New Trends in the Bitcoin Ecosystem: Lightning Network, Ordinals, Atomical, bitVM

Author: Everest Ventures Group

I. Introduction to the Bitcoin Ecosystem

Bitcoin's position in the cryptocurrency ecosystem is not only historical but also crucial. As the first and most famous cryptocurrency, Bitcoin not only ushered in a new era of digital currency but also laid the foundation for the widespread application of DeFi and blockchain technology. Its decentralized nature, limited supply (capped at 21 million bitcoins), and ability to serve as a store of value and investment vehicle have secured its significant status in the cryptocurrency market.

The public's interest in the Bitcoin ecosystem primarily stems from its innovation, challenge to traditional financial systems, and potential economic impact. Over time, Bitcoin has not only become part of asset diversification but also an important topic in global financial discussions. However, after several cycles of bull and bear markets, people have gradually realized that Bitcoin's non-Turing completeness significantly affects the further expansion of the Bitcoin ecosystem.

Turing completeness refers to a system's ability to simulate any Turing machine, typically associated with systems that can execute any computational instructions, including loops and branches. Bitcoin's scripting language is relatively simple, primarily designed to handle transactions and control conditions during the transfer process, such as multi-signatures or time locks, rather than executing complex computational tasks. This design aims to maintain the network's security and stability. In contrast, blockchain platforms like Ethereum provide a Turing-complete environment that allows for the execution of complex smart contracts.

When discussing Bitcoin, it is important to recognize its limitations, especially regarding its ability to execute complex programs and smart contracts. Therefore, to discuss the development of the Bitcoin ecosystem, we first need to summarize and categorize the "problems that the Bitcoin ecosystem needs to solve."

Overall, there are three aspects: first, how to improve network efficiency and reduce transaction fees without compromising the security of the Bitcoin network; second, how to address the issuance of native assets on the Bitcoin network without burdening it; third, how to tackle the issue of deploying more smart contracts and complex applications on the Bitcoin network in a non-Turing complete environment.

Here are some exploratory directions:

• Enhancing Bitcoin's scripting capabilities: Although Bitcoin's scripting language is relatively simple, developers have been exploring ways to add more functionality within the existing framework. This includes developing more complex transaction types and conditions, such as improved multi-signature mechanisms and intricate locking conditions.

• Sidechain technology: A sidechain is an independent blockchain that runs parallel to the main Bitcoin chain but is connected to it. This allows for more complex functionalities on the sidechain, including Turing-complete smart contracts, without affecting the security and stability of the Bitcoin main chain.

• Lightning Network: As a second-layer solution for Bitcoin, the Lightning Network aims to provide faster and lower-cost micropayments while reducing congestion on the blockchain. While this primarily addresses Bitcoin's scalability issues, it also offers developers a platform to experiment with new features.

• Rootstock (RSK): RSK is a smart contract platform that connects to the Bitcoin blockchain via a sidechain. RSK aims to bring Turing completeness to the Bitcoin ecosystem, enabling users to create and execute complex smart contracts within Bitcoin's secure framework.

• RGB: The core goal of the project is to implement smart contracts and asset issuance on the Bitcoin blockchain while maintaining its decentralized and secure characteristics. By utilizing Bitcoin's Layer 2 technology, the RGB project allows users to create and manage non-fungible tokens (NFTs) and other types of complex assets on top of the Bitcoin network. This means that RGB brings advanced functionalities to Bitcoin, such as tokenized assets, smart contracts, and digital identities, without compromising the stability and security of the Bitcoin main chain. The RGB project represents the Bitcoin community's efforts to explore the expansion of its fundamental capabilities, potentially providing a broader impact on Bitcoin's application scenarios and value. However, such attempts also pose challenges in terms of technical implementation and community acceptance.

• Taproot/Schnorr signatures: These upgrades bring more privacy and efficiency to the Bitcoin network. While these upgrades do not directly make Bitcoin Turing complete, they lay the groundwork for potential future functionality expansions.

