Exploring the New Bitcoin Ecosystem: Fractal's Innovations and Challenges

Recently, with the emergence of Fractal sparking heated discussions in the community, the Bitcoin ecosystem has once again become the focus of the market. As a scaling solution based on Bitcoin, Fractal has attracted a large number of users to participate in its assets and gameplay, leading to high on-chain gas fees. The reasons why Fractal has generated such a significant response are mainly as follows:

First, the overall market is currently sluggish and lacks fresh narratives. Second, influenced by Unisat's generous airdrop of Pizza, many users are placing a high emphasis on the launch of Fractal, with extreme competition even during the testnet phase, estimated to involve tens of millions of addresses participating in testnet tasks to compete for airdrop rewards. Finally, the high multiple return effects brought by asset protocols like Cat20, along with the continuous fermentation of the profit effect, further boosted the popularity of Fractal.

In addition, the official hunger marketing strategy of Unisat has also played a role in driving the momentum. Originally, the circulating supply of the airdropped FB was very small, but as competition on the chain intensified, the price of FB soared, becoming a kind of "golden shovel" to some extent, indirectly accelerating the development of Fractal.

Based on the above reasons, it is particularly necessary to conduct an in-depth analysis of Fractal.

Overview of Fractal: Bitcoin's Native Scalability Solution

Fractal is a recursive expansion solution for scalability based on the core code of Bitcoin. It is designed as a second layer network or sidechain for Bitcoin, aiming to enhance transaction efficiency by accelerating block generation speed and expanding block capacity, while maintaining compatibility with the main Bitcoin network.

As a native extension solution, Fractal is capable of enabling cross-layer secure asset transfers starting from the Bitcoin mainchain. Assets such as Bitcoin, BRC-20, and Ordinals can be bridged through decentralized means. The underlying mechanism employs a dynamically replaced rotating MPC signing mechanism, taking into account the specific aspects of the BRC-20 standard.

Functionally, Fractal resembles a testing ground for Bitcoin, supporting some features that have not yet been activated on the mainnet, providing better user experience and performance optimization space for complex applications. It also allows users to participate and provide feedback in a real environment, similar to the significance of EVM layer2 for Ethereum.

Investment and Financing: Development Momentum from Strong Partnerships

Fractal is developed in collaboration by UniSat and Block Space Force. As the main developer, UniSat is a leading Bitcoin wallet with over 900,000 active users weekly. It has raised an undisclosed amount in 5 funding rounds, two of which were led by a certain trading platform, with participation from Waterdrip Capital, ABCDE Capital, and others.

Block Space Force is a crypto-native fund with a portfolio that includes well-known projects such as Babylon, Pendle, and Aevo. They have extensive experience in USD A9 exits, investing in hundredfold projects, and developing globally used blockchain applications.

Overall, UniSat's resources are more prominent, attracting a large number of loyal users with its successful brand structure and the generous Pizza airdrop, providing the best endorsement for Fractal.

Under the promotion of the two project parties, Fractal implemented a series of strategic plans to initiate user and developer participation. After the mainnet launch, Fractal distributed 1 million FB tokens to over 100,000 eligible addresses and launched multiple developer resource funding programs, demonstrating Fractal's ambition for ecosystem development.

Fractal Highlights: Outstanding Advantages

The main highlight of Fractal lies in the performance optimization and improvement based on the Bitcoin mainnet, as well as the introduction of related asset issuance methods and ecological applications. It can be vividly said that Fractal is a "new wine" in an "old bottle" of resources from the Bitcoin mainnet for a brand new asset issuance method. Specifically:

1. Fully compatible with the Bitcoin mainnet
2. Faster transaction confirmation time( 30 seconds block time )
3. Larger block capacity ( Bitcoin mainnet is 20 times )
4. Supports cross-chain assets such as Bitcoin, BRC-20, and Ordinals.
5. Introduce the OP_CAT opcode to enhance script flexibility.
6. Use recursive expansion layers to enhance transaction processing capacity
7. Support Cadence Mining( rhythm mining) mechanism

The overall design of Fractal allows Bitcoin and assets such as BRC-20 and Ordinals to cross-chain through the decentralized bridge (pizza swap). Users' transaction records on the Fractal network can then be synchronized with the Bitcoin mainnet, providing faster confirmation times and greater capacity.

