【AMA】Inscription controversy escalates：Project and technology in jeopardy
This is an article summarizing the Ask Me Anything (AMA) session that took place with CoinHome on January 3, 2024.
About CoinHome
CoinHome is a financial aggregation platform for digital assets.
CoinHome New Version Officially Launched on Dec 24, 2023.In the context of the future digitization of a large number of assets, CoinHome, centered around its customers, aims to provide a more powerful, convenient, and secure trading experience to its vast user base through upgrades.
CoinHpme Social Links
- Website：https://www.coinhome.pro/#/home
- Twitter：https://twitter.com/CoinHomePro
- Medium：https://medium.com/@coinhomepro
- Youtube：https://www.youtube.com/@HomeCoinPro
- TG Community：https://t.me/CoinHomeGlobal
- Discord：https://discord.com/invite/X6qm3rmw
CoinHome & SPB Labs
Cicily：
Hello, everyone! I’m Cicily, the spokesperson for CoinHome. I’m thrilled to be here today representing CoinHome at the invitation of SPB Labs.
We’ll be discussing some projects and technical challenges amidst the Inscription craze. Hopefully, by the end of this conference, you’ll have a deeper understanding of today’s topics.
Wishing CoinHome more opportunities for collaboration with SPB Labs in the future. Alright, let’s kick off today’s meeting!
Q1: Could you please briefly introduce your project to us?
CoinHome is an all-in-one digital asset trading platform registered in the Virgin Islands in 2022. We’ve been providing secure, stable, and convenient trading services to global digital asset investors for over a year now.
Since our launch, CoinHome has been guided by the core principle of “prioritizing user asset security.” While creating a more user-friendly trading experience, we’ve also been offering comprehensive asset circulation services and value support for high-quality crypto projects.
Q2: When did you come into contact with Inscription? Do you think Inscription can be an effective solution for connecting real-world assets and crypto-world assets?
I officially started engaging with Inscription around June this year. While it’s not a new concept, I believe it represents a return to the original purpose of blockchain technology, addressing the core issues it aimed to solve at its inception. The current attention towards this direction is a positive trend and a signal of the industry’s healthy development.
In my understanding, Inscription is an asset issued in token form, corresponding to underlying assets from the real world. In other words, these tokens represent rights or business activities originating in the real world, categorizing them as Inscriptions. Therefore, the earliest Inscriptions can be traced back to familiar stablecoins backed by real-world assets.
Inscription is crucial for the future development of blockchain. If blockchain remains confined to niche assets such as gaming and NFTs, achieving scalability becomes challenging. Introducing real-world assets to blockchain requires two essential conditions: compliance and high-quality underlying assets.
Q3: The recent popularity of BRC 20 has given everyone a new hope. In your opinion, what can Inscription bring to everyone in the next bull market?
Regarding Inscription, I don’t believe it can lead the entire bull market. Instead, I believe it has the potential to expand the market for Web 3, attracting more traditional institutions and ordinary users to enter the Web 3 space. Therefore, I think in the next phase, Inscription may bring more traffic and value to the entire blockchain and Web 3.
From my perspective, Inscription is more like a channel — a means of transferring traditional high-quality assets onto the blockchain through a series of complex financial supply chains and tools. A bull market requires an open channel for funds to easily flow in and out, making it potentially a foundational infrastructure for initiating a bull market.
I think Inscription is not just the main narrative for the next bull market; it’s a bridge that can bring blockchain into mainstream finance afterward. It will not only bring about a bull market but also initiate an enduring bull market. This is our understanding, and we have this belief in it.
Q4: In this track of Inscription, what qualities do you think a project must possess in order to gain attention?
In the current Inscription track, everyone is still experimenting, contemplating how to improve. In my view, projects in the Inscription sector should address the pain points and drawbacks of traditional finance. If these aspects are resolved, there is a high probability that the product will be welcomed by users.
Concerning Inscription, it appears to be a seemingly “harmless” text on-chain, parsed through a centralized indexer, where security concerns seem to be primarily related to centralized services. However, on-chain security considerations include the following:
On-Chain Security Issues:
1. Increased Node Load:
Inscription increases the size of Bitcoin blocks, adding to the resources needed for nodes to propagate, store, and verify blocks. If there are too many inscriptions, it may reduce the decentralization of the Bitcoin network, making it more susceptible to attacks.
2. Reduced Security:
Inscription can be used to store any type of data, including malicious code. If malicious code is added to Bitcoin blocks, it may lead to network security vulnerabilities.