• Stacks (STX): A smart contract layer for Bitcoin, aimed at extending Bitcoin's functionality to support smart contracts and decentralized applications. The main goal is to introduce smart contract capabilities on the Bitcoin blockchain, allowing developers to build decentralized applications (DApps) and smart contracts to expand Bitcoin's use cases. Stacks 2.0 adopts a Proof of Transfer (PoX) consensus, where participants receive rewards in a more stable underlying chain cryptocurrency, which can better incentivize early participants compared to the new blockchain's cryptocurrency rewards, helping to attract early participants and strengthen consensus.

• Empowering BTC: By converting BTC into assets for building DApps and smart contracts, increasing the vitality of the Bitcoin economy.

• Ordinal Protocol: Introduces an innovative method for data storage and marking on the Bitcoin network without altering Bitcoin's underlying infrastructure. This protocol utilizes the ordinal number of transaction outputs on the Bitcoin blockchain, allowing users to embed small pieces of data within specific bitcoins. Although this increases the demand for data storage on the Bitcoin blockchain, it also opens up new possibilities for exploring Bitcoin as a multifunctional, multidimensional asset platform.

• Atomical Protocol: A recently emerged simple and flexible protocol for minting, transferring, and updating digital objects (i.e., digital objects) on the Bitcoin blockchain and other unspent transaction output (UTXO) blockchains. The core is a set of key simple rules that need to be followed for minting, transferring, and updating operations.

• BitVM: The BitVM project is an innovative attempt to enhance the functionality and flexibility of the Bitcoin network. As a virtual machine implementation, BitVM aims to provide more advanced programming capabilities and smart contract functionalities on the Bitcoin blockchain. This approach will allow developers to create more complex and multifunctional applications on the Bitcoin network, thereby expanding its use cases beyond just being a digital currency. By implementing such a virtual machine, BitVM aims to maintain the core security and decentralization of Bitcoin while introducing more programmability and interoperability. This project represents the Bitcoin community's exploration of technological innovation and the expansion of its blockchain capabilities, potentially bringing functionalities similar to Ethereum's smart contract platform to Bitcoin. However, it may face challenges in terms of technical implementation and community consensus.

In this article, we will compare several of the hottest projects in the Bitcoin ecosystem, considering key aspects such as community consensus, technical difficulty, and future application scenarios, leading to some general conclusions, including:

1. Community consensus is crucial for the success of these projects. The Bitcoin community has always valued the security and decentralization of the network, and any significant changes require broad consensus. Projects like BitVM and RGB aim to expand Bitcoin's functionality but must ensure that they do not compromise its core attributes, which may spark intense discussions within the community.

2. Technical difficulty is another important factor. These projects attempt to introduce new functionalities through Layer 2 solutions or other technical means without compromising the stability of the Bitcoin main chain, which is undoubtedly a technical challenge.

3. From the perspective of future application scenarios, these projects hold great potential. BitVM, by providing advanced programming capabilities, and the RGB project, by implementing smart contracts and asset issuance, could significantly expand Bitcoin's application scope, making it more than just a platform for value storage. However, the realization of these application scenarios will depend on the successful implementation of technology and broad acceptance by the community.

4. At the current stage, the focus of breakthroughs in the Bitcoin ecosystem is still on "solving asset issuance," so we expect a period of meme coin activity, attracting more users and developers into the ecosystem due to the significant wealth effect, finding project landing and network value, and achieving a true ecological closed loop.

II. About SegWit and Taproot

Before introducing the various protocols and projects in the Bitcoin ecosystem, it is necessary to have a brief understanding of SegWit and Taproot.

Since Bitcoin's inception, it has become a belief for many decentralization advocates due to its simple and elegant technology and ingenious economic incentive design. Throughout this process, after repeated discussions and iterations within the community, the network has undergone several significant upgrades, including BIP 34, which introduced version numbers in blocks, laying the groundwork for future protocol upgrades; BIP 66, which enhanced network security by requiring digital signatures in Bitcoin transactions to follow a specific format; and BIP 65 (OP_CHECKLOCKTIMEVERIFY), which allows the creation of time-locked transactions, thereby increasing the flexibility of creating complex transaction scripts. Among these upgrades, SegWit (Segregated Witness) and Taproot are undoubtedly the most important for the expansion of the Bitcoin ecosystem, aiming to improve the scalability and efficiency of the Bitcoin network and laying a solid foundation for subsequent technological innovations, including Ordinals and related protocols.

