Radical or Stable? A Review of the Controversy Surrounding the BRC-20 Upgrade

Author: Buidler DAO

The Bitcoin ecosystem, inscriptions, and BRC-20 have dominated much of 2023. Just when the market price fell and everyone thought the hype around inscriptions would come to an end, the debate over whether BRC-20 should upgrade brought all parties back into the spotlight. The core of the dispute can be summarized as whether to upgrade the 0.9 version of the BRC-20 index to keep it in sync with the iterations of Ordinals. Currently, this controversy has reached a preliminary conclusion as the BRC-20 standard follows Ordinals to upgrade to 0.14 (as of the completion of this article, Ordinals has already released version 0.15). This article will attempt to outline the entire upgrade process from various perspectives, including technical background, viewpoints and motivations of different parties, and observations from investors and users, allowing us to glimpse the consensus-building process within the Bitcoin community.

1. Review of the Dispute

1.1 Technical Background

What is BRC-20

BRC-20 is a fungible token protocol on the Bitcoin chain, allowing developers to issue tokens and perform accounting operations based on this protocol.

The relationship between the Bitcoin chain, Ordinals, and BRC-20

BRC-20 is a meta-protocol built on top of Ordinals; it uses the Ordinals protocol as a complete data availability layer and has an off-chain indexer to determine the state of the meta-protocol;

Ordinals is also a meta-protocol built on the Bitcoin chain; it uses the Bitcoin chain protocol as a complete data availability layer and has an off-chain indexer to determine the state of the meta-protocol;

Thus, BRC-20 is essentially a meta-meta-protocol that implements the financial behaviors mentioned in 1.1.1 through a mechanism called "Index" (see 1.1.3 for details).

Index

The index is a mechanism that arises based on the Bitcoin chain.

Tokens on the Bitcoin chain differ from those on the Ethereum chain; they are not distinguished by contract addresses but are stored in the "memo" field of blocks in text form, recording transaction information. Due to the decentralized nature of the Bitcoin chain, anyone can package and upload block content, and the information in the "memo" field does not affect the validity of the block. Therefore, there are valid/normal ledgers as well as invalid/malicious ones. To maintain information order, certain rules must be followed to collect and verify this ledger information. The process of verification is the index. The program executing the verification process (called smart contracts on the Ethereum chain) is the indexer.

The indexer is a database that can read and register all BRC-20 transaction data, such as checking which inscription is the first to deploy a new token, tracking changes in wallet balances for minted tokens, and related transaction address data. The rules of the indexer application are based on the consensus reached by the relevant parties.

Jubilee Upgrade

The name of an upgrade to the Ordinals protocol, occurring at block #824,544, with an upgrade date of January 5, 2024. The specific content is to update the Ordinals protocol to version 0.13. Version 0.13 is a routine but non-periodic update of Ordinals, mainly enriching the protocol's functionality.

Figure 1-1 Content of the Ordinals 0.13 version update (1) (Source: Ordinals' GitHub page)

Figure 1-2 Content of the Ordinals 0.13 version update (2) (Source: Ordinals' GitHub page)

It is important to note that the content of this update to Ordinals is not directly related to the indexing issue. The source of the current dispute stems from the inconsistency in indexing results caused by the different indexing standards generated by BRC-20 based on Ordinals versions 0.8 and 0.9, which may lead to greater discrepancies in future versions and the fact that the BRC-20 protocol standard has been frozen at 0.9 (see 1.2.1 for details).

1.2 Issues and Disputes

Technical Issues

As mentioned above, although the technology of the Bitcoin chain itself has ceased to develop, Ordinals, as a meta-protocol, continues to undergo technological iterations and updates. This iteration naturally affects the protocols and ecosystem built upon it, including BRC-20.

In November, a proposal put forth by Domo, the founder of the BRC-20 protocol, has already taken effect on-chain. The content of the proposal is to standardize the BRC-20 index based on Ordinals 0.9 and freeze it (paraphrased), aiming to maintain the stable operation of the protocol and avoid blind iterations that could lead to unforeseen impacts on technical standards and protocol operations.

In October, it was discovered that inscriptions #35321413 and #35329860 could be indexed by the 0.9 version of the Ordinals protocol but not by versions 0.7 and 0.8. Due to different markets adopting different versions of the Ordinals protocol, some inscriptions could not be correctly indexed in certain markets, resulting in a de facto offset in inscription numbering.

For the BRC-20 protocol as a whole, this issue is even more significant. A bug in the 0.8 version of the Ordinals protocol could lead to: 1) minting beyond the maximum supply; 2) double spending due to differences in Ordinals protocol versions across different markets. Such risks cannot be ignored.

Ecological Issues

BRC-20 is a protocol "parasitic" on the Ordinals protocol, and whether its index should follow the Ordinals protocol for upgrades is a dilemma at this stage. On one hand, the Ordinals protocol continues to rapidly update and iterate, adding more and more new features to the protocol. Especially with the upcoming "Jubilee" upgrade set to activate at block height 824544, the original method of generating cursed inscriptions will be fixed, meaning that cursed inscriptions assigned negative numbers in the 0.9 version of the Ordinals protocol will be assigned positive numbers in the 0.13 version, leading to significant differences in the numbering of subsequent new inscriptions due to version discrepancies.

