What is the view on on-chain Bitcoin assets

At the end of the April 23 article, a reader left a very long comment, discussing many viewpoints about Bitcoin’s on-chain assets, DMT-NAT, decentralization, and more.

Among these views, my stance on Bitcoin, Ethereum, and decentralization is basically the same as theirs.

This article mainly shares my thoughts on DMT-NAT and other Bitcoin on-chain assets.

Regarding the Bitcoin on-chain asset DMT-NAT: when it first emerged back then, I bought some of it, and in some article from 2023 to 2024 (in my memory, it was in a Q&A-type post) I shared my views on this asset. However, I really can’t find the specific article now.

Just like those other Bitcoin on-chain assets that were all the rage back then (such as inscriptions, runes, BRC-20, SRC-20, etc.), DMT-NAT is still in my hands to this day.

Every time I see them, I’m reminded of the expectations I once had for Bitcoin on-chain assets and the Bitcoin ecosystem.

Every time I look back and summarize that period of history, I end up reflecting again on some lessons and takeaways from it.

I will try to share and summarize my views on these Bitcoin on-chain assets using fairly plain, easy-to-understand language.

Whether it’s DMT-NAT or any other Bitcoin on-chain asset, we can broadly treat them as being realized through two steps:

The first step is to write information representing the characteristics and status of these assets onto the Bitcoin blockchain in the form of characters.

The second step is to interpret what that information means using an algorithm that can recognize this information—specifically, which part represents the asset type (DMT-NAT or BRC-20), which part represents the asset quantity (100 or 1000), which part represents the asset holder (Account A or Account B), and so on…

Of these two steps, the first step is relatively minor. It can be considered close to decentralization—in a sense, once this information is written onto the Bitcoin blockchain, it becomes harder to tamper with.

The second step, however, is the key to the entire implementation process, and it is also the weak point of the whole process.

Anyone who has participated in these Bitcoin on-chain assets should remember that when you participate in an asset (for example, DMT-NAT), you are always told: please download the XXX wallet.

Why does it specifically require telling participants to download the XXX wallet, instead of simply saying, “please download any Bitcoin wallet,” or providing a broad list of wallets?

This is exactly where the second step above comes into play.

As I just said, to interpret the state of this asset (that is, to interpret the information written onto the Bitcoin blockchain) there must be an algorithm capable of recognizing that information.

But this algorithm is not part of the Bitcoin universal consensus protocol; it is only a particular protocol—in other words, it’s a limited consensus formed within a small circle (such as the DMT-NAT community and enthusiasts).

So, to be able to parse/support this kind of asset (DMT-NAT), you need to embed this particular algorithm into the wallet. And only a small number of forward-looking wallet developers can do that, not all wallet developers for Bitcoin.

In the case of DMT-NAT specifically, the wallets that support it must support specific protocols such as inscriptions (Ordinals)/Tap protocol (Tap Protocol), rather than being just general Bitcoin wallets.

Let’s use the implementation process of DMT-NAT as an example.

The specific process of the first step above is: use the inscription technique / inscription method (inscription with the Ordinal protocol) to write its asset information onto the Bitcoin blockchain.

The specific process of the second step above is: use a wallet that can parse the DMT (Digital Matter Theory) protocol to interpret the asset information read from the Bitcoin blockchain. More specifically, the DMT protocol requires the wallet to parse the following fields (for more details, see the link at the end of this article):

“p”: “tap”,

“op”: “dmt-deploy”,

“tick”: “nat”,

The definitions of the above three fields are unique to the DMT-NAT asset.

For other Bitcoin on-chain assets like BRC-20, the definitions of those three fields are different, as follows:

“p”: “brc-20”,

“op”: “mint”,

“tick”: “ordi”,

From the comparison, you can see that each Bitcoin on-chain asset has its own unique definitions, and therefore its own unique parsing algorithm.

But the parsing algorithms for these fields are not part of the Bitcoin universal consensus protocol. So currently, only a very small number of advanced nodes/wallets across the entire Bitcoin network support this protocol—they are willing to work hard to promote this ecosystem, lead it, or for various other reasons.