SegWit, first introduced in 2017, primarily addresses the issue of transaction malleability by separating transaction signature information (witness data) from transaction data, increasing the effective capacity of blocks, thereby enhancing the network's processing capability and reducing transaction fees. Additionally, SegWit provides a better foundation for Bitcoin's second-layer solutions, such as the Lightning Network, making micropayments more feasible.

Taproot, activated in 2021, is another significant upgrade to the Bitcoin protocol. It enhances privacy and security by introducing Schnorr signatures while optimizing the efficiency and flexibility of smart contracts. Taproot makes all transactions, whether simple payments or complex smart contracts, appear the same externally, thereby enhancing user privacy. Furthermore, this upgrade reduces the data requirements for multi-signature transactions, lowering the costs of such transactions and making complex contracts more feasible on the Bitcoin network.

Overall, the upgrades of SegWit and Taproot together enhance the performance, scalability, and functionality of the Bitcoin network, laying a solid foundation for Bitcoin's future development.

III. The Booming Bitcoin Ecosystem

When we analyze the income of Bitcoin miners across the network, it is evident that in May 2023, miner income reached about 70-80% of the income levels seen during bull markets, reflecting an increasing trend in on-chain transaction activity. In this process, the income model for miners has been significantly impacted. The primary sources of income for Bitcoin miners come from two aspects: new Bitcoin block rewards and transaction fees. Although the rate of new Bitcoin generation is fixed, transaction fees can vary with the increase in network transaction volume. The fundamental reason for this change is the introduction of the Ordinal protocol, which has increased the number of transactions on the Bitcoin network, especially if digital artworks and other NFTs become popular asset classes on Bitcoin, leading to an increase in transaction fees and indirectly boosting miners' total income.

Daily Income of Miners

In this article, we will focus on analyzing the Bitcoin ecosystem, including the Lightning Network, Ordinals, BRC 20, Atomical, and ARC 20, and BitVM.

Sidechains or Layer 2 Solutions Represented by the Lightning Network

For a long time, sidechains and Layer 2 solutions have been the focus of the Bitcoin ecosystem and key technological innovations addressing Bitcoin's scalability and efficiency issues. Projects in this category include the Lightning Network, Rootstock (RSK), Stacks, Liquid, MintLayer, RGB, and more. Among them, the Lightning Network, as the king of orthodoxy, stems from Satoshi Nakamoto's concept of "payment channels." From 2016 until the explosion of the Ordinal ecosystem, it attracted more than half of the developers and participants in the Bitcoin ecosystem. Around 2020, the Lightning Network became well-known throughout the crypto community through Nostr.

A sidechain is an independent blockchain that runs parallel to the main Bitcoin chain and interacts with the main chain through specific anchoring mechanisms. This design allows users to move assets from the Bitcoin main chain to the sidechain, which can provide faster transaction confirmations, lower fees, and even support more complex smart contracts and applications. By processing a large number of transactions off the main chain, sidechains help alleviate the burden on the main chain and improve the overall network's performance.

Layer 2 solutions, such as the well-known Lightning Network, are protocol layers built on top of the Bitcoin main chain. These solutions achieve fast and efficient transaction processing by creating off-chain transaction channels, requiring interaction with the Bitcoin main chain only when opening or closing channels. This is particularly effective for supporting small, high-frequency transactions, greatly expanding Bitcoin's application possibilities in everyday payments and micropayments.

However, for a long time, the Lightning Network was only used for small payments and did not support the issuance of other assets. With limited use cases, it was surpassed by the popularity of Ordinals. In October 2023, Lightning Labs released the Taproot Assets protocol on the mainnet, supporting the issuance of stablecoins and other assets on the Bitcoin and Lightning networks. As Development Director Ryan Gentry mentioned, Taproot Assets will provide developers with "the tools needed to make Bitcoin a multi-asset network while maintaining Bitcoin's core values in a scalable way."

