New Strategy for Bitcoin Layer 2: Market Positioning of RGB++ - Disruptive Progress or Market Adaptation?

In today's rapidly evolving cryptocurrency space, Bitcoin Layer 2 solutions are becoming the new favorites in the market. In particular, the latest innovation from CKB (Nervos Network) — the RGB++ protocol — has garnered widespread attention. RGB++ not only propelled the value of CKB to soar through an innovative asset issuance mechanism earlier this year but also achieved an astonishing monthly increase of over 300% in just a few months.
The price volatility of Bitcoin has provided a stage for various Layer 2 projects to showcase their technologies, with CKB's performance being particularly outstanding. In the popular race of Bitcoin Layer 2, CKB has successfully bound the UTXO of the Bitcoin main chain with the Cell on the CKB chain, leading a new market trend thanks to its unique homomorphic binding mechanism and strong backing from the renowned public chain Nervos.
Moreover, the RGB++ protocol was further elaborated on during a Twitter Space hosted by Trustless Labs on February 22 this year. In this event, Cipher, the main author of RGB++ and co-founder of CKB, along with Baiyu, the head of ecology, shared their in-depth insights on Bitcoin Layer 2 and the future plans for RGB++ assets and the CKB ecosystem.
This article will provide a detailed introduction to the working mechanism of the RGB++ protocol, its position in the market, and how it may change our understanding and utilization of Layer 2 solutions.

Addressing Bitcoin's Scalability Pain Points: RGB++ Achieves Significant Performance Improvements and Interoperability Advantages through Homomorphic Binding

In-depth Analysis: The Logic and Challenges Behind Choosing the RGB Protocol

The team's development of the RGB++ protocol originated from a deep analysis of the competitive landscape of Bitcoin Layer 2 solutions. They particularly focused on the new protocol competition on Bitcoin Layer 1, distinguishing between two types of protocols: one that utilizes UTXO characteristics and another that does not involve UTXO. The team chose the first type, specifically selecting protocols with UTXO characteristics such as Atomicals, RGB, and Taproot Assets.
The reasons for selecting the RGB protocol as the development foundation are multifaceted. Firstly, team member Cipher has a great interest in the RGB protocol and has conducted in-depth research with Professor A Jian. The RGB protocol is known for its elegant design and strong scalability for Bitcoin, but despite these advantages, it has not achieved widespread adoption due to several technical and product issues in practical applications (such as interactive operation issues, data availability issues, interoperability issues, smart contract/script execution environment issues, etc.).

CKB Team's Bitcoin Layer 2 Solution

RGB++ is an asset issuance protocol belonging to Bitcoin Layer 1, positioned at the same level as other Layer 1 asset issuance protocols such as Ordinals, Runes, and BRC20. Its design and technical advantages reflect the CKB team's long-term accumulation in Bitcoin Layer 2 solutions. Compared to the traditional RGB protocol, RGB++ avoids the need to exchange transaction history and data through a P2P network, moving all smart components, such as virtual machines and smart contracts, directly on-chain, thereby significantly simplifying off-chain logic and accelerating the development process.

On-chain Processing of Traditional RGB Protocol Utilizing CKB Technology Platform

The core of the RGB++ protocol lies in transferring the complex logic that needs to be processed on the client side in the traditional RGB protocol to on-chain processing. This transformation benefits from years of accumulation on the CKB technology platform, including an independent P2P network, shared data, a virtual machine capable of verifying transactions, and a non-interactive operation experience. Through this homomorphic binding mechanism, RGB++ maps Bitcoin's UTXO to CKB's Cell, using script constraints on both the CKB chain and the Bitcoin chain to verify the correctness of state calculations and the validity of ownership changes.

Three Major Tools for Transaction Innovation

The main advantages of RGB++ include: non-interactive transactions — RGB++ utilizes the data hosting and computing platform features of CKB, allowing both parties to transact asynchronously and non-interactively, greatly improving user experience; transaction folding — by correlating multiple CKB transactions with a single Bitcoin RGB++ transaction, it enhances the performance of the slow and low-throughput Bitcoin chain; and direct interoperability between BTC assets and CKB chain assets — through the mapping relationship between UTXO and Cell, it achieves direct interaction between Bitcoin assets and CKB chain assets without the need for complex cross-chain mechanisms.

