What is Cardinals-DRC20?
December 22nd, 2023

I. What is the Cardinals protocol?

The Cardinals protocol is a system that assigns sequential numbers, called “Cardinals,” to elons, starting from 0 and incrementing in the order they are mined. These Cardinals give each elon a unique identity. Additionally, the act of inscribing text, images, audio, and video files onto elons is referred to as “inscription,” and all files inscribed on elons are collectively known as Cardinals NFTs, with images and text being the primary formats currently.

As the market’s understanding of the Cardinals protocol deepens, people are gradually realizing that it is a true on-chain NFT solution. Its core features include: 1) No reliance on L2 scaling or sidechains; 2) No need for any modifications to the Dogecoin protocol. This sets the Cardinals protocol apart from other NFT solutions on public blockchains to a significant extent.

II. What is DRC20?

DRC-20 is a standardized protocol for fungible tokens, based on the Cardinals protocol. As of now, besides BTC and LTC, Dogecoin is the only cryptocurrency capable of implementing the UTXO model functionality. The protocol was officially released by the Dogecoin community, Dogewow, on May 9th. As a novel experiment within the Cardinals protocol, DRC-20 aims to explore the potential for asset tokenization on the Dogecoin blockchain.

In Dogecoin, the smallest indivisible unit is defined as an "Elon," where 1 Dogecoin equals 100,000,000 Elons.

The core features of the DRC-20 Cardinals protocol tokens include:

  • Utilizing Cardinals theory, token information is embedded into Dogecoin's smallest unit (Elon), enabling the storage and transfer of non-native tokens within the Dogecoin network.

  • Transaction fees are low, requiring only the handling fees of the Dogecoin network.

  • High security, with all transaction ledgers stored on the blockchain.

  • Strong consensus, inherent meme attributes, and high spreadability.

  • Standardization and interoperability, building upon the BRC-20 protocol development. The protocol itself has been optimized for uniformity in rules and formats and compatibility with other protocols.

  • Ecosystem support, with existing collaborations with wallets, social plugins, etc., providing support for liquidity.

  • Clear value, not dependent on market sentiment and hype, focusing more on the development of a diverse financial ecosystem.

III. DRC-20 Pros

The DRC-20 protocol inherits the technical characteristics of BRC-20 and, to a certain extent, resolves the issues faced by the BRC-20 protocol. It achieves a higher degree of decentralization and improves transaction efficiency.

Firstly, the DRC-20 protocol ensures absolute security of assets by putting the ledger on the blockchain. In contrast, the inscription ledgers of BRC-20 tokens are currently stored centrally in wallets. It's important to clarify that ledgers and transactions are two distinct concepts. BRC-20 transactions take place on the BTC chain, while ledger information is stored in the database of wallets. The parsing and indexing rules of the ledger are set by the wallet, and without indexing according to these wallet rules, the corresponding inscription information cannot be found. For example, inscriptions under the Unisat rules cannot be found if not indexed according to Unisat’s rules.

Regarding the Unisat platform, it is essentially a simplified DeFi platform and not entirely decentralized. In practice, users authorize their BTC to Unisat, which handles inscription operations on their behalf. However, this authorization carries certain risks. Although malicious activities won't affect the user's balance, they still pose some risks.

In contrast, the inscription ledger of DRC-20 will be placed on the blockchain, and transactions will occur on the Dogecoin chain. Even if the wallet is lost, users can still find their inscriptions, ensuring absolute security of assets with this on-chain method.

Secondly, the DRC-20 standard features fast transaction speeds and low transaction fees, which are more conducive to application development. For BRC-20 to achieve its long-term development goals, it needs to continuously improve the DeFi ecosystem, such as introducing stablecoins and oracles. However, high gas fees directly limit the participation of new users. Currently, as users mint DRC-20 standard tokens on the Dogecoin chain, the daily transaction count on the Dogecoin chain has skyrocketed, continuously setting new historical highs and at times surpassing Bitcoin and Litecoin. The speculative frenzy of BRC-20 token standards is gradually spreading to the Dogecoin chain.

Furthermore, regarding the UTXO model, besides BTC and LTC, only Dogecoin is capable of implementing this functionality. BTC, LTC, and Dogecoin all belong to cryptocurrencies without smart contract functionality, allowing developers to create various programmable tokens and financial products. However, the difference is that the DRC-20 token has a broader user base and inherently carries a "meme" attribute, which represents an opportunity for development.

About DRAGON

DRAGON stands as the pioneering rune protocol based on Cardinals-DRC20, innovatively built upon the UTXO model with significant enhancements. Its primary objective is to enrich and fortify the existing Cardinals-DRC20 protocol. By doing so, DRAGON aims to introduce a broader spectrum of application scenarios and value-addition opportunities into the Dogecoin ecosystem.

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