The violent fluctuations brought by BRC-20 to the Bitcoin network have caused strong dissatisfaction among many Bitcoinists. In addition to criticism from Bitcoin purists that BRC-20 encourages centralization, there are also multiple warnings from technical parties about its security issues.
The Bitcoin network fluctuates violently, with multiple data indicators hitting record highs
While BRC-20 brings a new narrative, it also puts almost unprecedented pressure on the Bitcoin network.
Yesterday, after the daily transaction volume on the Bitcoin chain reached a record high of 605,000 on May 1, the single-day transaction volume on the Bitcoin chain reached a new high of 663,000. Currently, on the Bitcoin network, the transaction volume related to the BRC-20 protocol, including deployment/minting/transfer, has exceeded the transaction volume of the non-Ordinals protocol. On May 7, the BRC-20 protocol transaction volume once accounted for more than 65%.
The extraordinary transaction volume caused unprecedented congestion on the Bitcoin network, causing panic in the community. According to Bitcoin Browser data, there are currently 309,732 unconfirmed transactions on the Bitcoin network. Yesterday, the Bitcoin network was frequently stuck, and twice there was a bad situation where no blocks were produced for more than an hour. Binance also suspended Bitcoin withdrawals twice due to congestion on the Bitcoin network, and was forced to integrate the Lightning Network to relieve pressure.
Along with the congestion, Bitcoin network fees and block rewards have also surged. Bitcoin network transaction fees have risen over the past 24 hours to an average of $19.20 per transfer. According to @BitcoinEmber, the average BTC reward per block output 2 months ago was only about 0.19 BTC handling fees. It has now soared to 4.85 BTC handling fees, an increase of 25 times.
High handling fees and block rewards have also allowed miners to create astonishing profits, with profits exceeding US$36 million in just 7 days. What’s even crazier is that in order to compete for the first transaction, the block rewards of three Bitcoin blocks yesterday significantly exceeded the transaction fees. According to 21Shares researcher Tom Wan combined with past historical analysis, the probability of this happening is less than 0.005%. . As a result, Bitcoin transaction rates have reached their highest level in the past six years. Since July 2021, transaction fees on the Bitcoin network have remained around 1-2%, but on May 7 this metric surged to 31%.
BRC-20 is causing quite a bit of controversy due to the severe volatility it causes on the Bitcoin network.
Controversies and risks caused by: deviation from centralization, lack of fairness and security
Many people believe that Satoshi Nakamoto’s original intention was to “make a de-sovereign currency”, and that creating DeFi, NFT, and tokens on Bitcoin is a deviation from the original intention. In fact, since the beginning of this year, the new narrative surrounding the Bitcoin ecosystem has been dissatisfied and criticized by Bitcoin purists. With the outbreak of the BRC-20 narrative, many crypto influencers have become more specific in their accusations.
First, the BRC-20 narrative is accused of going against the core of the crypto world – decentralization. Bitcoin is currently the most decentralized, but the mechanisms set up by BRC-20 are encouraging centralization. The bitcoin manual analyst Che Kohler believes that BRC-20 tokens introduce unnecessary complexity to managing digital assets, such as requiring additional steps for storage and transactions. Specifically, BRC-20 minting inscriptions requires the installation of a separate Unisat wallet. In addition, there is no on-chain automatic market maker on Bitcoin. Tokens that have been minted are either traded privately or on specialized secondary platforms such as UniSat’s Marketplace. market transactions. This provides CEX with more opportunities to manage assets and fee income, and brings the risk of fraud and attack to users.
The encryption security platform SlowMist also reminds users that the defense measures of the related BRC-20 token minting platform are relatively weak and are prone to malicious attacks to tamper with the code. Users' assets can easily be stolen when Mint.
In addition to centralization, BRC-20 tokens have also been accused of deviating from mainstream narratives such as fairness and low cost. Crypto researcher Haotian | CryptoInsight (@tmel0211) believes that there is a logical paradox between the fomo mechanism of first-come-first-served inscriptions and the mechanism of miners prioritizing packaging based on mining fees, which means that mint is not necessarily fair. In other words, although they can all mint at the same time, if the mining fees are not paid enough for ordinary users, they will definitely be squeezed out with higher mining fees than the big users. In the end, it will also lead to the fact that the cost of one-click trading in the secondary market may be lower than the hard work of mint.
In addition, Haotian also reminded users that there are some cognitive pitfalls in Unisat-like proxy services, coin withdrawal and recharge wallet specifications, and batch mint signature on-chain mechanisms. Many novice users only look at the mining fees recommended by the system, but do not know a sum. A successful on-chain inscription transaction will deduct commissions from three parties, platform network data delays, and the estimated error costs caused by various delays, so the mining fee will be 2-3 times higher than expected.
Many technical experts also pointed out some risks in the security mechanism. First of all, BRC-20 tokens actually have little to do with Bitcoin assets and do not have the security mechanism of the Bitcoin network. Ajian, a contributor to the Bitcoin ecosystem, mentioned that issuance of assets on the Bitcoin chain can only rely on “off-chain protocols”, and Omni, Counterparty, RGB, Taro, and Ordinals are no exception. No matter what data is written to the chain, it cannot be converted into a security mechanism for these assets. If you issue an asset, no matter what data you write to the chain, it is impossible to require the Bitcoin network to control this asset from inflation. In other words, BRC-20 tokens have attracted many investors by leveraging Bitcoin, but they do not have the security and decentralization of Bitcoin.
In addition, if the block reward exceeds the transaction fee, it will also trigger MEV strategy attacks called time-bandit attacks. Crypto analyst @0xShinChannn analyzed that when the potential revenue of MEV exceeds the block reward, it becomes economically reasonable for miners to undermine the stability of the consensus. Specifically, a miner/group of miners attempts to rewrite blockchain history by secretly mining alternative versions of the chain that include transactions with higher fees. When an attacker's alternative chain becomes longer than the current main chain, they can publish it to the network, effectively causing a reorganization of the blockchain. Blocks that were previously part of the main chain but are now replaced by the attacker's chain become orphan blocks. Ultimately, time-bandit attacks disrupt consensus and produce orphaned blocks, negatively impacting the overall security and reliability of the network.
At the same time, there are many voices warning that BRC-20 tokens may cause the risk of regulatory crackdowns on Bitcoin. Originally BTC was more like a commodity, but BRC-20 tokens may enable an unregistered securities market on the Bitcoin blockchain. This year, U.S. regulatory agencies have launched a “campaign” against some centralized exchanges and stablecoins over whether they are unregistered securities.
Conclusion
The current benefit myth of BRC-20 tokens may cause many users to have a huge deviation in their perception of the real market and risks under FOMO. Among the currently popular BTC-20 tokens, only four such as ORDI, VMPX, NALS, and DRAC have a 24-hour trading volume exceeding one million US dollars. According to the analysis of on-chain activity data, many analysts believe that the number of active players in BTC-20 may be around 10,000, and among them, there may be only a very small number of people who profit from huge assets.
In addition, those who have missed the BTC-20 trend may want to pay attention to more narratives about the performance of the Bitcoin network. Although the BRC-20 token continues to be controversial, it has also exposed some problems of the Bitcoin network to a certain extent. Currently, the Lightning Network, RGB protocol, etc. surrounding the performance of Bitcoin may be ushering in a second spring.