RGB Starts a New Journey in Web3: From Payments to Smart Contracts, Making Bitcoin Great Again

Web3 technology has experienced vigorous development over the years, leading to various innovations. Bitcoin, while maintaining decentralization and security, continuously enhances its privacy protection capabilities, achieving advanced features such as Schnorr signatures and Taproot, laying the foundation for subsequent technological innovations. The evolution of on-chain smart contracts, represented by Ethereum, has ushered in a golden age of blockchain applications, resulting in two bull markets. However, since 2022, the Web3 industry innovation has suddenly lost direction, and blockchain technology has been unable to break free from the constraints of the impossible triangle, resulting in large-scale applications failing to materialize.

Have we reached the technological boundary? Are there deeper unknown territories waiting to be explored? Perhaps it is during these explorations that the Bitcoin Layer 2 protocol RGB is quietly biding its time, gradually maturing, ready to challenge the limitations of existing technologies and shine brilliantly.

Bitcoin: Establishing its status as a currency layer

The biggest difference between Web3 and Web2 lies in the built-in economic system, where any economic system is based on currency as the foundational layer, with the protocol layer and application layer built on top of the currency layer. The currency in Web3 is called cryptocurrency and is issued through blockchain.

Due to the following key factors, Bitcoin is recognized as the safest and most stable cryptocurrency, and its value has gained global consensus:

First, the Bitcoin network covers the globe, with over ten thousand full nodes working together to verify and record transactions. This decentralization makes it difficult for attackers to tamper with transaction history. Secondly, Bitcoin uses powerful hashing computational power as a proof-of-work mechanism, which is the cornerstone of network security. The substantial computational power consumed in block validation and mining makes it hard for attackers to control the network. In addition, Bitcoin's consensus rules have not undergone significant changes historically, and this stability helps maintain the network's consistency and security. Compared to other blockchain projects, Bitcoin's consensus rules are less susceptible to radical changes. The Bitcoin community is extremely focused on the network's security and stability, concentrating on the safety of the core protocol. Modifications to the core protocol are made after careful discussion and testing to ensure network stability. In summary, Bitcoin is recognized as the most secure and stable among numerous blockchains, becoming the preferred currency layer of Web3 due to its excellent decentralization, consensus mechanism, stability, and community focus.

Ensuring safety and simplicity in parallel with Bitcoin scripts

Bitcoin plays an important role as the foundational currency layer in the Web3 world. The core protocol has gradually evolved through careful discussion and testing. Of particular note is the development of its scripting system. The original intention of the Bitcoin scripting language is to ensure security and avoid potential risks, which is why its design intentionally limits functionality while maintaining simplicity and security similar to that of a chip instruction set. Bitcoin scripts are based on reverse Polish notation and are a stack-based execution language. This script is intended to be executed on limited hardware.

In the mainstream Bitcoin node code, developers have imposed certain restrictions on executable script types, allowing only several types of transactions referred to as "standard scripts" to be executed. The most important of which is the P2SH (Pay to Script Hash) transaction, which in fact allows any Bitcoin script to be executed, making it possible to perform scripts with certain complex functions on Bitcoin. For example, the Lightning Network has become the de facto standard for small, high-frequency Bitcoin payments.

With the introduction of the Schnorr signature proposal and the Taproot soft fork upgrade, Bitcoin has taken an important step, marking a significant milestone. This enables Bitcoin to better support the development of layer two protocols, further enhancing its role in the future Web3 world.

Focus on Schnorr signatures and Taproot

Behind Schnorr signatures and Taproot lies a series of technological innovations that create new opportunities for Bitcoin. Firstly, Taproot introduces more flexible payment channels, allowing various transaction types to be executed on-chain in a more privacy-preserving manner. By hiding complex multi-signature scripts within a single script, Taproot makes various complex transactions appear as regular single-party payments, thereby enhancing privacy and security. The introduction of Schnorr signatures makes transactions on the Bitcoin network more compact, reducing transaction fees and improving scalability, closely aligning with the efficient transaction demands of the Web3 world.

These two innovations not only enhance the performance and privacy of Bitcoin but also bring more innovative possibilities to the ecosystem. More efficient scripting and signing technologies support cross-chain operations, Lightning Network expansion, and complex smart contracts. This refocuses Bitcoin on the core of Web3, paving the way for the construction of a more secure and efficient decentralized finance and application ecosystem.

The impact of Schnorr signatures

During the early design phase of the Bitcoin protocol, Satoshi Nakamoto had to consider various factors regarding the signature algorithm, including signature length, open-source nature, patent issues, security verification time, and performance. Ultimately, he chose the Elliptic Curve Digital Signature Algorithm (ECDSA) and selected a specific elliptic curve, secp256k1, based on the performance and security of this algorithm. However, aside from ECDSA, there are still other digital signature algorithms that meet the criteria, particularly the Schnorr Signature. The reason Satoshi Nakamoto did not adopt this algorithm earlier could be due to the fact that the patent for the Schnorr Signature had not expired in the year Bitcoin was born. German mathematician and cryptographer Claus-Peter Schnorr applied for and obtained the relevant patent in 1990, thus during the patent validity period, the open-source community could not adopt this technology. Otherwise, Satoshi might have been able to incorporate this signature mechanism in the initial Bitcoin protocol.

