BRC-20 makes the BTC network more expensive and more congested RGB and Lightning Network usher in the second spring

Author: Grapefruit, ChainCatcher

Recently, due to the wealth effect of ordi tokens, a large number of users have been attracted to the Bitcoin network to trade BRC-20 tokens, resulting in serious congestion on the Bitcoin chain and a surge in Gas fees. On May 7th, due to the large number of withdrawal transactions and the surge in handling fees, Binance suspended Bitcoin withdrawals twice within a day; on May 8th, the Bitcoin network stopped producing blocks for an hour due to congestion, and the gas fee for each transaction on the chain was the highest It hit $30.

As of May 10, according to BTC.com, there were 300,000 unconfirmed Bitcoin transactions. According to the Mempool website, the gas fee for each transaction on the Bitcoin network chain is about 282 Satoshi, which is equivalent to 11 US dollars.

Solving the congestion on the Bitcoin chain and reducing Gas fees have become the consensus of users participating in transactions on the chain.

There are also more and more discussions about Bitcoin expansion. Among them, the RGB protocol, which is dedicated to providing smart contract support for Bitcoin, and the Lightning Network, which focuses on reducing Bitcoin transaction fees, have once again been placed high expectations by users, hoping that they can There are new developments to solve the current dilemma of Bitcoin as soon as possible.

In fact, in addition to RGB and Lightning Network, there are also blockchain networks that focus on expanding the Bitcoin ecosystem through side chains. So, what is the difference between Bitcoin's RGB, Lightning Network, and sidechain expansion methods? What representative applications? How should users participate?

Lightning Network is committed to reducing Bitcoin transaction Gas fees and increasing throughput

The reason why Bitcoin is congested is that its main network TPS can only conduct 7 transactions per second, while third-party payment platforms such as Alipay can process up to 100,000 transactions per second. And the block size of Bitcoin is 1MB (the number of transactions included), and the miners sort and package according to the Gas level when the user submits the transaction. At this time, in order to package the transaction submitted by the user as soon as possible, the user needs to increase the gas fee to obtain the priority of the miner for packaging. This is why under the BRC-20 upsurge, the more transaction users on the chain, the more expensive the Bitcoin Gas fee.

On-chain data BitinfoCharts shows that starting in May, the average transaction fee per transaction on the Bitcoin chain began to increase sharply, rising from the initial 2U to 20U now, and peaked at 30U in the middle.

Gas fee on the BTC chain

According to past history, there are two expansion methods, one is to increase the size of the block, the so-called large block, so that it contains more transactions, this expansion method adopted by Bitcoin Cash (BCH), but this method The block generation time remains unchanged, which will increase the pressure on node operations. The other is to not change the relevant content of Bitcoin, and transfer the small amount of Bitcoin transaction payment or related data to the off-chain through off-chain expansion, and the main network only conducts key transactions. The Lightning Network (Lightning Network) adopts this method under the chain.

The Lightning Network is also known as the Layer 2 solution of Bitcoin. It is mainly used in Bitcoin payment scenarios. The Lightning Network can help users save costs and improve efficiency. Core idea is to put the user transaction link under the chain, and only the final transaction result is confirmed on the Bitcoin main network chain, so as to improve the transaction efficiency of the Bitcoin network and allow users to trade at a lower cost, Complete payments faster.

Its working principle is: When a user initiates a transaction to another user, first, the Lightning Network opens an off-chain payment channel between the two parties, which is essentially a bookkeeping book held by both parties to be traded. Used to keep transaction records. Then, both parties to the transaction lock a certain amount of funds in the channel and sign the transaction through the private key. The small amount of funds transfer between the two parties does not need to be carried out on the chain, but is only stored on each other's ledger. When one or both parties decides that the channel is no longer needed, that is, when the channel is closed, the final settlement between the two The balance is then broadcast on the Bitcoin mainnet.

For example, if A and B want to conduct BTC transactions, they need to establish a channel first. The two parties lock a certain amount of bitcoins on the Bitcoin main network, and the channel is opened. The two can use it to send BTC instantly. The transfer fee is almost zero, and There is no need to broadcast each transaction to the Bitcoin main network. When any party closes the channel, both parties will liquidate the final asset amount of the transaction account and publish it on the Bitcoin main network.

