As BTC Reaches New High, Marking the End of the Inscription Era

By: Shijun

"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks." — This message inscribed in Bitcoin’s genesis block marked the beginning of an era.

Now, as Bitcoin repeatedly hits new all-time highs, we are also witnessing the end of another once-glorious era—inscriptions and runes.

From the emergence of the Ordinals protocol in early 2023, to the wild speculation around BRC20, followed by a parade of protocols such as Runes, Atomicals, CAT20, RGB++, and Alkanes, the Bitcoin ecosystem has undergone an unprecedented "Inscription Revolution."

All these attempts aim to transform Bitcoin from a simple store of value into a foundational platform capable of hosting various asset protocols.

Yet, as the frenzy fades and reality sets in, we must face a harsh truth: the fundamental limitations of inscription protocols have destined this beautiful tulip mania to collapse.

As a practitioner deeply involved in the technical development of inscription protocols—having personally built the底层 implementations of each—I’ve witnessed this ecosystem evolve from its infancy through explosive growth to its current rational regression.

This article will explore the innovations and limitations across multiple inscription protocols, analyzing why this once-prominent sector has so rapidly reached its endpoint.

1. The Evolution Chain of Inscription Protocols

1.1 Ordinals Protocol: Dawn of the Inscription Era

The first key that unlocked Bitcoin's "Inscription Era." By assigning ordinal numbers to individual satoshis and leveraging commit-reveal mechanisms, it enabled arbitrary data storage on-chain.

The fusion of the UTXO model with NFT concepts uses the birth order of sats as unique identifiers, allowing each satoshi to carry distinct content.

Technically, Ordinals is elegantly designed, fully compatible with Bitcoin’s native model, achieving permanent data storage.

However, merely writing data is also its limitation—it fails to meet the market’s strong demand for issuing BTC-based additional assets.

1.2 BRC20 Protocol: Commercial Breakthrough and Consensus Trap

Building on the technical foundation laid by Ordinals, BRC20 injected soul into on-chain data through standardized formats—bringing static inscriptions to life.

It defined a complete asset lifecycle—deploy, mint, transfer—transforming abstract data into tradable assets. As the first implementation of fungible tokens on Bitcoin, it satisfied the urgent market need for issuance and ignited the entire inscription ecosystem.

But its account model fundamentally conflicts with Bitcoin’s UTXO model. Users must first inscribe a transfer message before executing actual transfers, requiring multiple transactions per operation.

More critically, BRC20’s core flaw lies in binding “certain data” without sharing any consensus strength. Once off-chain indexers stop supporting it, all so-called “assets” instantly become meaningless garbage data.

This fragility was starkly exposed during the duplicate-sat incident—when multiple assets appeared on the same satoshi, the protocol team collectively modified standards, revealing that the entire ecosystem’s consensus was actually controlled by a small minority. Even more puzzling were subsequent “optimizations” like one-step transfers introduced by institutions, which failed to address core market pain points while imposing costly migration burdens across platforms.

This reflects a deeper issue: for two years, inscription protocol designers remained fixated on the single dimension of “issuance,” neglecting serious consideration of post-issuance use cases.

1.3 Atomicals Protocol: Native UTXO Correction and Disconnection

In response to BRC20’s UTXO compatibility issues, Atomicals proposed a more radical solution: directly linking asset quantities to satoshi amounts within UTXOs, introducing proof-of-work mechanisms to ensure fair minting.

It achieved native compatibility with Bitcoin’s UTXO model—asset transfers equate to satoshi transfers—partially solving BRC20’s cost and interaction problems.

Yet technological iteration came at the price of complexity—transfer rules became extremely intricate, requiring precise calculation of UTXO splitting and merging, often resulting in accidental asset burns, making users hesitant to operate.

More fatally, the proof-of-work mechanism revealed serious fairness issues in practice. Large players leveraged superior hashing power to dominate minting, contradicting the prevailing narrative of “fair launch” in the inscription ecosystem.

