UTXO: New Expectations for the Bitcoin Ecosystem

As we all know, Bitcoin does not have the smart contract capabilities of Ethereum, and its UTXO model is very different from Ethereum's ERC20 contracts. Building applications based on UTXO can share the security of the Bitcoin main chain, and this model brings new expectations to the market, with the potential to form an ecological model different from Ethereum L2.

Compared to Ethereum, UTXO is the most distinctive data model of Bitcoin, so the Bitcoin Layer 2 ecosystem may present a development model different from that of Ethereum. In recent years, Ethereum L2 has developed rapidly, controlling on-chain fees, while the Bitcoin network ecosystem is still in its early stages. The applications of inscriptions in 2023 and this year's runes have laid the foundation for tapping into the potential of UTXO.

The Taproot upgrade further enhances the development potential of the Bitcoin ecosystem. This is the most important upgrade since Segregated Witness, aimed at improving the network's privacy and efficiency. Taproot allows for the aggregation of multiple complex signatures, thereby improving performance, reducing fees, and saving block space. This provides new ways to execute Bitcoin transactions, significantly increasing scalability.

The Cell model of Nervos CKB is similar to a smarter UTXO. If Bitcoin's UTXO is a box that holds a paper ledger, then the Cell is like replacing the ledger in the box with an Excel electronic document. Nervos CKB inherits the Bitcoin UTXO architecture and creates the Cell Model, which is a universal UTXO model that maintains the simplicity and consistency of UTXO. In CKB, all states are stored in Cells, calculations are done off-chain, and nodes perform transaction validations on-chain. Cells can contain various data types, extending the capabilities of UTXO, such as implementing smart contracts.

Will the uniqueness of UTXO give rise to a different ecological world? The in-depth exploration of inscriptions and runes in Bitcoin's UTXO makes the deployment of UTXO-based assets possible, while the upgrade of UTXO by Nervos CKB further liberates computational power. These indicate the different application potential of UTXO, becoming a new expectation for the industry. Looking at the development of Ethereum, from ERC20 to DeFi to NFT, its ecological paradigm has gradually become enriched, but this process has not been smooth sailing. Bitcoin's recent innovations have gained market traction from the start, showing the market's expectations for UTXO's potential. However, inscriptions and runes are still in the "minting" phase, and how to develop applications and enrich the ecology is key. Currently, the ecological applications of Nervos CKB are merely a simple "copy" of Ethereum's ecology.

Risk Warning: The research and development of blockchain technology is not meeting expectations; uncertainty in regulatory policies; the implementation of Web3.0 business models is not meeting expectations.