Through a Taproot-centered design, Taproot Assets deliver assets on the Bitcoin and Lightning networks in a more private and scalable manner. Assets issued on Taproot Assets can be deposited into Lightning Network channels, where nodes can provide atomic swaps from Bitcoin to Taproot Assets. This enables Taproot Assets to interoperate with a broader Lightning Network, benefiting from its coverage and enhancing its network effects.

However, as mentioned by @blockpunk 2077, at the current stage, "users cannot directly send transactions on the BTC mainnet to mint tokens autonomously; instead, there is a project address that issues (or registers) all tokens at once, which are then transferred by the project party to the Lightning Network for distribution. Therefore, Taproot Assets tokens are not fairly distributed through free minting but often require a centralized project party for airdrops, and the project party itself can reserve tokens, as was the case with the recently issued $trick and $treat." This centralization characteristic has drawn some criticism, as it does not fully align with the Bitcoin community's pursuit of decentralization and disintermediation.

Ordinals, BRC 20, and the Pandora's Box It Opens

We will not elaborate much on the Ordinal and BRC 20 protocols here. As an innovative application, Ordinals implements a new data storage method on the Bitcoin blockchain, assigning a unique serial number to each satoshi and tracking them in transactions, allowing users to embed non-fungible, complex data within Bitcoin transactions. With the introduction of inscriptions allowing NFTs on Bitcoin, the natural progression of development shifted towards fungible tokens. On March 9, an anonymous Crypto Twitter user named @domo posted a message theorizing a method called BRC-20, which could create fungible token standards on top of the Ordinals protocol. Essentially, this method involves inscribing text on satoshis to create fungible tokens. The initial design only allowed for three different operations: deployment, minting, and transferring.

We believe that the Ordinal protocol and its derivative BRC 20 design are very ingenious, solving the major issue of asset issuance in the Bitcoin ecosystem in a simple and quick manner, aligning well with Bitcoin's design philosophy, making it easier to gain widespread attention and support from participants in the Bitcoin ecosystem. In the Bitcoin ecosystem, it plays a bridging role. It leverages the new features introduced by the Bitcoin Taproot upgrade, making it possible to store large amounts of data in a single transaction. Through this method, the Ordinals protocol can directly create and transfer digital artworks, collectibles, etc., on the Bitcoin chain, bringing the concept of NFTs (non-fungible tokens) to the Bitcoin blockchain, differing from the implementation methods of NFTs on platforms like Ethereum.

The BRC 20 standard, derived from the Ordinals protocol, aims to implement a token standard on the Bitcoin blockchain similar to Ethereum's ERC 20. The goal of BRC 20 is to provide a standardized definition and interface for tokens in the Bitcoin ecosystem, allowing developers to create, issue, and manage tokens on the Bitcoin blockchain, similar to token operations on Ethereum. This means that in the future, complex token transactions and smart contract operations can also be conducted on the Bitcoin chain, although this requires complex programming and data storage technologies. The introduction of the BRC 20 standard represents an expansion of Bitcoin's functionality, demonstrating the continuous maturation and diversification of the Bitcoin ecosystem. However, realizing such standards requires broad community support and further technical development.

The innovation of Ordinals primarily lies in the fact that, prior to this, Bitcoin was fungible (interchangeable), and one satoshi on the blockchain could not be distinguished from another. Ordinals changes this by utilizing two updates to the original Bitcoin protocol: Segregated Witness (SegWit) and Taproot. In simple terms, SegWit allows cheaper data to be placed in the witness portion of transactions, effectively increasing block size, while Taproot allows for advanced scripting in the witness portion. Together, these two updates are crucial for inscriptions, as they allow for more arbitrary data storage in the witness portion of any Bitcoin block.