Subsequent product iterations further reflected developers’ misalignment with user needs—complex features like semi-colored assets consumed vast resources yet barely improved user experience, instead forcing high costs on institutions to rebuild on-chain tools.

Meanwhile, the long-awaited AVM arrived too late, missing the optimal market window as conditions had already shifted.

1.4 Runes Protocol: Official Elegance and Application Void

As the “official” issuance protocol by Ordinals creator Casey, Runes absorbed lessons from predecessors. It avoids witness data abuse by using OP_RETURN for data storage and achieves a relative balance between technical complexity and user experience through clever encoding and UTXO design.

Compared to earlier protocols, Runes offers more direct data storage, more efficient encoding, and significantly reduced transaction costs.

Nonetheless, Runes remains trapped in the fundamental dilemma of the inscription ecosystem—it lacks any special design beyond token issuance.

Why would the market need a token that can be obtained effortlessly?

And what meaning does holding it have beyond selling it on secondary markets? This purely speculative-driven model inevitably limits the protocol’s longevity.

Still, its use of OP_RETURN opened new possibilities for future protocols.

1.5 CAT20 Protocol: On-Chain Validation Ambition and Real-World Compromise

CAT20 indeed achieved true on-chain validation via Bitcoin scripts. Storing only state hashes on-chain and using recursive scripts to enforce consistent constraints, it claimed to eliminate the need for indexers—a holy grail long sought in inscription protocols.

However, while validation logic runs on-chain, the state data itself is stored as hashes in OP_RETURN. Since hashes cannot be reversed, practical operations still require off-chain indexers to maintain readable states.

Design-wise, the protocol allows non-unique token names and symbols, leading to confusion among same-named assets. Early development suffered from UTXO contention under high concurrency, delivering a terrible initial minting experience.

Later, a hacking incident occurred due to internal data concatenation errors—missing delimiters allowed different numeric combinations (e.g., 1 & 234 vs. 12 & 34) to produce identical hash results. The attack forced a protocol upgrade, but prolonged delays caused the market to lose interest.

The CAT20 case shows that even partial technical breakthroughs may fail if they exceed user comprehension or lack timely execution.

Moreover, the ever-present threat of hackers serves as a constant reminder—hubris must be checked.

1.6 RGB++ Protocol: Technological Idealism Meets Ecosystem Challenges

CKB’s isomorphic bridging approach attempts to overcome Bitcoin’s functional limitations via a dual-chain architecture. Leveraging CKB’s Turing-completeness to validate Bitcoin UTXO transactions, it represents the most advanced technical framework, enabling richer smart contract verification—the true “technological gem” among inscription protocols.

Yet the gap between ideal and reality is stark—high complexity, steep learning curves, and significant institutional adoption barriers.

Crucially, the project team lacked sufficient strength, simultaneously tackling both chain (CKB) and protocol (RGB++) development, failing to capture adequate market attention.

In a domain heavily reliant on network effects and community consensus, it became a classic case of “critical acclaim without commercial success.”

1.7 Alkanes Protocol: Final Sprint Amid Resource Scarcity

A smart contract protocol based on off-chain indexing+, integrating design philosophies from Ordinals and Runes, aiming to enable arbitrary smart contract functionality on Bitcoin. It represented the last major push of inscription protocols toward traditional smart contract platforms.

Theoretically, it could support arbitrarily complex contract logic. And timing-wise, it launched just before Bitcoin’s upgrade lifted the 80-byte OP_RETURN limit.

Yet real-world cost considerations shattered this technological dream. Complex contracts operating off-chain created massive performance bottlenecks—even the project’s self-built indexer was repeatedly overwhelmed. Deploying custom contracts required nearly 100KB of on-chain data, far exceeding deployment costs on traditional public chains.

Contract operations remained uncontrollable and still depended on indexer consensus. High costs confined usage to only a few high-value scenarios, where participants inherently distrust general-purpose indexers. Despite strong backing from Unisat, the market didn’t embrace it. Had it launched a year earlier, under better conditions, outcomes might have been different.