Because support for these assets is limited to only a few nodes/wallets, the risk of centralization becomes apparent. If, under extreme circumstances, these few nodes are taken out in one blow (technically, it’s not that difficult to do; it just depends on whether an attacker has incentives or whether the cost-benefit is worthwhile), then the entire DMT-NAT asset would be in serious danger.

That’s why I say this is the key and the weak point in the whole chain of events.

DMT-NAT is like this, and any other Bitcoin on-chain asset (including inscriptions, etc.) is the same.

Of course, if you go check DMT-NAT’s related websites today, you’ll find that there are “quite a lot” of wallets that support it—not only Bitcoin wallets, but also Ethereum wallets (such as MetaMask), and even Uniswap supports trading of it.

So what’s going on here? How can Ethereum also support Bitcoin assets?

In reality, the so-called “DMT-NAT” assets supported by Ethereum wallets and exchanges are not the native DMT-NAT assets on the Bitcoin network. Instead, they are wrapped assets created by certain enthusiasts or small teams by bridging from Bitcoin to Ethereum through cross-chain bridges.

Fundamentally, the origin of these assets still traces back to those specific nodes/wallets that support DMT-NAT in the first place.

Going back to the centralization risk we discussed just now: how do we address this centralization risk?

In my view, there are only two approaches:

First, form another blockchain network with strong consensus, where all nodes support this parsing algorithm, and use that network to fully and completely parse and support the DMT-NAT asset.

Second, completely write this specific algorithm / specific protocol (the DMT-NAT protocol) into the Bitcoin universal consensus protocol.

The first approach is not easy at all.

How could the initiators of DMT-NAT get the broad community of developers and wallet developers in the Bitcoin ecosystem to participate in building that network and support this protocol inside their own products?

Is it through incentive mechanisms, or through a grand vision?

In fact, even the inscription asset with the strongest consensus in the Bitcoin ecosystem so far (BRC-20) has not achieved this yet.

The second approach is the most thorough and the most “set it once and for all.” As long as the CORE team that controls Bitcoin’s universal protocol approves adding the DMT protocol into the next Bitcoin update, everything would be settled.

But would the CORE team be willing?

The answer is obvious.

They have strongly rejected the inscription protocol—so how could they accept DMT-NAT?

Don’t just look at the CORE team. I believe many readers of today’s article are probably muttering in their minds as well: Bitcoin doesn’t need expansion; it doesn’t need any on-chain assets like this or that. Just keep Bitcoin pure.

Someone might say: then why not just do a hard fork—let those enthusiasts and communities who are willing to support and promote these assets create a completely new “Bitcoin” that supports these Bitcoin on-chain assets?

Doing so is theoretically and technically feasible. But the problem is this: after the fork, would the wider industry consensus recognize the “old Bitcoin” or the “new Bitcoin”?

I believe they would still recognize the “old Bitcoin.”

So, from any angle, the consensus in the Bitcoin ecosystem regarding this kind of on-chain asset is actually not strong, and I suspect it will be difficult for it to become strong in the future.

I once had very high hopes for Bitcoin on-chain assets and the Bitcoin ecosystem. If, back then, the broadly enthusiastic community-driven innovation movement within the Bitcoin ecosystem had been accepted by the CORE team—leading them to upgrade and expand the Bitcoin protocol—then Bitcoin could truly have caught up to, or even surpassed, Ethereum in terms of ecosystem.

But later, all kinds of realities forced me to admit that this path is very likely not to work, and it will be even harder to work in the future.

So I think it’s fine for Bitcoin assets and the Bitcoin ecosystem to remain a niche hobby and avenue for exploration. But to become a large, thriving ecosystem and develop into assets with strong consensus, the difficulty is enormous.

However, I’ve said this in past articles, and I still want to reiterate it now:

I continue to admire and support the enthusiasts who keep working and contributing within the Bitcoin ecosystem.

If they succeed, even better. But even if they don’t, it’s still remarkable if, by chance, they explore and discover some unexpected innovations. Many major inventions and innovations in the history of technology weren’t planned in advance—they’re often discovered by accident, through “unintentional planting of willow branches that leads to shade.”