Compared to ECDSA, Schnorr Signature is more aligned with the essence of Bitcoin signatures. Not only does it perform better and have shorter signature lengths, but it also has linear properties that simplify key aggregation, eliminating the need for special techniques required for multi-signatures. This linear property is easy to understand, as the keys of the participating parties aggregate to form a new key through a simple mechanism. There are various ways to achieve aggregation, such as MuSig proposed by Blockstream and the updated version MuSig2. In the MuSig2 scheme, multiple signatures can generate an aggregated public key from their respective private keys, and then collectively produce a valid signature for that public key, reducing the number of interaction rounds from the original three rounds ( MuSig ) to only two rounds.

So, in the case of a 2-3 multisig transaction, the traditional method requires three public keys and two signatures to initiate the transaction.

In the Schnorr Signature scenario, on-chain transactions only require one aggregated public key and one signature, which significantly reduces the transaction byte size, thereby lowering the transfer cost.

Innovation of Taproot scripts

Taproot is an innovative Bitcoin script structure designed to specify how to use and parse Taproot-type transaction addresses. The inspiration for Taproot originally came from Bitcoin developers' research on the Merkle Abstract Syntax Tree ( MAST ), so Taproot can be seen as a special implementation of MAST. Through Taproot, Bitcoin UTXOs with multiple different branch scripts can expose only one branch when spent, while the other branches will never appear on the blockchain, significantly enhancing the privacy and efficiency of transactions. This technology enables the use of complex scripts to become more convenient and efficient under a more secure premise.

In the Bitcoin protocol, the "locking script" ( output script ) specifies the conditions for receiving Bitcoin ( UTXO ), while the "unlocking script" ( input script ) specifies the method for using Bitcoin ( UTXO ). The former can be seen as a lock, and the latter is the corresponding key. In the Segregated Witness ( SegWit ) upgrade, the script rules of Bitcoin have been fully upgraded. Two new script rules have been introduced, namely P2WPKH ( pay to witness public key hash ) and P2WSH ( pay to witness script hash ), which allow addresses starting with bc1 to be used. P2WPKH is mainly used for regular addresses, while P2WSH is commonly used for multi-signature addresses.

In the Segregated Witness upgrade, the concept of version numbers was also introduced; the previous Segregated Witness rules were marked as version V0. Taproot made further upgrades to the Segregated Witness framework, updating the version number to V1, which is also the origin of the "SegWit V1" title in BIP 341. Therefore, this new set of script rules is called P2TR( paid to Taproot), corresponding to P2WPKH and P2WSH.

In addition, by combining Schnorr Signature and Taproot, the construction of multi-signatures ( has a variety of methods. For example, Steve Lee, a pioneer in the Bitcoin community, introduced several methods in his speech, such as threshold signatures and Musig trees ) Musig Keytree (, etc.

For example, for the exchange's hot wallet, a 2-3 multi-signature scheme can be used, involving three private keys: the exchange's private key, a trusted third party's private key, and a cold wallet backup private key. In threshold signatures, multiple signers pre-construct the receiving address through the MuSig mechanism. During the actual transaction, only two signatures need to be aggregated to complete the transaction.

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

In the previous text, we explored the foresight exhibited by the Bitcoin network through the introduction of Schnorr signatures and the Taproot soft fork upgrade. At the same time, as technological wonders never cease, the LNP/BP Standards Association has been quietly cultivating in the background, as if a finely crafted artwork has brought more innovative possibilities to the Bitcoin ecosystem. The LNP/BP codebase covers standards and best practices for Bitcoin's second layer and above, which do not require soft forks or hard forks at the Bitcoin blockchain level, and have no direct connection to the contents covered by the Lightning Network RFC)BOLTs(. In short, the LNP/BP standards encompass everything related to Bitcoin transactions, defining the basic building blocks of second layer solutions and above, and describing complex use cases built on these modules. This provides possibilities for financial assets, storage, messaging, computing, and more, as well as secondary markets utilizing Bitcoin's security model and Bitcoin as a means of payment/exchange.

Here, we will only introduce a few key points that will have a significant impact on the future of Web3, such as key stage transactions in state channels, as well as some key protocols and technologies: 双向通道)Bi-directional channels(, PTLCs, eltoo, 通道工厂)Channel factories(, 离散对数合约)Discreet log contracts(, 高频微支付)high-frequency micropayments(, and Sphinx, etc.

) State Channel Same Stage Transaction Overview

Funding Transactions ###: Funding transactions are the initial transactions used to create payment channels in the Lightning Network. They aggregate the funds of the parties into a multi-signature address as collateral for the payment channel. Funding transactions ensure that before participants begin off-chain transactions on the payment channel, they have all committed a certain amount of funds. Funding transactions are the first step in creating a payment channel, ensuring the security and availability of the channel.

Partially Signed Bitcoin Transactions (: Partially Signed Bitcoin Transactions are a special format of Bitcoin transactions that allow multiple participants to collaboratively build and sign a transaction. In the Lightning Network, PSBT can be used to create, update, and close payment channel transactions. When both parties of a payment channel want to conduct a transaction, they can collaboratively build a PSBT, each performing partial signatures, and then merge the partially signed transaction to ultimately complete the transaction and submit it to the Bitcoin network. PSBT makes the multi-party collaboration in the transaction process more flexible and efficient.

State-based Bitcoin transactions ) BSBT, Base-Signed Bitcoin Transactions (: