to Alice (we ignore the gas fee here), then two UTXOs will be generated in the end, one of which is your responsibility The new UTXO of 0.5 BTC (lower right), the other is the new UTXO that Alice is responsible for (upper right), the original UTXO is no longer available. Of course, if your input (on the left) is a combination of several UTXOs (e.g. 1 BTC is actually a combination of 0.8 BTC + 0.2B TC UTXOs), then the situation is more complicated.
However, you can see that it continuously creates new UTXOs based on old UTXOs to deliver the entire transaction information. This is completely different from an ETH account (ETH account information is more like a traditional database, with a name and a balance, and the balance will change when you spend it...)
2.3 RGB principle
According to its official explanation, the RGB protocol works as follows:
The asset issuer creates a new asset on the client side and generates a one-time seal and transaction commitment. At this time, the asset belongs to a Bitcoin UTXO (whether it already exists or is temporarily created).
Issuers anchor new assets to the Bitcoin network by embedding commitments into Bitcoin transaction outputs (UTXOs).
The asset recipient verifies the validity of the asset by accepting the commitment and verifying the one-time seal.
During the asset transfer process, the old one-time seal is destroyed, and the new one-time seal, commitment and transaction data are anchored to the Bitcoin network.
Twitter user @trustmachinesco explains the process in a more visual way:
Matt issues 100 $MATT tokens for himself on the RGB network.
On the Bitcoin network, Matts token issuance corresponds to the Bitcoin UTXO (Unspent Transaction Output) A he currently holds.
Matt transfers 50 $MATT tokens to Pam.
On the Bitcoin network, Matts token transfer corresponds to a new UTXO B, and UTXO A in step 2 is destroyed.
On the Bitcoin network, Pams receipt of tokens corresponds to a new UTXO C, which represents Pams current Bitcoin UTXO.
Likewise, when Pam transfers money, her original UTXO C is destroyed and a new UTXO D is generated.
As $MATT tokens continue to change hands, each transfer will be represented by a corresponding UTXO on the Bitcoin mainnet.
But we cannot create contracts directly on the chain, so how do off-chain contracts correspond to UTXO? This involves another innovation of RGB: client verification.
In the RGB protocol, transaction verification and data storage are done on the client (such as wallet software) rather than on the blockchain. This keeps transaction data from being exposed on-chain, improving privacy. Client verification can also reduce the need for on-chain data storage and improve the scalability of the network. This is also the big difference between RGB and BRC 20. Since the transaction data is on the client rather than on the chain, it can theoretically greatly reduce the current network congestion. and high handling fees.
In general:
The RGB protocol takes advantage of the security of Bitcoin mainnet UTXO to endorse the security of its off-chain asset issuance or contract logic.
2.4 RGB Advantages
Security: relies on the high security of the BTC network;
Confidentiality: Transaction information is not disclosed on the chain, so it is private, but this privacy is also relative. When you have the corresponding UTXO, you can look back at the previous data;
Scalability: It can be perfectly combined with the Lightning Network, etc. This is something I value very much. The Lightning Network allows the Bitcoin network to get rid of the existing speed, and RGB can introduce smart contracts, which is not a replica of ETH. High-speed smart contract system? !
Some people may say, what’s the point of replicating it? Of course it makes sense!
1) BTC can provide higher security, so smart contracts, etc. will also have relatively higher security.
2) It can revitalize the funds currently accumulated on BTC or introduce funds that only believe in the Bitcoin network, allowing these funds to have more usage scenarios.
3) Make DEFI possible, which will greatly solve the miner income problem mentioned at the beginning
4) No congestion: because transactions only retain homomorphic commitments that require additional storage
5) It can be upgraded in the future without hard fork: it operates off the chain without affecting the chain.
6) Higher censorship resistance than Bitcoin: because transaction information is not reflected, miners cannot see the flow of assets in the transaction.
3. RGB ecology
Although the RGB protocol has been around for a long time and has strong legitimacy, it has always been in a tepid state (I believe more and more people will mention it). Currently, there are roughly the following in the ecosystem:
3.1 Infinitas
Official website: https://www.iftas.tech/
Infinitas is a Bitcoin application ecological network that integrates the RGB protocol and the Lightning Network, aiming to achieve higher privacy protection, excellent throughput and excellent low-latency transaction processing.
It is said that Infinitas will have an incentive plan for its native economy, and will use mining to generate market output in the early stage to promote the long-term development of the ecosystem.
3.2 COSMINMART
Official website: https://cosminmart.com/
COSMINMART is a new Bitcoin application ecosystem based on the Lightning Network, compatible with RGB and other protocols, and supports smart contracts. Its products:
COSM Wallet
COSM Market
COSM Lanuchpad
3.3 Pandora Prime Inc
Official website: https://pandoraprime.ch/
Pandora Prime is committed to using the combination of RGB smart contracts and Lightning Network to create Bitcoin Finance. They started with programmable assets on Bitcoin (RGBTC and CHFN) that can scale to VISA/MasterCard levels in terms of transaction throughput via the Lightning Network, plus provide convenient facilities to exchange these assets without the need for cumbersome KYC The program allows you to conduct transactions of less than 1,000 Swiss francs (in compliance with Swiss law). Currently, their products include MyCitadel (wallet), RGB Explorer (browser), and Pandora Network.
3.4 DIBA（DIGIT ALBITCOIN ART）
Official website: https://diba.io/
Contains products DIBA and Bitmask
DIBA
It is the first marketplace (as DIBA calls it) to trade Bitcoin NFTs using the RGB smart contract protocol and the Lightning Network.
Bitmask
Created by DIBA, this wallet is the first NFT wallet in the RGB ecosystem. It can run in a web browser and interact with RGB contracts like MetaMask on Ethereum.
3.5 Bitswap-BiFi
github：https://github.com/BitSwap-BiFi/Bitswap-core
Currently, the RGB ecosystem is actively exploring DEX solutions to solve the liquidity problem of RGB assets. Bitswaps demonstration and proof-of-concept showed how to introduce SWAPS to DEX, but there is no AMM or LP for the time being. It is still in the verification stage, very early, and also worthy of attention.
4. What opportunities are there to participate?
I looked at these projects and found that infra is still very imperfect, and the experience of wallet and so on is not very good, but it is this early stage that gives us more opportunities to participate at a very early stage.
Personal suggestion 1: When using the wallet, if you have a test network, you must try it and experience it. Not only will you understand the process, but you can also give some suggestions to the project team.
Personal suggestion 2: You can also pay attention to some projects of the same type. I am also paying attention to Taproot (Taro). Its entire design is very similar to RGB, but behind it is the Lightning Labs team, which has raised 70 million US dollars. There are many people with money, and the RGB team is relatively embarrassed, but its code is open source and it has a first-mover advantage in the technology circle.
Personal suggestion 3: You can also focus on some projects in RGB such as memes and NFTs, as there may be surprises.
references
RGB Blackpaper
Detailed explanation of RGB protocol: finding a new way to create a new second layer of Bitcoin asset issuance
How can the RGB protocol be a game-changer for Bitcoin’s layer 2 solution?
https://academy.binance.com/en/glossary/unspent-transaction-output-utxo
https://www.rgbfaq.com/rgb-resources