From this point of view, the channel integrates multiple micropayments into one transaction and broadcasts to the underlying Bitcoin network, improving transaction efficiency.

The picture comes from Youtube blogger @币圆小林子

In addition, the Lightning Network is not just a direct link channel between A and B, it can also connect a large number of individual channels in series to form an interconnected and vast payment network. That is to say, assuming that A and C have a channel, A and D do not have a channel, but C and D have a channel, then A can indirectly trade with D through C, and C as an intermediary can charge routing fees.

The structure diagram of Lightning Network, from the network

In the Lightning Network, the network will find the path with the fewest nodes and the least transaction fees to complete the transaction.

According to 1ML, on May 10, the Lightning Network had a total of 16,000 nodes, about 73,000 payment channels, and the number of BTCs in the channels was about 5,376, worth $140 million.

Lightning Network related data

The application scenarios of the Lightning Network are mainly in the payment field. It can mainly solve the problem of high gas fees and instant credit for small transactions on the Bitcoin chain, such as social platform reward payment, cross-border remittance, merchant payment, transfer transactions, etc. The average settlement time on the Lightning Network is less than a minute, mostly in milliseconds, and data shows that the cost per transaction on the Lightning Network is about $0.0001. All in all, the payment experience of the Lightning Network is not inferior to that of centralized electronic payment, especially in cross-border transfers.

Most of the Lightning Network products currently on the market are aimed at payment infrastructure products used by B-end enterprises and developers. For ordinary users, it is difficult to understand the principles of these products. In fact, most of the BTC small instant transfer payments that users often use use Lightning Network technology. For example, the built-in BTC rewards of Damus, a decentralized social application that has become popular some time ago, uses Lightning Network as the underlying technology.

Lightning network representative application

Strike - is a bitcoin lightning network payment platform that provides instant bitcoin payment. Users can use Strike to pay with BTC, purchase goods and services online, make micropayments, and reward content creators , and buying and selling BTC, etc. Its predecessor was Zap, a bitcoin ecological wallet.

Strike once completed a Series B financing of US$80 million in September 2022, led by Ten31. In addition, Strike has cooperated with Shopify, NCR, etc. to establish a bitcoin payment system, which allows merchants to quickly convert to US dollars after customers pay with cryptocurrencies.

Taro - is a protocol supported by Bitcoin Taproot, which defines how to issue and use Token on the Bitcoin blockchain. It is mainly used to issue assets on the Bitcoin blockchain, including homogeneous tokens and NFT assets.

Assets issued through Taro can be circulated on the Lightning Network, currently only supported by developers. Using Taro, developers will be able to issue assets on the Bitcoin blockchain and then transfer them to the Lightning Network.

However, the Taro product is currently in beta.

Lightning Labs, the developer behind Taro, is a developer of the Bitcoin Lightning Network. It provides relevant software support for the Lightning Network, such as Lightning Network node management tools, wallets, etc., such as the self-developed test version software "LND". Supporting users can directly share with other users Send Bitcoin and Litecoin without having to process these transactions on the blockchain. In April 2022, Lightning Labs received $70 million in financing.

Lightspark - is a lightning network payment solution provider, founded by former PayPal president David Marcus, mainly provides enterprise users with lightning payment solutions, such as providing relevant API and SDK toolkits, and supporting enterprises to integrate lightning network and other functions. In April of this year, Lightspark announced the Bitcoin Lightning Network product suite,

In May last year, Lightspark completed the financing led by a16z and Paradigm, and because the founder is David Marcus, the initiator of Libra, it has attracted the attention of users.

RGB is mainly used to support smart contract functions on Bitcoin and Lightning Network

RGB is a scalable smart contract system with privacy features. Developed by the LNP/BP Association, it is mainly used to support the smart contract deployment of Bitcoin and Lightning Network. Support developers to create, deploy and execute smart contracts on Bitcoin or Lightning Network, while maintaining the security of their data.

Compared with Bitcoin, the biggest innovation of Ethereum is to support smart contracts (Smart Contract). The so-called smart contract is a program running on the blockchain (also known as a programmable contract automatically executed by a piece of code).

The biggest difference between Ethereum and Bitcoin is that it can perform complex logical operations through smart contracts. Today, DeFi and other DApp applications on Ethereum are all implemented through smart contracts. However, since Bitcoin does not support the deployment of smart contracts, the ecological development on the chain is limited. The BRC-20 tokens that have recently become popular on the chain are also realized through the inscriptions of the third-party Ordinals protocol, and the token issuance process is relatively simple and only deployed , minting, and transfer three processes, does not support token destruction, or additional issuance, etc.

