Comparing BRC20 and Taproot Assets
Colin Wu . 2023-11-21 . Data
Author: @tmel0211


I rarely discuss BRC20.Why? Because, if you understand it, BRC20 fundamentally falls into the category of market speculation and lacks any technical components.

If you think I’m biased against BRC20, I feel it’s actually the lack of respect for Bitcoin’s UTXO technology on your part.

I understand the existence of shilling in the market, but it doesn’t necessarily have to be based on confusing the facts.

So, how do we view the narrative of Taproot Assets and Ordinals? In simple terms: Ordinals assets are easy to distribute but hard to grab, while Taproot Assets don’t require grabbing but are hard to distribute.

Ordinals BRC20

Ordinals are third-party data indexes, and actions such as token deployment, minting, and transfers depend entirely on users publishing specific data fields to the blockchain. Ordinals can only provide “legitimacy” interpretation based on decentralized data retrieval.

The advantages include: 1) Inherent fairness in launching; users can participate in asset circulation by sending transaction notes with specific parameters directly to the blockchain. 2) Easy to FOMO speculate; some people can profit from market sentiment with information and cognitive differences. 3) In line with miner interests, overall mining fees increase during FOMO sentiment.

The disadvantages include: 1) Fair launching is just a concept switch; for assets with real growth, it’s challenging to participate in early minting or low-cost fundraising. 2) During FOMO, most retail investors may incur significant losses while failing to mint assets. 3) Susceptible to market manipulation; whales can deploy a token at any time, gain traffic and followers by pumping it.

If you insist on discussing technical logic, you’ll find numerous bugs, such as: It’s easy to have Ordinals index ledger discrepancies when depositing or withdrawing BRC20 assets on exchanges, leading to false deposit attacks. Moreover, it’s technically possible to monitor Mempool data in real-time to block BRC20 deployment, disturbing the fairness of token issuance. There might also be logic errors in accounting between Ordinals indexes and some third-party service platforms, disrupting the order of asset circulation.

In summary, due to the “delay” effect of on-chain block confirmation, Ordinals-related tokens cannot have a clear state division like Ethereum’s smart contract tokens. They have to manage assets by accounting and reconciliation on multiple platforms. Once the asset’s circulation environment becomes complex, various problems will arise.

I don’t have bias against BRC20; it’s just that it doesn’t belong to the realm of technical logic. It’s best understood as a product of the market speculation category. Trying to shill something purely based on market logic with so-called technical advantages makes you look like a greenhorn from miles away.

Taproot Assets

Taproot Assets are based on Bitcoin’s multi-signature and hash time-locked contracts for asset issuance. They use the Lightning Network’s trust channels for large-scale asset distribution, with asset settlement provided by the Bitcoin mainnet. The Lightning Network, as a well-developed off-chain solution with strong consensus, serves as a Bitcoin scaling solution similar to Layer 2.

Although it makes more sense from a technical perspective and relies on Lightning Network wallets and relay nodes for token distribution, forming consumption, it brings long-term application value to Bitcoin. But the Taproot Assets issuance model is similar to ICO, easy to issue but difficult to operate and distribute. It requires projects to have strong technical, operational, and marketing capabilities.

Only with pre-established initial channels can assets circulate. 2) Channels have limited capacity, and expanding the scale requires increasing channel capacity. 3) Limited distribution efficiency, limited throughput in asset transfers within channels, and users are not yet accustomed to using the Lightning Network for asset interactions. This determines that Taproot Assets are unlikely to experience short-term FOMO.

Many people are unaware that there are over 40,000 types of assets already issued on Taproot Assets, including tokens and NFTs. However, these tokens do not have a first-mover advantage in issuance. Anyone can issue Sats, but the competition is about the ongoing operational growth ability. It clearly resembles a burgeoning era of new Bitcoin ICOs, the question is, what story should be told?

Fortunately, the narrative of Taproot Assets has just begun and has not been derailed yet. It is still seen as the mainstream track for “stablecoins,” igniting a brand-new narrative wave for Bitcoin applications. It can be compared to Ethereum’s token issuance and DEX, CEX token distribution, and multi-level agency distribution mechanism. Let’s look at the development of Taproot Assets.

In summary, for short-term speculation, BRC20 might be more attractive, but be cautious of those who try to convince you of its long-term value. When it comes to long-term value, don’t miss Taproot Assets, but don’t expect too much in the short term, or you may be taken advantage of by speculators.

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