UniSat CEO: The Future of BRC-20 and Bitcoin

Author: Leonidas

Compiler: hiiro

A conversation about the potential of BRC-20, the rapid rise of UniSat, network congestion, and the future of Bitcoin.

Hi, Lorenzo. You are the founder and CEO of UniSat, right?

Yes. I have been actively involved in the crypto space since 2018, particularly in development and research related to Bitcoin. UniSat was initially formed by a small group of developers well-versed in Bitcoin technologies such as SegWit, Lightning Network, and TapRoot.

Our team is primarily composed of developers who take a fast and pragmatic approach, constantly exploring novel ideas, experimenting, and developing prototypes. This heuristic thinking allows us to iterate quickly and provide innovative solutions for our growing audience.

Additionally, we made a conscious decision to maintain a focused and compact organizational structure for the foreseeable future, enabling us to concentrate on delivering exceptional value to our audience.

When did you first hear about Bitcoin? What attracted you so much that you would build a company on it?

Bitcoin has had a profound impact on the world and my personal journey. As early as 2015, I wrote an in-depth article exploring how Bitcoin could revolutionize the gaming industry. It was during that exploration that I conceived the idea of a decentralized, continuous virtual open world built on Bitcoin, utilizing a combination of blockchain + magnet + Git. Over the past eight years, I have gradually built a relatively strong confidence that blockchain technology has the potential to achieve this when combined with various technologies.

Compared to other modern blockchains, Bitcoin is as straightforward as described in the white paper. While the crypto industry has witnessed complex solutions and innovative concepts emerging around blockchain technology, Bitcoin's implementation has remained simple and direct, much like the C language in computer science, retaining inherent power and elegance while having immense untapped value waiting to be discovered and utilized.

In 2023, the introduction of ordinals and the BRC-20 standard opened up new possibilities for Bitcoin, and we are seeing more exciting developments on the horizon.

When all other developers in the ordinal space dismissed Domo's initial proposal of the BRC-20 standard as a ridiculous idea, you did not see it that way. What did you see in the potential of BRC-20 that others missed?

BRC-20 is far from just a copy of ERC-20. It has proven to be a compelling innovation.

What caught our attention was how it demonstrated a command-based system that could effectively operate simply on top of inscriptions, running independently of the underlying UTXO hierarchy within the Bitcoin blockchain boundaries.

By "floating" above the execution layer, BRC-20 achieves significant simplicity and flexibility, albeit at the cost of the determinism advantages provided by the UTXO hierarchy (such as consistency and coherence).

This simplicity holds significant value for both Domo and UniSat. Moreover, the true potential of BRC-20's flexibility has yet to be fully realized, and we expect it to gradually unfold in the near future, bringing more benefits and possibilities to the desktop.

UniSat became famous overnight. Within the first two weeks of launch, your trading volume exceeded $25 million, sparking tremendous excitement for minting BRC-20 tokens, causing Bitcoin fees to rise from an average of $2 to over $30. How did it feel to experience that moment and know that what you built captured the attention of the entire crypto space?

To be frank, we were not prepared for the surge in demand.

During that time, every stage of the process was severely congested. The influx of inscriptions into the mempool posed significant challenges for them to be included in blocks. Due to high traffic and configuration issues, our nodes were continuously rejected by the main network. As a result, backlogged orders accumulated highly batched inscription transactions that exceeded our capacity to handle them. Additionally, our enthusiastic users generated a large number of requests, further exacerbating the pressure on the system.

Most of the infrastructure components were overwhelmed by the intensity of the situation. This highlighted the fragility of the entire system and emphasized the need for comprehensive solutions. We learned this lesson the hard way and realized that addressing the challenges was not just about solving issues within the UniSat infrastructure. It also required addressing the overall network capacity limitations. We recognized the importance of finding a sustainable approach to ensure the prosperous future of the entire system.

It is well known that UniSat has been working behind the scenes with several centralized exchanges (such as OKX) to improve the infrastructure behind the BRC-20 protocol. What role do you think CEXs play in the BRC-20 ecosystem? How do you see them coexisting with DEXs like UniSat?

They generally bring more audiences into the game, which is beneficial for them. UniSat welcomes CEXs, and we have been assisting in this regard through our API/documentation in May and June. Frankly, we do not view them as any form of competitor. It is not about politeness or hypocrisy. The logic behind it is quite simple.

UniSat continuously innovates and experiments within the Bitcoin space. We often find ourselves venturing into uncharted territory, tackling open and complex problems. Large players like CEXs rarely take on these challenges, as they prefer to wait for validated and risk-averse approaches. In contrast, UniSat engages in exploratory play, seeking communities and tribes before concepts are fully validated, as we experienced when introducing BRC-20.

By charting our own course and exploring unverified territories, we are able to pioneer new ideas and technologies that may not be immediately accepted by established players. This unique approach allows us to uncover opportunities and push boundaries in the crypto industry.