RGB aims to make Bitcoin realize all possibilities based on smart contracts like Ethereum or other block networks (Solana, BNB Chain, etc.). Developers can deploy tokens, NFT asset issuance contracts, and decentralized finance on Bitcoin. Applications (DEX, lending), DAO, etc. The protocol promises to support complex smart contracts running on Bitcoin and the Lightning Network.

From this point of view, RGB is not a specific block network nor a token issuance agreement, but an infrastructure that provides smart contract support for the Bitcoin network.

As a smart contract system, the scheme proposed by RGB is also different from previous smart contract schemes such as Ethereum.

RGB modularizes the process of smart contract issuance, data, status, etc., puts smart contract code maintenance and data storage off-chain, and uses the main network (Bitcoin) as the final state commitment layer. This means that RGB saves all the data of the smart contract under the chain through the mode of the smart contract under the chain. The Bitcoin main network is only used as the confirmer of the final state, which reduces the use of block space and can greatly improve the throughput. quantity.

The current blockchain network advocates storing smart contract code and data on the blockchain and executing it by all nodes in the entire network, which will lead to excessive increase in block capacity and waste of computing resources. RGB is verified by the client. It does not require each node to execute each contract. By using the sign on the unspent balance of the Bitcoin transaction output (UTXO) as the transaction status tracking, it not only ensures that the main network relies on The security row, in turn, enables scalability.

**What can RGB currently be used for? **

**Developers can use RGB to deploy homogeneous token RGB20 and non-homogeneous token NFT contracts; and compatible with Lightning Network. **

Just because RGB can support users to issue Bitcoin or homogeneous tokens on the Lightning Network by deploying smart contracts, it is also considered an alternative to BRC-20 tokens.

The biggest advantage of RGB20 and BRC-20 tokens is that, the tokens issued by RGB20 can be circulated in the Lightning Network, with low gas fees and fast transfers. While BRC-20 is engraved on Satoshi, all activities are carried out on the Bitcoin chain, and the scalability is limited.

**What are the applications supported by the RGB protocol, and how can users participate? **

Bitcoin NFT Market DIBA——is the first Bitcoin NFT trading market built using the RGB smart contract platform, which supports users to create and trade NFT on Bitcoin (this asset is often referred to as UDA unique digital asset). Currently, DIBA is still in beta.

In addition, users can experience RGB smart contracts and related assets through Bitcoin network-related wallets.

Iris Wallet—This is a wallet application for issuing, sending and receiving RGB assets, developed by Bitfinex Labs, and users need to download it from the Google Play Store.

My Citadel——Supports RGB asset wallets, currently users need to download the installation package.

Bitmask - can be used to experience the casting, distribution and RGB application of RGB assets. BitMask is a Chrome extension wallet created by DIBA that supports stablecoins and NFTs. Currently, users can experience the issuance and transfer of RGB20 assets by using the Bitmask wallet beta version.

BitMaskWallet

Judging from the current user experience, Bitmask wallet is easier for users to get started. Currently, users can experience the issuance and transfer of RGB20 assets, and asset transfers in the Lightning Network by using the Bitmask wallet beta version.

Bitcoin Sidechain

The side chain is to create a separate public chain separately, with its own customized ledger, consensus mechanism, transaction type, script and contract support, etc., and then connect to the Bitcoin main network through specific cross-chain technology. Simply put, it is to transfer and circulate BTC between the Bitcoin main network and the side chain through the cross-chain bridge.

Bitcoin sidechains such as Stacks, Rootstock, and OmniLayer transfer BTC between the sidechain and the main network through cross-chain bridges.

Generally speaking, smart contracts can be supported on the side chain, and various decentralized applications such as DeFi can be built. It has strong scalability, and the difficulty of implementation is not high compared with other solutions. At the same time, the ledger is relatively safe. However, not everyone can run the side chain nodes. The ledger consensus depends on the management of some central organization, and the degree of decentralization is low. This may be the main reason why there have been many attempts to expand the side chain but have not been able to obtain large-scale applications. reason.

