BIP341 and BIP342 are two proposals related to Bitcoin improvements. The full name of BIP is Bitcoin Improvement Proposal (Bitcoin Improvement Proposal), which is used to describe new features, processes or specifications of the Bitcoin protocol, client or environment. BIP341 and BIP342 are related to the Taproot upgrade, the main purpose is to improve the privacy and scalability of Bitcoin, rather than directly used to write data to the blockchain, but the Taproot upgrade can use Bitcoin scripts and transfer to the blockchain through transactions. The cost is written into the data, laying a technical foundation for the brc-20 standard.

• **BIP341: **Segregated Witness (segregated witness) output, this proposal defines a new output type that implements the Taproot function. This allows Taproot-enabled transactions to coexist in a block with other types of transactions while maintaining backwards compatibility. BIP341 provides detailed descriptions and specifications for new output types.
• **BIP342:**Tap, this proposal describes the scripting language inside Taproot, called Tap. Tap is based on Bitcoin's existing scripting language and has been extended and optimized. BIP342 defines the syntax, operating environment and execution rules of Tap. These improvements make it more efficient and private to execute complex smart contracts on the Bitcoin network.

Conventionally we can use the OP_RETURN opcode to append a small piece of data (up to 80 bytes) to the transaction output, thus permanently writing the data into the Bitcoin blockchain. If we need to store more data, we need to use the method of data segmentation, create multiple transactions containing OP_RETURN, and write a piece of data to each small block, this method will greatly increase the transaction fee.

When BIP341 and 342 come out, we can use P2WSH (Pay-to-Witness--Hash), P2WSH is part of Segregated Witness (Segregated Witness), which allows you to create a Bitcoin address that represents Witness-(witness script ), to spend funds from this address, an input that satisfies the script's unlocking conditions must be provided. The specific process is as follows:

1. Create a witness script that contains the data you want to store. You can embed data in scripts using the OP_PUSHDATA opcode.

2. Calculate the hash value (SHA-256) of the witness script.

3. Create a P2WSH address using the hash value. 4. Create a Bitcoin transaction to send funds to the P2WSH address.

4. Broadcast the transaction to the Bitcoin network.

When we conduct a transaction, the unlocking script is separated from the transaction body and stored in the Witness (witness data). With this technology we can store arbitrary data up to 4MB in the Witness part of any bit block. This constitutes the upper limit of 4MB for any Bitcoin Inions (inscriptions).

3. The technical principle of BRC-20

Based on the BRC-20 standard of the ordinal inscription, Satoshis (Satoshi) is used to store and manage various information of tokens, such as token name, symbol, total amount, etc., and the information is encoded in JSON format and written into Satoshis (Satoshi) Among them, inscriptions (inions) are formed one by one. Finally, by summarizing the activities of all inions (inions), the balance status of the BRC-20 pass can be found, thereby realizing the deployment, minting and transfer of tokens.

BRC-20 is an experimental token standard based on Bitcoin. The core idea is to create, mint and transfer BRC-20 tokens through ordinal theory to realize asset management on the Bitcoin blockchain. The experiment mainly includes the following aspects:

Deploy: To create a BRC-20 pass, you need to set pass parameters, such as token symbol, maximum supply and minting limit, etc. The deployment process is only used to initialize the BRC-20 and does not affect the state.

{ "p": "brc-20", "on": "deploy", "tick": "ordi", "max": "21000000", "lim": "1000" } ***************Notes*********\ ******* "p": "brc-20": specifies the protocol as BRC-20, which helps other systems to identify and process BRC-20 events. "op": "deploy": Specifies that the operation type is deployment. "tick": "ordi": Specifies the 4-letter identifier of the token. Here, "ordi" is used as an example in the demo document. Its maximum supply has been reached. "max": "21000000": Set the maximum token supply to 21,000,000. "lim": "1000": Sets the minting limit per ordinal to 1000.

Minting (Mint): Use the minting function to mint a certain number of BRC-20 tokens. The minting operation provides the corresponding balance to the original owner of the minting function. If the token has a minting limit, please make sure that the limit is not exceeded.

{ "p": "brc-20", "on": "mint", "tick": "ordi", "amt": "1000" } ***************Notes*********\ ******* "p": "brc-20": specifies the protocol as BRC-20, which helps other systems to identify and process BRC-20 events. "op": "mint": Specifies that the operation type is mint. "tick": "ordi": Specify the 4-letter identifier of the token, here we use "ordi" as an example. "amt": "1000": Set the number of minted tokens to 1000.

Transfer: Transfer a certain amount of BRC-20 tokens through the transfer function. A transfer operation deducts tokens from the sender's balance and adds them to the receiver's balance. The transfer function only takes effect on the first transfer.

{ "p": "brc-20", "on": "transfer", "tick": "ordi", "amt": "100" } ***************Notes*********\ ******* "p": "brc-20": specifies the protocol as BRC-20, which helps other systems to identify and process BRC-20 events. "op": "transfer": Specifies that the operation type is transfer. "tick": "ordi": Specify the 4-letter identifier of the token, here we use "ordi" as an example. "amt": "100": Set the number of tokens transferred to 100.

Status tracking: We create on-chain inscriptions (inions) and store BRC-20-compliant json data in them, which can prove the status of off-chain token deployment, minting, and transfer. The balance status of BRC-20 tokens can be found by summarizing the activity of all inions on the chain.

4. Application and operation of BRC-20

(1) How to create a BRC-20 wallet

1. Download and create a wallet: ordinalswallet.com 2. Click on your wallet profile. 3. Click "Receive". 4. Copy the wallet address. 5. Go to any exchange that supports taproot and withdraw some BTC to this address. (Binance, Bybit, etc.)

(2) How to buy BRC-20 tokens

1. Click on the BRC20 tab and select any token from the list. (Take $PEPE as an example) 2. Now check the number of tokens, the price of each token. Click "Buy Now". 3. Confirm the password. 4. Click "Buy Now" and confirm the transaction.

(3) How to mint your own BRC-20 tokens

1. Go to the "Inscriptions" section. 2. Select "BRC-20", enter the token abbreviation (4 letters) and quantity, and click "Submit". 3. Select the network fee and click "Inscription".

(4) How to mint other tokens for free

1. Go to the BRC-20 list and see the progress bar under each token supply. (If the progress bar is not 100%, then you can mint the token). 2. Click Token >> Check Details >> Mint. 3. Set Fee >> Inscription. 4. Confirm the transaction.

5. Risks of BRC-20

(1) Deviating from the principle of decentralization

The issuance and usage mechanism of BRC-20 tokens results in a certain degree of centralization. This is because BRC-20 tokens need to rely on specific platforms and exchanges for issuance, trading and management, and these platforms and exchanges often have more resources and power. This is contrary to the core spirit of Bitcoin decentralization, because the goal of Bitcoin is to achieve a decentralized, fair and open currency system.

(2) Lack of fairness and security

Inscriptions on BRC-20 tokens may lead to unfairness on a first-come, first-served basis. This is because on the Bitcoin network, miners can choose to process the transactions they want to process, and the first-come, first-served mechanism of the inscription of BRC-20 tokens makes miners more inclined to process transactions that pay higher fees, and ignore other transactions. This may result in some users being excluded because they cannot afford high transaction fees. In addition, BRC-20 tokens are less secure than the Bitcoin network itself, as it relies on second-layer technology on top of the Bitcoin network, which may have security loopholes and risks.

(3) Risk

BRC-20 tokens may trigger MEV strategic attacks called time-bandit attacks. This is because the transaction and application of BRC-20 tokens on the Bitcoin network may give miners the opportunity to exploit the MEV (Miner Extractable Value) strategic attack to seek benefits by manipulating the order of transactions. This negatively affects the overall security and reliability of the network. In addition, BRC-20 tokens may also pose the risk of a regulatory crackdown on Bitcoin. This is because the issuance and trading of BRC-20 tokens may involve some illegal activities, such as money laundering, financial fraud, etc., causing governments and regulators to worry about the entire Bitcoin network and take measures to suppress it.

6. BRC-20 Investment Suggestions

Although the BRC-20 protocol is currently in the experimental stage, the BRC-20 protocol provides a new token implementation method for the Bitcoin community. The emergence of the BRC-20 protocol will help promote the innovation of the Bitcoin ecosystem and attract more Developers and users join the Bitcoin community. In the future, as the Bitcoin community optimizes and improves the BRC-20 protocol, it will play a greater role in the cryptocurrency field.

Some of the current challenges. **First of all, compared with Ethereum's ERC-20, BRC-20 cannot interact with smart contracts, and cannot perform automated operations, such as automatic transfers or dividends. **This limits the application potential of BRC-20 in certain scenarios. Its application in decentralized finance (DeFi) and other application scenarios may be limited. In addition, since the BRC-20 protocol is still in the experimental stage, its scalability and compatibility still need to be further explored. **

As an experiment based on the Ordinal protocol, BRC-20 is essentially an application experiment of the Ordinal protocol, which provides us with new ideas. Investors should have a long-term perspective when investing. There may be more optimizations and innovations based on the Ordinal protocol in the future, and investors should pay attention to these development trends to make more informed investment decisions.