2. Fundamental Dilemma: Bitcoin’s Minimalist Philosophy vs. Overengineering

Accumulation of Technical Debt

The evolution of these protocols reveals a clear yet contradictory logic: each new protocol attempts to solve prior shortcomings, but in doing so introduces new layers of complexity.

From the elegant simplicity of Ordinals to the technical stacking of later protocols, novelty was pursued through increasing complexity until every participant had to learn countless terms and constantly guard against risks.

When all attention focuses solely on being a “token issuance platform,” why wouldn’t users choose cheaper, easier-to-operate, faster-ramping alternatives with better-matured mechanisms?

Repeatedly revisiting the same theme has led to user fatigue.

Vicious Cycle of Resource Scarcity

The root cause of these projects’ resource scarcity may lie in Bitcoin’s own operational centralization and the principle of fair launches—platforms without competitive advantages receive little investment when there’s no incentive structure.

Running indexers incurs pure costs compared to miner block rewards. Without a reward distribution mechanism akin to “mining,” no one steps up to resolve technical and operational challenges.

Speculative Demand vs. Real Demand

Through repeated user education, it became clear that off-chain protocols cannot inherit Bitcoin’s security consensus. Market cooling wasn't accidental—it reflects the core problem of inscription protocols: they serve speculative demands, not real ones.

In contrast, truly successful blockchain protocols solve real problems—consensus, functionality, and performance are all essential. Yet inscription protocols contribute almost nothing here, explaining their inability to sustain momentum.

3. RWA and Era Transition: From Price-to-Dream Ratio to Market Share

Maturity of Market Perception

As the market matures, users who’ve endured multiple bull and bear cycles now value their attention—a precious resource.

They no longer blindly trust information monopolized by Twitter KOLs or echo-chamber communities, nor do they naively believe whitepaper “consensus.”

The low barrier to entry for issuance platforms means this “low-hanging fruit” has already been picked. The industry is shifting from mere token issuance to actual application scenarios.

But caution is warranted—if RWA space sees only another wave of issuance platforms, this opportunity too will come and go quickly.

Return to Value Creation

Technical innovation during the inscription era often carried a “show-off” quality—clever for cleverness’ sake rather than practical utility. The new era shifts from “price-to-dream ratio” to “market share,” emphasizing genuine network effects built through user口碑.

The real opportunities belong to teams pursuing product-market fit—building products that genuinely meet user needs, generate cash flow, and sustain viable business models.

Conclusion: Return of Rationality and Restraint

In the early days, everything viewed through a macro lens eventually appears correct—and thus justified.

With hindsight, the exploration and setbacks of the inscription era offer invaluable lessons for the healthy development of the broader industry.

As Bitcoin reaches new highs, we have every reason to feel proud of this great technological innovation. But we must also recognize that technology evolves according to intrinsic laws—not all innovations succeed, nor are all bubbles devoid of value.

The rise and fall of inscription protocols teach us that technological innovation must rest on solid technical foundations and authentic market demand. Speculative fervor and excessive technical showmanship, if disconnected from current market realities (institutional understanding and user comprehension), lead only to fleeting moments of glory. Projects chasing trends may gain temporary visibility, but those creating trends endure.

In this fast-moving industry, builders must prioritize rationality and restraint over hastily launching trendy projects for quick fame.

Moreover, the market has little patience for iterative refinement—traditional internet strategies of “small steps, rapid iteration” often fail here. First battle equals final battle.

As I wrote two years ago:

“BRC-20 and Ordinals NFTs have sparked much debate… While these new phenomena surge in price, their technical flaws are evident: excessive centralization, lack of credible validation, Bitcoin network performance limits, inadequate infrastructure, and poor security.”

“Though I’m not optimistic about current Ordinals—they’re still too simplistic in blockchain applications—as an interesting experiment, such boundary-breaking innovation can spark renewed reflection.”

History has proven the importance of rational thinking. The end of the inscription era is not failure—it’s growth.

It points us forward and provides valuable lessons for future builders. In this sense, the historical significance of inscription protocols will endure, becoming an important chapter in the evolution of blockchain technology.