Additionally, new features introduced by modified versions of BRC-20, such as CBRC-20, which utilize the new version of the Ordinals protocol for performance optimization, also pose certain challenges to the development of BRC-20.

On the other hand, as a protocol that has already given birth to numerous assets with a large market capitalization, maintaining stability during the development of BRC-20 has naturally become a top priority. If the pursuit of new features leads to user asset losses, it would undoubtedly cause significant harm to the BRC-20 ecosystem.

Therefore, under the dual pressures of technical and ecological issues, various stakeholders with a voice in the BRC-20 protocol have expressed differing opinions, and the core of the dispute can be summarized as whether to upgrade the 0.9 version of the BRC-20 index to keep it in sync with the iterations of Ordinals.

1.3 Voices from Various Parties

UniSat Wallet: Strictly Follow Upgrades

UniSat has decided to follow Ordinals for the Jubilee upgrade, which may lead to two different indexing standards for BRC-20 on the Bitcoin chain and result in different accounting rules. Differences in accounting rules mean that users may experience different balances or discrepancies in account balances in different places, which will fragment the BRC-20 market due to the differing indexing standards of the Ordinals versions.

In addition, UniSat has launched a black-and-white module system. Developers can introduce new features in the black module, and tokens can be placed in the black module but can only be withdrawn once approved ("turned white"). UniSat hopes to use this module to provide convenience for users and further standardize the market.

For other un-upgraded protocols, UniSat's stance is "Split." Although it is "separation," it does not equate to a "Fork" like BTC and BCH. According to UniSat's official explanation, this Split allows two different standards to operate simultaneously under two different ecosystems, while token/ledger information can still interact freely. However, compared to the repeated emphasis on technological iteration, UniSat has not elaborated much on how to address market chaos and risks such as double spending.

BRC-20 Founder Domo: Temporarily Freeze, Focus on Testing

Although Domo previously proposed freezing BRC-20 at Ordinals 0.9 and this proposal has officially taken effect, he also recognizes the technical issues and risks and holds an open attitude towards upgrades. However, for the sake of stability and risk prevention, Domo opposes directly following Ordinals for the Jubilee upgrade and hopes that current indexers will continue to freeze at 0.9 while thoroughly testing future versions of Ordinals (not limited to 0.13) in the background. Once satisfactory results are obtained from the testing, a decision will be made on which future version of Ordinals BRC-20 will specifically upgrade to and whether to continue freezing.

Minority Radicals: Direct Fork

Apart from the two opposing sides of UniSat and Domo, there are also some minority radicals in the market who propose a direct fork, similar to BTC and BCH, executing different standards where token information does not interoperate, allowing each to "play their own game." However, on one hand, this plan would impact the nascent BRC-20 and further create chaos; on the other hand, the proponents of this view are very few and do not have significant and direct ideas for the ecosystem like Domo or UniSat, so this perspective has not received much attention.

1.4 Trend Predictions

Note: At the time of writing, all parties have reached a consensus to jointly upgrade to 0.14. To ensure the completeness of the article, this analysis is retained.

On January 3, Twitter user @lilyanna_btc published a long thread analyzing several potential possibilities. From a technical analysis perspective, there are roughly the following possibilities:

Coexistence of Freezing and Upgrading Factions

The upgrading faction compromises and stays at 0.9 with the freezing faction.

The freezing faction compromises and follows Ordinals for the upgrade.

For the original text, see:

https://twitter.com/lilyanna_btc/status/1742395707624132825

In addition, I have another viewpoint: each side takes a step back and discusses business later.

Domo once mentioned in the L1F forum that he was considering gradually accepting Ordinals' upgrades in maintenance mode. This means freezing first and then upgrading later. This plan is actually not feasible. Freezing first and then upgrading would reignite the debate over whether to change inscription numbering. If the inscriptions before the upgrade are backtracked, it would reorder the inscription numbers, leading to even greater chaos than a direct upgrade of BRC-20. If not backtracked, the numbering of BRC-20 and Ordinals will forever remain inconsistent.

1.5 Final Result

After five days of discussion and coordination among all parties, a consensus was finally reached and implemented:

Figure 1-3 Final plan agreed upon by all parties (Source: Twitter)

BRC-20 will upgrade to version 0.14 along with Ordinals, which is even further than Jubilee. This version addresses bugs that occurred during the indexing process but does not have significant differences from 0.9;

In the short term, there will be no discussion on whether BRC-20 should freeze at Ordinals version 0.14; the current focus is on safety, stability, and related testing work, with further decisions based on the results.