Overall, the emergence of Ordinals and BRC 20 not only ignited the Bitcoin market (the source of miner income has completely changed, as shown in the figure below) but also pointed the way for subsequent improved protocols. For example, the BRC 20 standard TRAC deployed by active Bitcoin community developer Beny and the first cursed inscription with a total supply of 21 million - CRSD, based on this, led to the launch of the BRC-20 improved version Tap Protocol, which is an improvement at the BRC-20 protocol level, and based on the Tap Protocol, TAP and -TAP were issued, along with the Pipe protocol, which is an improved version of Runes.

Analysis of Miner Income

In September, another anonymous developer in the Bitcoin community, after some time of refinement, identified some design flaws in the Ordinal protocol and launched the Atomicals Protocol. From a technical aesthetic perspective, Atomicals is based on BTC's UTXO for minting and propagation, not adding extra burden to the BTC network, aligning more closely with Bitcoin technology, gaining support from some Bitcoin purists. On the other hand, since the Ordinal protocol has a stronger "experimental" nature, being a more spontaneous product, its BRC 20 protocol is another kind of "derivative" that even Ordinal founder Casey did not anticipate, thus the Ordinal ecosystem does not possess "planning." In contrast, Atomicals, having undergone thought and refinement, along with the foresight of its founder, has a clear blueprint for its ecosystem.

Here we provide a brief introduction to the Atomicals protocol.

The Atomicals protocol is a simple and flexible protocol for minting, transferring, and updating digital objects (i.e., digital objects, traditionally referred to as NFTs; Atomical believes that NFT is a highly technical term that cannot express its various potential uses, and thus chooses to use the term "digital objects" to highlight all potential uses of the protocol, which is more familiar to the general public and more developer-friendly).

Atoms (Atomical or Atom) are a way to organize the creation, transfer, and updating of digital objects—essentially a chain of digital ownership defined by some simple rules. The protocol is open-source, and anyone can use it for free. All libraries, frameworks, and services are released under MIT and GPL v3 licenses to ensure that no one can control these tools and protocols.

Compared to other Bitcoin ecosystem protocols, Atomical's main advantage is that it does not require centralized services or intermediaries as trusted indexers. It does not require any changes to Bitcoin and does not need sidechains or any auxiliary layers. It is designed to work in coordination with other emerging protocols (such as Nostr, Ordinals, etc.). Each protocol has its different advantages, and Atomicals Digital Objects increase the range of options available to users, creators, and developers.

According to @bro.tree, "The Atomicals protocol is the first protocol to mine token inscriptions through a POW process, allowing anyone to personally mine tokens/realms/NFTs using their CPU, which is the most fascinating feature of this protocol."

In terms of future ecological scenarios and implementations, Atomicals mainly considers three asset categories and their derived scenarios: ARC 20 (i.e., fungible tokens), non-fungible digital objects (i.e., NFTs), and realms (digital identities). Related implementation scenarios include: digital collectibles, media and art, digital identities, authentication and token-gated content, web hosting and file storage (Bitcoin native file system), peer-to-peer exchanges and atomic swaps (naturally supporting swaps), digital namespace allocation (DAO construction and domain name revolution), virtual land and property registration, dynamic objects and states in games (GameFi), social media profiles, posts, and communities (verifiable SBT, SocialFi), etc.

Overall, compared to the Ordinal protocol, ARC 20 and $ATOM are still very early and need to wait for the improvement of wallets and markets. However, due to their technical design and mining settings being more aligned with Bitcoin, their orthodoxy occupies a relatively high position, which is invaluable for the Bitcoin community. In terms of possibilities, there is also an opportunity to achieve true BTC-native DeFi. From the perspective of ecological development, the community has experienced a few small bursts (see the figure below), but has not yet undergone large-scale speculation, still possessing significant potential.

Atomical Minting Situation

Additionally, it is worth mentioning that all tokens under the Atomical protocol use the native satoshi unit to represent each token, allowing them to be split and combined like ordinary bitcoins. 1 coin corresponds to 1 satoshi, and one atom is 1000 coins, corresponding to 1000 satoshis of BTC. This requires a period of adaptation for beginners in the ecosystem; if they mistakenly burn an atom as ordinary BTC transaction fees during transfers, it will result in destruction.

