The only use case I can see for combining Ordinals with PSBT is if you want to share ownership of Ordinals with multiple users using a multisig-like key, and then you give the transaction for everyone to sign in a PSBT form.
But since Ordinals already use their own custom script in Taproot, its leaves will have to be adapted in order to add the multisig opcodes inside them.
Topic: Ordinals & PSBT — A Fresh Start for the Bitcoin Ecosystem (Read 79 times)
https://miro.medium.com/v2/resize:fit:4800/format:webp/1*RZhtSMnVJ2cDVKhkRIbm3g.png
What is PSBT?
Bitcoin PSBT (partially-signed-bitcoin-transactions) is a transaction description format used for constructing and processing Bitcoin transactions. It provides a secure and flexible way for multiple parties to collaborate and work in parallel to build and sign Bitcoin transactions without exposing their private keys. PSBT is a data structure that includes transaction information and partially signed data. Its primary purpose is to allow participants to exchange transaction data while performing partial signatures to complete the Bitcoin transaction construction process.
What is the Ordinals Protocol?
The Ordinals Protocol is a system that assigns a unique number to each satoshi and tracks them in transactions. In simple terms, users can attach additional data through Ordinals, making each satoshi distinct. This process is called “Inscription.” The term “satoshi” is named after the pseudonymous creator of Bitcoin, Satoshi Nakamoto, and represents the smallest denomination of Bitcoin (BTC).
What Sparks Can Be Generated by Combining Both?
First, we need to understand why the Ethereum ecosystem thrives. The emergence of smart contracts and DeFi has led to a large number of ecosystem builders. DeFi essentially aims to solve two problems: asset verification and trustless asset exchange. With these two core foundations, a DeFi ecosystem can be built. The reason why the Bitcoin ecosystem has not seen much development is due to the lack of necessary conditions. However, with Ordinals solving the verification problem and PSBT addressing atomic exchange, the Bitcoin ecosystem’s story is about to begin.
An Example of PSBT:
Let’s consider three people: Alice, Bob, and Charlie, abbreviated as A, B, and C.
1.There’s a UTXO (Unspent Transaction Output) that needs to be split among A, B, and C. It can only be spent when 2 to 3 people sign and agree on the transaction.
https://miro.medium.com/v2/resize:fit:4800/format:webp/1*QtBKhT9uIAhrQODH5wL8gg.png
2. A creates a PSBT. A, B, and C each generate an address and give it to A as the transaction output (representing the amount they should receive). They use the previously co-signed multisig UTXO as the transaction input. In Bitcoin, the unlocking script and locking script are referred to as input and output, respectively.
https://miro.medium.com/v2/resize:fit:4800/format:webp/1*vcoq6ire6B_azIQMYrrA2A.png
3. A checks all the transactions, finds no issues, and signs (this step requires no trust since only the participants can spend this money). A then sends the PSBT to B.
https://miro.medium.com/v2/resize:fit:4800/format:webp/1*f74AxVd-4uH1hSN7eJQEqw.png
4.B checks the transaction output to verify the amount of Bitcoin received, finds no issues, signs the PSBT, and sends it to C.
https://miro.medium.com/v2/resize:fit:4800/format:webp/1*5UQOPweTVF1nQm5fa2IsDw.png
5.C checks the transaction output to verify the amount of Bitcoin received, finds no issues, signs the PSBT, and broadcasts the transaction.
https://miro.medium.com/v2/resize:fit:4800/format:webp/1*zb71Ff52sXSqkIsLOJc9eg.png
In summary, when all participants have signed, the transaction is included in a block by miners and executed. This behavior resembles a multisig transaction, but the signing can be done offline and in parallel. B does not need to wait for A to finish signing before signing.
In conclusion,
the above example illustrated the distribution of BTC balances. However, the final output of the transaction can be different, such as BRC-20 tokens or BTC-NFTs, opening up vast possibilities. For instance, in the case of BRC-20 tokens, the transaction process would involve atomic exchange. The seller constructs an input pointing to their Ordinals-Token and creates a receiving address with a specified amount of BTC, followed by signing. The PSBT is then passed to the buyer, who creates an input pointing to their BTC and constructs two outputs — one for their change and another for their Ordinals-Token receiving address — and signs again. Finally, the finalized transaction is broadcasted, completing the transaction in a fully trustless manner.
Imagine turning the above process into a user-friendly interface. It would enable the creation of a Bitcoin-based DEX (Decentralized Exchange) similar to Uniswap. Notably, mature products in this space have already emerged, indicating that it’s no longer just a theoretical concept. Feel free to explore further.
https://miro.medium.com/v2/resize:fit:4800/format:webp/1*R7oiHJYLLTGFtWWATmQwUw.png
https://www.orders.exchange/
Lastly, let’s look forward to the continuous expansion of the Bitcoin ecosystem. As the layer1 ecosystem of Bitcoin grows, the demand for second layer solutions will inevitably arise. This path resembles the journey Ethereum has taken. While users may not experience significant differences in operations, the underlying technology and core logic are entirely different. Let’s anticipate the rise of the Bitcoin ecosystem together.