Analyzing RGB++'s Innovative Mechanism and Looking Ahead to the Future Development Path of Bitcoin Layer 2 Technology

Core Mechanism and Challenges of the RGB Protocol

The RGB protocol is a unique P2P asset protocol that primarily operates off-chain on the Bitcoin network, with its computing system being similar to payment channels in certain aspects. It requires users to run a client and personally verify transfer actions related to themselves, a method known as "interactive transfer." Even as the recipient of the asset, the user must confirm that the sender's transfer declaration is correct before it can take effect. This method enhances privacy protection, as unlike traditional blockchains like Bitcoin and Ethereum that adopt widespread node consensus protocols, the RGB protocol protects the privacy of each transaction through "client verification."
However, this design of the RGB protocol also brings significant challenges. The lack of a public consensus process means that different clients may hold inconsistent data, leading to "data islands." Additionally, users must verify the historical source of each transaction to confirm its legitimacy and the authenticity of the assets, which increases the complexity of user operations and may limit the widespread adoption of the protocol.

Innovations and Advantages of the RGB++ Protocol

In contrast, the RGB++ protocol significantly improves user experience and system efficiency while maintaining the privacy advantages of the original RGB protocol. RGB++ combines Bitcoin's UTXO with CKB's Cell through a "homomorphic binding" mechanism, achieving on-chain management of asset and transaction information. This mechanism allows all relevant verification logic to be executed directly on the CKB chain rather than solely on the user's local client. This not only simplifies the process for users to verify assets and transactions but also resolves data inconsistency issues through centralized on-chain verification.
Another major advantage of RGB++ is the non-interactive nature of transactions. In the RGB protocol, if Alice wants to transfer funds to Bob, she must send the transaction information to Bob, who then checks and verifies it personally. In RGB++, this process is automatically completed by the CKB chain, eliminating the need for manual intervention from users, greatly simplifying the transaction process and improving efficiency. Furthermore, RGB++ leverages the computational power of the CKB chain to allow for the execution of more complex smart contracts and extended functionalities, which not only enhances the protocol's functionality but also provides developers with more room for innovation.
In summary, RGB++ retains the privacy advantages of the RGB protocol while significantly improving transaction convenience and data consistency through on-chain centralized processing and verification, addressing the main pain points of the traditional RGB protocol. These improvements not only enhance user experience but also lay a solid foundation for the widespread adoption and future development of RGB++.

RGB++ Takes the Stage: Can It Stand Out in the Fierce Competition of Bitcoin L2?

Market Potential and Strategy

Currently, Bitcoin's second-layer solutions (L2) are growing rapidly, with various projects like BounceBit, Merlin Chain, and B^2 accumulating considerable total locked value (TVL). In the face of this explosive growth, how will RGB++ penetrate this market? The key lies in its unique market positioning and strategic deployment. RGB++ not only exists as an issuance protocol for NFTs and FTs but also fully leverages the technical advantages of the CKB chain to provide a seamless trading experience. Although operating on the Bitcoin mainnet may face high gas fees and slower transaction speeds, the RGB++ protocol optimizes these operations by directly utilizing CKB's Dex for asset trading.

Integration Strategy on CKB Layer 2 Chain

On the CKB Layer 2 chain, RGB++ focuses on the issuance of native assets and support for cross-chain assets. Bitcoin and Ethereum assets can be securely transferred to CKB through advanced bridging technology, and we collaborate with several large institutions to ensure the security and reliability of transactions. Additionally, the assets we launch on CKB adhere to unified standards, such as the FT standard XUDT and the NFT standard, which have already been applied on the mainnet. We also plan to launch specific trading platforms, such as the Omega Market, to support the issuance and trading of CKB native inscription assets.

Challenges and Uncertainties Ahead

Despite the clear advantages of RGB++ in technology and market strategy, its development process is not without challenges. The original RGB's development has been influenced by various factors, such as the need to build on the Lightning Network, which does not fully support the RGB protocol under existing standards. Additionally, the refinement of RGB's development tools and virtual machine (AluVM) will also take time, which may lead to slow development progress and missed market cycles.
In conclusion, RGB++ not only carries the hope of technological innovation but also faces multiple challenges in practical applications. As we continue to push the technological frontier and strive to overcome these challenges, will RGB++ be able to carve out a place in this fiercely competitive market?