The Future of Bitcoin: From Payments to Smart Contracts, RGB Opens a New Journey for Web3

After more than a decade of vigorous development, Web3 technology has emerged with various innovations at different levels. Bitcoin has enhanced its privacy protection capabilities through technologies like Schnorr signatures and Taproot, while maintaining decentralization and security, laying the foundation for subsequent innovations. Smart contract platforms like Ethereum have given rise to applications such as DeFi. However, since 2022, the Web3 industry innovation seems to have encountered a bottleneck, and blockchain technology struggles to break through the limitations of the impossible triangle.

In this context, the Bitcoin Layer 2 protocol RGB is gradually maturing, expected to challenge existing technological limitations and inject new vitality into the Bitcoin network.

Bitcoin: Establishing Its Position as a Currency Layer

The biggest difference between Web3 and Web2 lies in the built-in economic system, which is based on currency. The currency of Web3 is cryptocurrency issued through blockchain.

Bitcoin is recognized as the safest and most stable cryptocurrency for the following reasons:

• More than 10,000 globally distributed full nodes, making it difficult to tamper with transaction history.
• A powerful proof-of-work mechanism that ensures network security.
• The consensus rules are stable and not easily subject to radical changes.
• The community is highly focused on security and stability.

Therefore, Bitcoin has become the preferred currency layer of Web3.

Bitcoin script that ensures security and simplicity in parallel

Bitcoin script language is designed to be simple and secure, similar to a chip instruction set. It mainly supports "standard script" transactions, such as P2SH, which allows executing complex scripts.

Schnorr signatures and the Taproot upgrade are important milestones that lay the foundation for the development of second-layer protocols.

Impact of Schnorr Signatures

Compared to ECDSA, Schnorr signatures have better performance, shorter signatures, and linear characteristics, making key aggregation easier. For example, the MuSig2 scheme aggregates multiple signatures into a single public key signature, greatly reducing the transaction byte size.

The innovation of Taproot scripts

Taproot is an innovative script structure that allows complex scripts to appear on-chain as a single signature transaction, enhancing privacy and efficiency. It is based on the Segregated Witness framework and introduces P2TR script rules.

Combining Schnorr signatures, Taproot supports various multi-signature methods, such as threshold signatures and Musig trees.

LNP/BP: "Bitcoin Protocol/Lightning Network Protocol" Maturity

The LNP/BP standard covers Bitcoin's second layer and above standards and best practices, providing possibilities for financial assets, storage, messaging, and other areas.

Key technologies supporting RGB smart contracts in the Lightning Network

• Bi-directional channel: Real-time off-chain interaction
• PTLC: Solving the privacy issues of payment paths
• Eltoo: Solving the old state submission problem through state numbering
• Discrete Logarithm Contracts: Addressing scalability and privacy issues of smart contracts
• SPHINX: An onion routing mechanism that ensures secure communication

These technologies inject new vitality into the Bitcoin network and lay the foundation for supporting complex RGB smart contracts.

Leading Change: Exploring the Mission of the RGB Protocol

RGB aims to combine Bitcoin as the underlying currency layer with smart contracts. It allows for the creation and management of various assets on the Bitcoin network, enabling broader financial innovation.

Interpretation of RGB smart contracts

The core of the RGB smart contracts is ownership and state verification. It is a distributed network, where only the owner can access their owned state.

Rights management defines specific operations, such as asset ownership, identity ownership, etc. Rights transfer is controlled through Bitcoin scripts and one-time sealing mechanisms.

RGB implements the rights transfer/state transition verification rules, defined through pattern structures and simple scripts. Each rights state is independent and can achieve "shared states" through metadata.

Open Infinity: A New World Analogous to TCP/IP

With the maturity of Schnorr, Taproot, and second-layer protocols like LNP/BP and RGB, the standard development path for Web3 is becoming increasingly clear. This pattern is based on the LNP/BP protocol and presents a layered structure similar to TCP/IP.

It will bring:

• Scalability and efficiency improvement
• Privacy and security enhancement
• More enriched features
• Reduce the burden of blockchain
• Inspire developer innovation

This development path is similar to the TCP/IP protocol stack, requiring a process of moving from scattered to complex and then to standardization. Solutions like Infinitas are conducting in-depth expansions based on this.

The Brilliant Future of Web3 Development

As the LNP/BP and RGB protocols mature, the Web3 world will become richer and more diverse:

• Large-scale adoption of decentralized finance
• The emergence of blockchain games
• Diversified on-chain social applications
• Deeply integrated with AI
• Integrated with wearable devices and sensors

The RGB protocol allows us to stand at a new starting point, witnessing a future with unlimited possibilities, like Bitcoin. We look forward to a more open, inclusive, and innovative Web3 future as a result.