What is PSBT?
Bitcoin PSBT (partially-signed-bitcoin-transactions) is a transaction description format used for constructing and processing Bitcoin transactions. It provides a secure and flexible way for multiple parties to collaborate and work in parallel to build and sign Bitcoin transactions without exposing their private keys. PSBT is a data structure that includes transaction information and partially signed data. Its primary purpose is to allow participants to exchange transaction data while performing partial signatures to complete the Bitcoin transaction construction process.
What is the Ordinals Protocol?
The Ordinals Protocol is a system that assigns a unique number to each satoshi and tracks them in transactions. In simple terms, users can attach additional data through Ordinals, making each satoshi distinct. This process is called “Inscription.” The term “satoshi” is named after the pseudonymous creator of Bitcoin, Satoshi Nakamoto, and represents the smallest denomination of Bitcoin (BTC).
What Sparks Can Be Generated by Combining Both?
First, we need to understand why the Ethereum ecosystem thrives. The emergence of smart contracts and DeFi has led to a large number of ecosystem builders. DeFi essentially aims to solve two problems: asset verification and trustless asset exchange. With these two core foundations, a DeFi ecosystem can be built. The reason why the Bitcoin ecosystem has not seen much development is due to the lack of necessary conditions. However, with Ordinals solving the verification problem and PSBT addressing atomic exchange, the Bitcoin ecosystem’s story is about to begin.
An Example of PSBT:
Let’s consider three people: Alice, Bob, and Charlie, abbreviated as A, B, and C.
1.There’s a UTXO (Unspent Transaction Output) that needs to be split among A, B, and C. It can only be spent when 2 to 3 people sign and agree on the transaction.
https://miro.medium.com/v2/resize:fit:4800/format:webp/1*QtBKhT9uIAhrQODH5wL8gg.png
2. A creates a PSBT. A, B, and C each generate an address and give it to A as the transaction output (representing the amount they should receive). They use the previously co-signed multisig UTXO as the transaction input. In Bitcoin, the unlocking script and locking script are referred to as input and output, respectively.
https://miro.medium.com/v2/resize:fit:4800/format:webp/1*vcoq6ire6B_azIQMYrrA2A.png
3. A checks all the transactions, finds no issues, and signs (this step requires no trust since only the participants can spend this money). A then sends the PSBT to B.
https://miro.medium.com/v2/resize:fit:4800/format:webp/1*f74AxVd-4uH1hSN7eJQEqw.png
4.B checks the transaction output to verify the amount of Bitcoin received, finds no issues, signs the PSBT, and sends it to C.
https://miro.medium.com/v2/resize:fit:4800/format:webp/1*5UQOPweTVF1nQm5fa2IsDw.png
5.C checks the transaction output to verify the amount of Bitcoin received, finds no issues, signs the PSBT, and broadcasts the transaction.
https://miro.medium.com/v2/resize:fit:4800/format:webp/1*zb71Ff52sXSqkIsLOJc9eg.png
In summary, when all participants have signed, the transaction is included in a block by miners and executed. This behavior resembles a multisig transaction, but the signing can be done offline and in parallel. B does not need to wait for A to finish signing before signing.
In conclusion,
the above example illustrated the distribution of BTC balances. However, the final output of the transaction can be different, such as BRC-20 tokens or BTC-NFTs, opening up vast possibilities. For instance, in the case of BRC-20 tokens, the transaction process would involve atomic exchange. The seller constructs an input pointing to their Ordinals-Token and creates a receiving address with a specified amount of BTC, followed by signing. The PSBT is then passed to the buyer, who creates an input pointing to their BTC and constructs two outputs — one for their change and another for their Ordinals-Token receiving address — and signs again. Finally, the finalized transaction is broadcasted, completing the transaction in a fully trustless manner.
Imagine turning the above process into a user-friendly interface. It would enable the creation of a Bitcoin-based DEX (Decentralized Exchange) similar to Uniswap. Notably, mature products in this space have already emerged, indicating that it’s no longer just a theoretical concept. Feel free to explore further.
https://miro.medium.com/v2/resize:fit:4800/format:webp/1*R7oiHJYLLTGFtWWATmQwUw.png
https://www.orders.exchange/
Lastly, let’s look forward to the continuous expansion of the Bitcoin ecosystem. As the layer1 ecosystem of Bitcoin grows, the demand for second layer solutions will inevitably arise. This path resembles the journey Ethereum has taken. While users may not experience significant differences in operations, the underlying technology and core logic are entirely different. Let’s anticipate the rise of the Bitcoin ecosystem together.
Jump to: