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Path to Vision Realization for NOTE Protocol

· 7 min read

Note: This article is still being written. Stay tuned for updates.

Introduction​

Since the release of Bitcoin in 2008, it has revolutionized the financial world with its concept of a "peer-to-peer electronic cash system," as outlined in its whitepaper. Bitcoin's unshakable security and global consensus quickly made it a core asset in the cryptocurrency space. Thousands of miners secure the Bitcoin network through competitive mining, while Bitcoin itself has become a major asset on exchanges worldwide, attracting a significant user base. Bitcoin's global influence and solid consensus foundation have established it as a store of value, with the potential to become a global currency.

However, despite Bitcoin's strong technical and user foundations, it still has a long way to go to fully realize the vision outlined in its whitepaper. Against this backdrop, the NOTE Protocol emerged, aiming to leverage Bitcoin's strong consensus foundation to promote the global adoption of digital currencies, enabling more ordinary users to easily use Bitcoin and other digital currencies. To achieve this vision, NOTE Protocol confronts various challenges such as technical limitations, ecosystem competition, user demands, and price fluctuations, striving to promote global adoption while maintaining Bitcoin's stability and security.

Challenges and Development Prospects​

As we advance Bitcoin and NOTE Protocol's global vision, we must clearly recognize the technical foundations and real-world limitations. Bitcoin's success stems from adhering to conservative design principles. These principles ensure Bitcoin's security and stability. For instance, the UTXO model guarantees transparency and immutability of transactions, and the 10-minute block generation time, though limiting throughput, strengthens the system's resilience. This conservative design allows developers to innovate with confidence, without worrying about unpredictable node upgrades leading to large-scale restructuring. Additionally, while the Taproot upgrade improved Bitcoin's scripting capabilities, there remains room for optimization in on-chain scripting and block-packing TPS (transactions per second).

Bitcoin's network evolution is also influenced by a complex interplay between miners, users, and developers. Miners ensure network security through competitive mining, but their desire for higher transaction fees often conflicts with users' need for lower transaction costs. Developers must balance improving user experience and maintaining network security, adding further complexity to the ecosystem.

Moreover, economic factors are crucial. Bitcoin's price fluctuations directly affect network security and user adoption. As prices rise, more miners join the network, enhancing security; however, high prices may deter ordinary users due to increased costs, weakening Bitcoin's role as a daily payment tool. NOTE Protocol fully considers these economic factors in its design, aiming to lower transaction costs while enhancing network security to promote wider adoption.

In the face of these challenges, we must not only recognize Bitcoin's technical limitations but also find a balance between miners, users, and developers, while addressing complex economic trends to realize NOTE Protocol's global vision.

Lessons from Bitcoin Forks and Sidechains​

Bitcoin's evolution has seen multiple forks and explorations of different asset protocols, which have provided valuable lessons. Forks such as BCH (Bitcoin Cash) and BSV (Bitcoin Satoshi Vision) sought to increase TPS by expanding block capacity, yet despite technical progress, these forks failed to maintain Bitcoin's original consensus, leading to fragmented users and miners, and a significant decline in on-chain activity.

From these forks and sidechain experiences, we see that simply increasing TPS does not guarantee ecosystem prosperity, and losing consensus can lead to failure. The true challenge lies in enhancing transaction processing capacity and functionality while maintaining network security and stability. NOTE Protocol addresses this challenge by introducing more application scenarios on Bitcoin's Layer1, such as Token and NFT issuance and complex smart contract functionality, to promote global adoption.

These experiences demonstrate that advancing Bitcoin and its related protocols requires more than just technical improvements—it necessitates a holistic approach that considers consensus maintenance, user needs, and ecosystem coordination. This comprehensive perspective is the core principle NOTE Protocol adheres to in its design—building a flexible and efficient global protocol on Bitcoin's strong and stable Layer1 foundation.

Untapped Potential of Bitcoin's Layer1​

In reality, Bitcoin's Layer1 still has immense untapped potential. The UTXO model guarantees transaction transparency and immutability, while the 10-minute block generation time enhances network resilience. Although Bitcoin's TPS is often considered limited, this calculation method is misunderstood. TPS should be calculated from the moment a transaction is accepted by a node, rather than when it is included in a block. Instantaneous TPS depends on network conditions and server performance, currently reaching around 3,000 transactions. By upgrading blocks to 4MB, a single block can pack 6,000 to 7,000 transactions, with daily transaction volumes reaching 600,000 to 800,000 transactions. Despite this, Layer1's potential has yet to be fully realized, and further optimization of memory pool size and management could significantly improve network efficiency, potentially reaching a daily transaction volume of 1 million transactions.

Expansion of Programming Capabilities​

Bitcoin's scripting language, with its simplicity and predictability, is central to its security design, but it also limits its support for smart contracts and complex business logic. To address the limitations of Bitcoin's on-chain programming capabilities, NOTE Protocol introduces the concept of off-chain contracts. Off-chain contracts allow complex logic to be executed off-chain, with only the final state being stored and verified on-chain, fully leveraging Bitcoin's network security and stability.

Through off-chain contracts, NOTE Protocol can enable Token issuance, NFT creation, and complex smart contract rules—capabilities beyond the scope of Bitcoin's native scripting language. At the same time, off-chain contracts greatly improve efficiency, allowing NOTE Protocol to handle more complex business processes without compromising network security.

Off-chain contracts not only enhance Bitcoin's programming capabilities but also expand its application scenarios. For example, supply chain management, decentralized finance (DeFi), and cross-border payments can all be efficiently implemented within NOTE Protocol using off-chain contracts. Additionally, off-chain contracts reduce the burden on the main chain, improving overall system processing speed and efficiency.

Consideration of Economic Factors​

Bitcoin's continued price appreciation has strengthened network security and boosted miner enthusiasm. However, this has also led to high transaction costs, affecting its use as a daily payment tool. NOTE Protocol has designed a more reasonable economic model to balance user experience with system sustainability.

  • Low transaction fees: NOTE Protocol optimizes block space utilization, capping miner fees per transaction at $1 to $2, reducing the amount of information occupying space and lowering user cost.
  • Native cross-chain support: NOTE Protocol supports asset transfers between UTXO chains, allowing assets to move across lower-cost chains and return to Bitcoin when needed, without relying on bridges, using Bitcoin's UTXO principles throughout.
  • Reasonable economic design: By controlling transaction fees and optimizing protocol incentives, NOTE Protocol ensures network security and sustainability while maintaining low user entry barriers.

NOTE Protocol's economic model mitigates the negative impacts of Bitcoin's high price, offering a more user-friendly experience and creating a sustainable ecosystem for miners and other participants.

Path to Vision Realization​

NOTE Protocol's vision is based on Bitcoin's strong consensus foundation, promoting global adoption of digital currencies. Achieving this vision requires not only technical breakthroughs but also reasonable economic design, expanded programming capabilities, and continuous adaptation to market changes.

  1. Global promotion of Bitcoin and NOTE Protocol: Through technical optimization and economic design, NOTE Protocol promotes the global adoption of Bitcoin and itself. By optimizing memory pools, introducing off-chain contracts, and other innovations, NOTE Protocol expands Bitcoin's application scenarios, transforming it from a store of value into a platform supporting complex smart contracts and digital asset issuance.

  2. Continuous future improvements: As blockchain technology evolves, NOTE Protocol will continue to optimize to meet emerging market demands and technological challenges. Future improvements, such as more efficient transaction packing algorithms and node optimization, will further enhance Bitcoin's TPS and overall efficiency while maintaining decentralization and security.

Conclusion​

NOTE Protocol inherits the core strengths of the Bitcoin network while driving its global adoption through technical innovation and economic optimization. By leveraging off-chain contracts, low-cost transactions, and expanded programming capabilities, NOTE Protocol overcomes Bitcoin's inherent limitations, extending its application scenarios and ensuring security and stability in the process.

NOTE Protocol's vision is to promote the global adoption of digital currencies through technological iteration and global outreach, advancing a decentralized economic system. With Bitcoin's consensus foundation and NOTE Protocol's innovative power, the protocol is steadily progressing toward becoming a global standard for digital currencies.