Regarding the potential issue of duplicate inscription numbering mentioned in 1.2.2, Casey, the author of Ordinals, proposed the following: to add markers in specific parts of inscriptions that may duplicate numbering, indicating that these inscriptions will be correctly indexed in the future through minor modifications on Ordinals. Before updating to the relevant version of Ordinals, indexers can temporarily skip this and merge inscriptions after the update. In the consensus reached by the current parties, this proposal called "Vindication" has been shelved but may be activated in the future;

The extreme situations mentioned in "Vindication" are being jointly addressed by all parties;

Delegation and Encoding issues are ignored. However, the consensus did not specify what delegation and encoding refer to.

Figure 1-4 Casey's proposed Vindication proposal (Source: Casey's GitHub page)

2. Analysis from Various Parties

2.1 UniSat: "Radical"

The proposals and viewpoints put forth by UniSat throughout the event have always been from a very "radical" perspective. This radicalism has both advantages and disadvantages. On one hand, this radicalism can maintain synchronization with the Ordinals protocol, actively or passively promoting the update and development of the BRC-20 ecosystem. On the other hand, overly radical proposals that lack communication and coordination with peers indeed overlook potential bugs, which could further lead to market chaos or even technological gaps.

Domo has commented that this radicalism is purely speculative behavior, but this criticism is mainly based on "too short a time" and "lack of communication," rather than reckless behavior in terms of technology, ecology, and development routes. Considering that UniSat is also a startup team, it is understandable that they want to "do more" in the early stages of the ecosystem to enrich team experience. Therefore, I am reluctant to evaluate UniSat's motives and role as "good" or "bad," but I do recognize their proactivity in this dispute.

2.2 Domo and the Genesis Team: "Stable"

Domo and his team, unlike UniSat, have always emphasized "stability." Even before the dispute arose, the proposal to freeze the BRC-20 version at 0.9 was primarily aimed at ensuring the stability of the entire protocol. Throughout the dispute, whether in their viewpoints or statements on social media, they have focused mainly on the technology and protocol itself, with less consideration for future routes.

This way of thinking is actually common in various industries. It is mainly characterized by technical background personnel who pay great attention to the stability and quality of the technical layer, believing that quality is paramount. There is insufficient emphasis on future development, especially from the market and funding perspectives. This way of thinking cannot simply be evaluated as good or bad; it has its advantages and limitations, just like UniSat's perspective.

2.3 Market and Users Neutral Party: Focus on Customer Relationships

The neutral viewpoints are mainly held by service providers, such as exchanges like OKX. For OKX, BRC-20 or the Ordinals protocol is just one of their many main businesses. Whether to adopt 0.8, 0.9, or the Jubilee upgrade to 0.13 or even 0.14 is not important; what matters is to quickly reach a consensus on which standard to adopt, avoiding the additional costs brought by the coexistence of multiple systems, and helping to maintain market order.

2.4 Conspiracy Theories

From inscription users to the Bitcoin chain, all participants have varying degrees of profit-seeking intentions, whether that profit is money, technology, or something else. Naturally, there are conspiracy theories suggesting that the disputes between Domo and UniSat mainly revolve around seizing ecological discourse power to maximize their own interests.

I believe this logic, while plausible, is somewhat unfounded when directly attributing the early thinking logic, wording of statements, and the later negotiation process and final results of both UniSat and Domo to "seizing discourse power." Moreover, considering that BRC-20 has already attracted significant funding at its inception, and the mechanisms and gameplay within the ecosystem are still in the early stages of exploration and development, it would be shortsighted to rush to seize discourse power and establish a monopoly, especially when the parties have demonstrated a vision for future development during the dispute, which indirectly confirms that the conspiracy theories do not hold water.

2.5 Event Evaluation

There is a classic triangle in blockchain: security, decentralization, and scalability. For any product or ecosystem, aside from the product itself, how to balance technical quality and market responsiveness is also a very important topic, and this dispute mainly revolves around this.

After six months of development, the BRC-20 ecosystem is no longer a toy or speculative direction; its $3 billion scale is enough to attract everyone's attention. Therefore, how the BRC-20 ecosystem develops in the future should not be determined by users, nor should it be driven unilaterally by UniSat, Domo, or exchanges. One encouraging point is that in the later statements from all parties and interviews with Domo himself, there is a general lack of concern about "winning" or "losing," with repeated mentions of "communication," "cooperation," and "coordination," while not blindly insisting on their own viewpoints but rather integrating the strengths of all parties.

Recently, the U.S. has also approved applications for Bitcoin spot ETFs, and digital currencies and blockchain are gradually evolving from "speculative products" to "investment products." The $3 billion funding scale of the BRC-20 ecosystem is both large and small. It is large in that it involves many participants and substantial market funds that will wisely support every healthy developing project and community. It is small in that there are still larger pools of funds waiting to be unleashed outside of BRC-20 and even the blockchain industry. After the conclusion of this dispute, although all parties only reached a temporary consensus, the positive attitudes displayed send a very encouraging signal to users, developers, operating teams, and even traditional investors outside the market. Perhaps, looking back at this event after some time, we will find that the ecosystem and industry have precisely concentrated on the right timing and conditions, embarking on a path of rapid and healthy development.