Analysis of the Best Model for Bitcoin Asset Proxy Mechanism

Foreword

Transactions are the core of web3, and attention is its most important resource. Price is the starting point of popularity, while value is the endpoint of time.

The Bitcoin halving and the launch of the Runes protocol have been over a month now. During this time, numerous代打 platforms and trading markets have emerged. On the day of the halving, the代打 cost for a Runes asset even exceeded 100 dollars.

This article will take Runes assets as an example to explore the optimal mechanism of asset代打 (etching) model on Bitcoin.

1. Runes Substitute Platform GAS Ranking Analysis

From the perspective of the plan, the main conclusions are as follows:

1. Gas cost ranking: Split + Chain scheme < Chain < Split < Single
2. Degree of centralization: Chain (no intermediary address) < Split (no intermediary address) < Chain (with intermediary address) < Split (with intermediary address)
3. Asset aggregation effect: chain type > split + chain type > split
4. Batch on-chain speed: Split = Split + Chain > Chain

1.1 Introduction to Runes Etching Mechanism

Runes uses etching technology to record information in the op-return field of Bitcoin UTXO. This method was introduced in Bitcoin Core version 0.9, creating a verifiable but non-consumable output that allows data to be stored on the blockchain.

In the Bitcoin block explorer, you can see the op-return information attached to the transaction. Although this information occupies the output position of the UTXO, it cannot be transferred or consumed again, similar to the remarks section of the transaction.

The代打 mechanism of Runes can be simply summarized as follows: One transaction can only代打 one asset. The transaction cost is mainly reflected in the size of on-chain data. Therefore, the optimal代打 platform design should minimize the number of UTXOs in transactions as much as possible.

1.2 Split Model

The split model first conducts a transaction during the代打 process, splitting the funds into multiple sub-transactions, and then each sub-transaction proceeds with asset minting.

Taking a certain platform as an example, the execution process is as follows:

1. Estimate the transaction fee for each sub-transaction in the first transaction, reserving 546 (common dust value) + transaction fee amount, and split multiple UTXOs to a new address.
2. The second transaction transfers from the new address back to the user address, completing the proxy transaction, and the user receives Runes assets.

The main issue with this model is:

• A split transaction needs to be conducted first.
• Users receive decentralized UTXOs
• Users may need to merge before placing an order when selling, which increases transaction costs.
• Some platforms do not execute代打 for users in split transactions, resulting in higher overall losses.

1.3 Chain Model

The chain model is similar to a continuous transaction chain, where each transaction consumes the previous transaction that is still in the memory pool. In this model, the platform usually charges a fee for the first transaction, while subsequent transactions are processed in a loop, resulting in a relatively smaller amount of data.

The advantage of the chain model is the lower gas cost, but it is limited by the DoS attack prevention mechanism of Bitcoin nodes, where the vout of a single UTXO can be consumed and its linkage can only have a maximum of 25 transactions in the memory pool. This is also why large-scale minting usually uses intermediate addresses.

2. Best代打模型 for Runes: Split + Chain

A certain platform has adopted a split + chain scheme, becoming a relatively optimal model at present. Its characteristics include:

1. When splitting, assign a piece of assets to the user, not wasting the opportunity.
2. Execute the minting within 25 times after splitting out enough gas for chain minting.
3. Execute after casting more than 25 times and splitting out the necessary gas for multiple chain-based.

Although this model does not have basic transaction fees superior to pure chain models, it allows for large-scale minting, and the on-chain efficiency can be controlled to be completed within 2 blocks.

The Importance of On-Chain Efficiency 2.1

Bitcoin nodes have a DoS attack prevention mechanism that limits the consumption of a single UTXO's vout and its chain to a maximum of 25 transactions in the memory pool. This is why large-scale minting usually uses intermediate addresses.

The split model can be placed in the memory pool without restrictions after the split transaction is on-chain (since the parent transaction is no longer in the memory pool, each UTXO's vout independently calculates the limit of 25). In contrast, the chain model can only have 25 transactions in the memory pool at the same time.

Therefore, the optimal model must not only consider gas costs but also take into account the capacity for large-scale minting.

2.2 BTC fee optimization rate comparison

Taking Taproot addresses as an example, the fee structures for different types of addresses vary slightly:

• Each additional input increases the vsize by 58
• For each additional output, vsize increases by 43
• For each OP_RETURN, vsize increases by about 30

Through calculations, it can be obtained:

• Chain batch minting 10 transactions, cost is 1310 vsize

• Split batch Mint 10 transactions, cost is 1697 vsize

• gas optimization rate: 22.8%

• Chain batch mint 20 transactions, cost is 2620 vsize

• Split batch Mint 20 transactions, cost is 3437 vsize

• gas optimization rate: 23.8%

A 20% optimization may not seem like much, but during times of high代打 costs, performing batch transactions 10 times can save around $200, which has a significant impact on the psychological threshold for trading.

3. Summary

Since the launch of the Runes asset protocol one month ago, although it has not been able to break through a market value of $1 billion, its development is still worth paying attention to. Currently, the two core infrastructures of the ecosystem, namely the代打 and the market, are not well-developed, leading to high participation costs for retail investors and a lack of ecosystem operation by institutions.

Existing platforms either charge high fees or have incomplete functionalities. Some platforms, although they use low-cost chain models, may have inaccurate gas estimates that can lead to transaction failures, affecting the determinism of on-chain operations.

In addition, the current代打model overlooks the real needs of users—the trading itself. In the early days of the market, when price fluctuations were significant, there was actually not much demand for bulk asset打, aside from the market behavior of project parties. The core users of the platform should be retail investors.

Therefore, although the chain model is cost-effective, it may not be suitable for the earliest high-volatility pricing phase in the absence of split tools in the market. Compounding over 20 assets in a single transaction will raise the barrier to entry.

This article only discusses the代打 mechanism for assets on BTC, and in the future, it will also explore trading market models applicable to new assets such as BRC20, Ordinals, Atomical, and Runes.