Implementation Path: Multi-layer Expansion, Mining Mechanism and OP_CAT

Multi-layer Extension Mechanism

Fractal enhances Bitcoin transaction speeds through recursively extended layers. It establishes multiple layers of scaling on the Bitcoin main chain, forming a tree structure. This design allows each layer to further branch out, increasing the network's parallel processing capability. Each layer can independently process transactions and dynamically adjust the number of layers as needed. During peak periods, layers can be quickly increased to flexibly respond to various loads.

Cadence Mining ( Rhythm Mining )

Fractal uses the same PoW consensus mechanism as Bitcoin. This means Bitcoin miners can seamlessly switch to Fractal mining with existing hardware, improving efficiency and increasing additional earnings by sharing workload.

Fractal mining is divided into two types: permissionless and merged mining. Out of every three blocks, two are generated through permissionless mining and one through merged mining. Permissionless mining allows anyone to participate, while merged mining is specifically aimed at Bitcoin miners, enabling them to mine both Bitcoin and Fractal blocks simultaneously without using additional hash power.

OP_CAT

OP_CAT is an opcode in the Bitcoin scripting language used for string concatenation. It was removed in 2010 due to security and memory usage concerns. Fractal reintroduced OP_CAT, bringing more development possibilities to the Bitcoin ecosystem, such as on-chain applications, smart contracts, and more.

Fractal Tokenomics

The Fractal mainnet mainly consumes two types of tokens: $FB( general gas) and $SATS( pizza swap exclusive gas).

The total issuance is 210 million coins, and only the tokens generated through mining can circulate after the mainnet goes live. Other tokens have a lock-up mechanism, with private placements locked for six months.

Distribution Plan:

• 50% PoW mining, Bitcoin miners can directly mine $FB
• 15% ecosystem treasury, up to 10% usable each year for 10 years.
• 15% core contributors, 7 months lock-up, 12 months linear release
• 10% community subsidy, up to 10% each year for 10 years
• 5% presale, 7 months lock-up, 12 months linear release
• 5% advisor, up to 20% usage each year within 5 years

The official has not clearly stated whether there will be airdrop rewards for users participating in the testnet. In the short term, 45% of the funds will still be controlled by the official, which may pose risks.

To ensure transparency, the official has published the addresses of various funds, allowing users to track the usage of funds.

Fractal Ecosystem Overview

CAT20

Currently, the most popular ecological protocol in Fractal is CAT20 launched by CAT Protocol. This protocol was released on September 11, with a total issuance of 21 million. Although the project's information is unclear and there are risks, community sentiment and KOL promotion have caused its popularity to soar, and the Gas fees on the Fractal chain once surged to nearly 7000.

The main innovation of CAT20 lies in the use of the OP_CAT opcode, which is compatible with the Fractal ecosystem. Its modularity and programmable minting provide flexibility for complex DeFi applications. Another feature is that transactions are fully verified by miners, reducing reliance on indexers.

BTCTerminal

BTCTerminal is a notable project that originally served as an infrastructure provider for the Runes protocol. It was later renamed and integrated into the Fractal ecosystem, launching a comprehensive trading market that supports querying Mint progress, wallet balances, and other functions, with plans to support Cat721 in the future.

UniWorlds

UniWorlds is a metaverse project built on Fractal, dedicated to developing community and game toolkits for interoperable virtual worlds. As the first large application on Fractal, UniWorlds has received seed round investments from institutions like UniSat.

BRC20

The BRC20 function was activated at block 21000, and the on-chain gas fees remain high. However, the performance of major inscription projects has been mediocre, with a common occurrence of startup funding or studio monopolization. Future development still needs to be tested by the market.

Considerations of Different Participating Groups

Retail Investor Perspective

The new narrative and high enthusiasm brought by Fractal have attracted some on-chain retail investors. With 50% of the time cost for POW production, retail investors can hold a significant amount of chips in the short term, and this may be the best profit opportunity currently.

Miner Perspective

Bitcoin mainnet miners can mine BTC and FB simultaneously. If the Fractal ecosystem continues to perform well and consumption exceeds production, miners can drive up the price of FB for profit. Conversely, the value of FB may decrease over time. When the value of FB stabilizes after listing, it may be the best time for miners to sell, and retail investors should be wary of risks.

Institutional Perspective

Large trading platforms have launched related trading markets, and in the future, they may list FB or influence the Fractal ecosystem trends through resource advantages. The entry of large capital may promote ecological development, but it may also weaken the voice of retail investors, with institutions' interests dominating more.

Conclusion

From the current perspective, there are not many innovations in Fractal, mainly focusing on compatibility and optimization of the mainnet. The ecosystem is in the early stages, and the development prospects of new projects are still unclear. More answers require time and market testing.