BitVM—The Holy Grail of the Bitcoin Ecosystem?

In the Bitcoin ecosystem, the BitVM, Ordinal, and Atomicals protocols each represent different directions of technological innovation and expansion. BitVM aims to provide more advanced programming capabilities and smart contract functionalities for the Bitcoin network, thereby broadening its application scope and increasing its functionality. This approach attempts to introduce more programmability and flexibility while maintaining Bitcoin's core attributes—such as security and decentralization.

In simple terms, BitVM is a computational model that allows developers to run complex contracts on Bitcoin without changing its fundamental rules. Since the concept of BitVM was proposed until the release of its white paper in October 2023, it has attracted widespread attention and anticipation from the Bitcoin community. Bitcoin community developer Super Testnet boldly claimed, "This might be the most exciting discovery in the history of Bitcoin scripting." Abstractly speaking, BitVM operates similarly to the Lightning Network, which some in the community believe represents the future of Bitcoin payments, as it also uses off-chain mechanisms to expand Bitcoin transactions.

As mentioned earlier, Bitcoin serves as the digital gold standard of cryptocurrencies, but it lags behind other public chain ecosystems in its ability to handle complex, Turing-complete smart contracts. BitVM starts from this point, created by Robin Linus, who also created ZeroSync, an exciting direction that introduces zero-knowledge proofs into the Bitcoin ecosystem, focusing on the implementation of Stark Proofs for Bitcoin.

To summarize in one sentence, under BitVM, computations will be executed off-chain, with on-chain verification, similar to the op rollup mechanism on Ethereum.

Similarly, BitVM involves two main participants: provers and verifiers. The prover is the party initiating the computation or assertion, essentially saying, "This is a program, and this is what I assert it will execute or generate." On the other hand, the verifier is responsible for validating that assertion. This dual-role system can achieve a certain degree of checks and balances, ensuring that the computation results are accurate and trustworthy.

The originality of BitVM lies in its handling of computational workloads. Unlike traditional blockchain operations that place a large computational burden on-chain, most of the complex computations in BitVM are executed off-chain. This significantly reduces the amount of data that needs to be directly stored on the Bitcoin blockchain, improving efficiency and lowering costs. This off-chain approach also provides higher speed and flexibility, as developers or users can run complex programs or simulations without worrying about overloading the blockchain.

However, BitVM does adopt on-chain verification when necessary, especially in cases of dispute. If a verifier questions the legitimacy of a prover's assertion, the system will refer to the immutable decentralized ledger of the Bitcoin blockchain to resolve the issue. This is achieved through what is known as "fraud proofs."

If a prover's claim is proven to be false, the verifier can submit concise fraud proof to the blockchain, exposing dishonest behavior. This not only resolves disputes but also maintains the overall integrity of the system. By integrating off-chain computation and on-chain verification, BitVM achieves a balance between computational efficiency and robust security, which we know as Optimistic rollup. The basic idea is to assume that all transactions are correct ("optimistic") unless proven otherwise. Only when disputes arise will the relevant data and computations be published and verified on the main blockchain. This significantly reduces the amount of data that must be stored on-chain, freeing up space and lowering transaction fees.

In BitVM, Optimistic rollup is particularly useful. Most computational work occurs off-chain, reducing the amount of data that needs to be stored on the Bitcoin blockchain. When a transaction is initiated, BitVM can use Optimistic Rollups to bundle multiple off-chain transactions into a single on-chain transaction, further reducing blockchain space usage.

Additionally, in the event of a dispute, BitVM's use of fraud proofs aligns very well with the inherent "challenge-response" system of Optimistic Rollups. If a prover makes a false claim, the verifier can quickly expose dishonest behavior by providing concise fraud evidence. This fraud evidence will then be reviewed within the Optimistic Rollup framework, and if verified, the dishonest party will be penalized.