The biggest criticism I hear about UniSat is that you have achieved such great success with the BRC-20 indexer and DEX that UniSat poses a centralization risk to the BRC-20 protocol. What would you say to those who raise this concern?

Our indexer is open-source, and we now have an on-chain indexer provided by Alex. These development activities have led to decentralized implementations for public witnessing, as well as proprietary implementations optimized for improved performance and responsiveness. Both approaches have value and are expected to coexist in the foreseeable future.

Our goal is to make the indexer service easily accessible to everyone with a simple "one-click" setup. By empowering individuals to run their own indexers, we aim to alleviate concerns regarding centralization risks. We believe this decentralized approach will contribute to building a more robust and resilient ecosystem.

In exploratory domains, new continents are often discovered by individual explorers. We consider being "criticized for centralization" a key benchmark, indicating that we are doing the right thing and being widely adopted. And we are genuinely passionate about tackling the next challenge that leads to "centralization risk" :).

What is the most pressing issue facing the BRC-20 protocol right now? What measures do you think should be taken to address it?

BRC-20, as a protocol, provides developers with a solid foundation to build upon, thanks to its simplicity and stability. We greatly appreciate the efforts Domo has made to maintain and uphold this simplicity.

That said, it has become increasingly important to introduce a method for effectively and flexibly scaling the protocol without introducing unnecessary complexity. This urgency stems from the diverse needs and use cases that people are exploring with BRC-20.

We are actively discussing with relevant parties how to address the design and implementation aspects of protocol scalability and versatility. While we are still refining these ideas, we expect to share more details in the coming weeks once the practical maturity of these concepts is reached.

What exciting initiatives has UniSat been working on? What are you most excited about in the short term regarding BRC-20?

In the coming weeks, we will provide support for recursive inscription collections, as well as product-level improvements such as Trustless Auction and the development of a mobile application. These additions, while significant, are just part of our ongoing efforts.

There are some very exciting things (usually I tend to be conservative, but yes, it is exciting) that we are experimenting with. It relates to the Bitcoin main network congestion issue I mentioned earlier.

This congestion issue is a major concern for us. The last time there was congestion, people might have thought, "Well, they didn't anticipate it happening so quickly, and they weren't prepared." But within months, with the emergence of interesting applications, the main network could become congested again.

If this happens, it could lead to skepticism about the scalability of ordinals on Bitcoin, and people might begin to doubt the system's ability to handle the existing volume, let alone accommodate future growth. We are fully aware of this potential scenario, and addressing congestion has become a top priority for UniSat.

If we do nothing, this is likely to happen. It is the elephant in the room that everyone has seen for years but pretends not to see. In the coming weeks, we will reveal more details about our efforts to tackle this challenge. We are committed to finding a sustainable and scalable solution to the congestion issue, ensuring the long-term viability and confidence of the entire system.

What is your vision for UniSat? Where do you hope UniSat and BRC-20 will be in ten years?

The impact of Bitcoin on fintech is undoubtedly significant. However, over time, other blockchains have emerged, showcasing strong capabilities across various domains. This has led to a narrowing of the Bitcoin narrative, primarily revolving around its role as "digital gold" and "crypto reserve." Unfortunately, concerns about its performance, programmability, and scalability have overshadowed Bitcoin's potential as a technology to serve billions. Additionally, for years, miners' fixed block rewards have been the primary source of profit, with expectations of transitioning to a service fee-driven model since 2009.

Fortunately, the introduction of ordinals, including protocols like BRC-20 and others built around it, has opened up new possibilities for us. These protocols allow external value to be injected into Bitcoin, potentially enabling miners to earn more than through fixed block rewards. This presents an opportunity for a paradigm shift for Bitcoin, ultimately establishing itself as a sustainable chain with a healthier incentive model.

On top of this, BRC-20 represents an extraordinary (no pun intended :p) experiment. The 'floating' nature allows for a more flexible and loose connection with the underlying physical structure. This characteristic opens up potential for different evolutionary paths.

To understand why this is important, we can examine the evolution of the Lightning Network (LN) over the years. LN was initially designed to be tightly integrated with Bitcoin transactions, leading to significant limitations in its application. It was too complex (difficult for users to understand and use) and too rigid (difficult for developers to scale). Typical users unfamiliar with concepts like open-close channels, inbound-outbound capacity, and transaction routing tended to opt for custodial solutions, limiting LN's adoption in everyday transactions. Instead of becoming the "micropayment network" originally envisioned, LN primarily served as a "settlement network" between merchants and wallet providers, failing to achieve widespread adoption.

New experiments like ordinals and BRC-20 have learned from these challenges and are leading us down an exciting exploratory path that emphasizes simplicity. They provide Bitcoin with an opportunity to grow into an organic system with the original chain as its backbone.

As a dedicated development team, UniSat is committed to assisting Bitcoin's growth. Our goal is to transform Bitcoin from a single blockchain scattered with numerous incompatible protocols into an organic, multifunctional system. We prioritize compatibility, composability, parallelism, and scalability to lay the foundation for Bitcoin's evolution in the coming years.