Bitcoin smart contract platform Stacks (STX)

Stacks (STX) realizes the function of deploying smart contracts and decentralized applications on the Bitcoin network by building a new blockchain network. And issued the native token STX on the blockchain network to pay for smart contract fees and transaction fees on the blockchain. Developers can build any application based on Stacks.

In 2021, Stacks will release the V2 version, which is committed to innovating around the Bitcoin settlement protocol without changing Bitcoin itself, and enabling native Bitcoin smart contracts and decentralized applications.

The core mechanism in Stacks 2.0 is mainly divided into two parts. One is PoX, a consensus mechanism based on the Bitcoin chain. PoX is similar to PoS equity pledge. Nodes can obtain STX by locking BTC, and can also obtain BTC by locking STX. Coordinate the income between miners and pledgers through this dual token exchange. The second is the native programming language Clarity, which allows smart contracts to operate according to the behavior on the Bitcoin chain. For example, if A completes a transaction transfer on Bitcoin, Stack 2.0 can track and detect this transaction as part of the smart contract on Stacks 2.0, and use this transaction as the condition for the next step of the smart contract, etc.

At present, Stack ecological applications have covered applications such as DeFi, NFT, DAO, and NFT. Such as the wallet Hiro Wallet, there are also deployed applications: Alex, a one-stop DeFi application project integrating DEX and lending functions, Gamma, an NFT trading market, and Arkadiko, a mortgage lending platform, etc.

Bit network asset issuance platform OmniLayer

Omnilayer (OMNI) is a blockchain network based on Bitcoin, which is mainly used to issue tokens based on the Bitcoin network. The principle of Omnilayer issuing Bitcoin network Token is based on some information attached to the Bitcoin transaction output (UTXO), which is based on the data on the Bitcoin chain.

Among them, the initial stable currency USDT was issued by Tether based on Omnilayer.

Compared with the RGB protocol, the data related to the tokens issued by Omnilayer are stored on the Bitcoin main network chain, which has poor privacy and scalability.

OmniBolt is a version of OmniLayer compatible with the Lightning Network, which supports the creation and transmission of Tokens through the Lightning Network. On May 9, OmniBolt announced that it will support BRC-20 tokens on the Lightning Network.

Bitcoin Alliance Side Chain Liquid Network

Liquid Network (Liquid for short) is more like a Bitcoin alliance sidechain, which is jointly maintained and governed by the Liquid Joint Committee consisting of exchanges, financial institutions, and other Bitcoin-focused companies. Aiming at solving the liquidity problem of Bitcoin and providing users with a faster and more convenient Bitcoin transaction experience, the network was launched by Bitcoin infrastructure developer Blockstream in 2018.

The LBTC issued on the Liquid chain is still anchored by Bitcoin 1:1. According to the official website, the number of LBTC circulating in the Liquid ecosystem has been maintained at more than 3,000 for a long time, and it was 3,280 on May 10.

In addition, Liquid also supports the deployment of smart contracts. There are already DEX Sideswap and lending platform Hodl in the ecosystem.

EVM Compatible Bitcoin Sidechain Rootstock

Rootstock (RSK for short) is an EVM-compatible sidechain on Bitcoin. This means that RSK developers can use Ethereum's Solidity to deploy smart contracts, and users can also add the RSK mainnet to the Ethereum wallet Metamask to interact with the RSK ecosystem just like Ethereum or EVM-compatible Polygon and BNB Chain DApps.

The RSK platform does not have its own native token, but uses smartBTC (RBTC), where RBTC is issued 1:1 by the BTC on the main network through the cross-chain bridge.

Because of this, RSK is not well-known in the encryption community, and users are more familiar with RIF tokens.

RIF tokens are issued by Rootstock Infrastructure (RIF), a platform built on Rootstock, which aims to provide developers with blockchain infrastructure and services, including domain names, storage, authentication, etc., to support the development of dApps and deploy. Although Rootstock does not issue tokens other than RBTC, Rootstock and RIF are developed by the same company, IOV Labs, and RIF tokens are often mistaken by users as Rootstock’s native tokens.

In fact, many well-known DeFi applications have appeared on the RSK chain, such as Sovryn (SOV), a platform that supports trading and lending bitcoins. In March this year, the application announced the launch of Sovryn Dollar (DLLR), a stable currency supported by bitcoins ). In addition, there are DEX platform RSK Swap, lending application Tropykus, etc.