> For the complete documentation index, see [llms.txt](https://gategamefi.gitbook.io/gate-gamefi-white-paper/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://gategamefi.gitbook.io/gate-gamefi-white-paper/iii.-technical-foundations/context.md).

# Context

When the Bitcoin Halving L4 event happened, it became a powerful catalyst in the Bitcoin ecosystem and the explosion of the Proof-of-Work (PoW) system in the second quarter of 2024.

Previously, Bitcoin (BTC) was the only known token on the Bitcoin network, with a simple programming language that did not allow the issuance of other tokens. However, with the emergence of Ordinals, the door for the development of alternative tokens has been opened, leading to the birth of many new protocols in 2023, including BRC-20, ARC-20, ORC-20, ORC-CASH, SRC-20, along with older solutions like RGB, Counterparty, Omni Layer, and Taproot Assets.

<figure><img src="/files/J1LkH2vql6ssHSDKjl4T" alt=""><figcaption><p>Bitcoin ecosystem landscape</p></figcaption></figure>

Data from Dune shows that demand for activity on Ordinals is increasing and showing signs of booming again based on the sudden change in the amount of Daily Inscriptions in the last week of March 2024.

Developers in the Bitcoin ecosystem agree that switching to a Rollup solution is the most complete option compared to the Unspent Transaction Output (UTXO) mechanism on the current Bitcoin network, which is causing too much redundancy from coins. direction BRC-20.

BRC-20 works based on the Ordinals protocol, each transaction generates new UTXOs to record its balance. As the number of BRC-20 tokens and transactions increases, the number of UTXOs also increases, leading to spam on the Bitcoin network. Furthermore, BRC-20 token data is stored in Witness Data instead of in UTXO, causing expensive network costs when participating in rewards on the Bitcoin network.

Aware of these limitations, the founder of Ordinals sought to solve them by developing a completely new protocol for alternative tokens, to optimize fragmentation in the system, leading to the birth of Runes Protocol.


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