In contrast, while both BitVM and Ethereum's EVM (Ethereum Virtual Machine) provide smart contract functionalities, their approaches and functionalities differ. Ethereum's EVM is more general in supporting multi-party contracts and offers a wider range of computational tasks on-chain, which may lead to higher costs and a more chaotic blockchain. In contrast, BitVM primarily focuses on two-party contracts and executes most computational work off-chain. This minimizes the footprint on the Bitcoin blockchain and lowers transaction costs. However, BitVM's current design limits its applicability in complex multi-party environments, which is a domain where Ethereum's EVM excels.

Not everyone believes that BitVM deserves attention, and it has raised concerns among some individuals. As Dan from Paradigm Research Institute stated, the protocol is only applicable to two parties, so it cannot be used for rollups or other multi-party applications, and there is nothing particularly novel about it; for instance, programmer Greg Maxwell proposed a better protocol ("ZK contingent payments") long ago to address the same issue. However, it must be acknowledged that if BitVM is effective, it could have a widespread impact on constructions built on Bitcoin. Another criticism is that even if computations are completed "off-chain," on-chain verification may still incur significant overhead. BitVM's proposal states that it will not add a large volume of transactions to the network, nor will it lead to skyrocketing gas fees—unlike the surge in popularity of Ordinals.

Overall, BitVM is still in the conceptual stage. As Linus stated, "The purpose of releasing the white paper is to describe the idea in simple terms to spark community interest, but it is not yet a complete solution."

Conclusion

Compared to other public chain ecosystems, Bitcoin, as the most consensus-driven and long-standing decentralized practice, has a community that is very committed to Bitcoin's orthodoxy and fundamentalism. To horizontally compare different explorations of the Bitcoin ecosystem, it is necessary to consider community opinions to a greater extent and to ensure that no harm is done to the Bitcoin network.

• The sidechains and Layer 2 solutions represented by the Lightning Network are the longest-standing explorations and practices in the ecosystem. The Lightning Network has gathered more than half of the developers in the Bitcoin ecosystem, possessing a consensus and cohesion that other sidechains and protocols cannot match. As a protocol aimed at addressing Bitcoin's scalability issues, the Lightning Network creates payment channels on top of the main chain to achieve fast, low-cost micropayments, effectively alleviating congestion and high fees on the Bitcoin network. However, for a long time, the Lightning Network was only used for small payments and did not support the issuance of other assets. With limited use cases, it was surpassed by the popularity of Ordinals. Its project company, Lightning Labs, timely released the Taproot Assets protocol on the mainnet, supporting the issuance of stablecoins and other assets on the Bitcoin and Lightning networks, providing developers with "the tools needed to make Bitcoin a multi-asset network while maintaining Bitcoin's core values in a scalable way."

• The various asset issuance protocols represented by the Ordinal protocol are ingeniously designed and possess strong technological innovation highlights, solving the major issue of "asset issuance" that has plagued the Bitcoin ecosystem in a simple manner, quickly attracting a large amount of market attention. The wealth effect and influx of developers have made it reminiscent of the previous DeFi summer. Other innovative protocols derived from Ordinals, such as BRC 20, Rune, Atomicals, etc., have generated a strong sense of technological iteration. Although there are negative evaluations in the Bitcoin community regarding these protocols, such as "increasing the burden on the mainnet," we believe that asset issuance protocols represented by the Ordinal protocol will become a market hotspot for a period, serving as a transitional or phase-based innovation in the Bitcoin ecosystem.

• BitVM and similar virtual machines or smart contract platforms hold a particularly unique and important position in the Bitcoin ecosystem. The emergence of these platforms represents the Bitcoin ecosystem's desire for functional expansion and technological innovation, especially in terms of smart contracts and more advanced programming capabilities, bringing new use cases and value enhancements to Bitcoin. Although it is still in the development and exploration stage, in the long run, the ability to introduce smart contracts is crucial for Bitcoin's long-term development and competitiveness, potentially becoming a key driving force for innovation and diversification in the Bitcoin ecosystem. However, the success of these systems will depend on community acceptance, technical feasibility, and whether they can align with the security and decentralization characteristics of the Bitcoin main chain.