3. Transaction Construction:
Inscription transactions require careful construction, considering the first-in-first-out rules of ordinals, to prevent the disruption of the Inscription’s indexing due to negligence.
4. Risks in Buying and Selling:
The Inscription transaction market, whether OTC or PSBT, carries the risk of asset loss.
Certainly, these are only technical security issues on the chain. Currently, the Inscription market continues the previous round of the “animal market” meme, but with a limited number of public chains and total funds in the industry, when the hype subsides, ultimately, only the top Inscriptions on each chain will hold value.
Fundamentally, emerging assets in the industry are potential Total Value Locked (TVL). Inscription liquidity is worse than tokens but better than NFTs. The second half of the Inscription market will undoubtedly revolve around “Fi (Finance) transforming” these Inscription assets. After all, with such a large amount of assets scattered and idle in users’ hands, the efficiency of asset utilization is too low.
The “Fi transformation,” based on the difficulty of technical implementation, can be categorized into three types of products:
1. Non-cross-chain Inscription Collateralized Lending: This category is the easiest to implement, as Inscription belongs to semi-centralized assets. Teams that have previously developed lending protocols or NFTfi can quickly deploy products online (some projects have already announced deployments). The difficulty for these products lies in calculating the liquidity and over-collateralization rate for different Inscription assets. There may not be issues when the price of Inscription rises, but if it crashes, liquidation becomes a fatal problem. At that time, Dutch auctions may not be the best choice, and active liquidation may be more effective. Of course, for highly volatile and low-depth Inscription assets, the risk of flash loans should also be avoided.
2. Non-cross-chain Inscription Staking Mining: Providing Inscription on-chain trading pairs for staking mining. It can be a single pool or multiple pools. It can also be further boosted through lockups, using veToken’s high APY to quickly increase pool depth. The difficulty for this category of products lies in the semi-centralized nature of Inscription assets, and the liquidity and depth of Inscription will result in significant volatility in Inscription trading pairs. This issue is a natural defect of Inscription assets. Perhaps, it can be considered to use an appropriate joint curve when users stake Inscription assets to smooth out the volatility of Inscription trading pairs within a certain period. However, this requires a high level of requirements for mining model design. Essentially, it is doing high-frequency quantification after Inscription assets enter the pool, and it is also affected by the big market cycle of the Inscription market.
3. Cross-chain Inscription Asset Management Products: This type of product may be the ultimate form of the second half of the Inscription market. Users can deposit Inscription assets on any chain through the platform, and obtain corresponding token returns, equivalent to Inscription financial products. The platform acts as an exchange for all-chain Inscription, and currently, major exchanges adopt this model. It’s just that it hasn’t reached the point where it needs to attract deposits through Inscription financial products. However, like the first two types of products, when the Inscription market collapses, the platform will face great risks.
Q5: Although inscriptions are currently controversial, many people are still optimistic about the direction of inscriptions. Can you give us some suggestions? For example, among the existing content, which ones can be tried and experienced?
Advice:
1. Explore Inscription ETFs: Given the nature of the inscription market, introducing Inscription Exchange Traded Funds (ETFs) is an interesting proposition. Similar to traditional stock markets, this provides a convenient investment option for users who are not familiar with or prefer not to engage in direct trading. This can be facilitated through the DEIX platform, allowing users to entrust their inscription assets to DEIX in exchange for platform tokens based on the valuation of inscriptions.
2. DEIX’s On-Chain Trading Platform: DEIX introduces the concept of a decentralized inscription trading platform, offering a new approach to the trading and management of on-chain assets. Users can entrust their inscription assets to DEIX in exchange for platform tokens, enabling them to share dividends during an upswing in the inscription market and quickly exit during a downturn. This approach is akin to an inscription market ETF but with improved liquidity and depth.
3. Addressing Cross-Chain Issues: Due to varying standards among inscription assets, direct cross-chain transactions are challenging. The proposed solution is to endow DEIX tokens with Omni-Chain properties, possibly by returning to the value network of Bitcoin (BTC). Collaboration with BTC ecosystem projects could be instrumental in solving cross-chain issues and enhancing the stability of the DEIX platform.
4. Collaboration with Stablecoins: DEIX can collaborate with stablecoin projects to enable its tokens for instant payments across the entire blockchain. Collaboration with projects like Bmaker and the Aptos chain, deploying ABSC inscription assets based on APT-20, could offer a viable solution. Tokenizing inscriptions across multiple chains and using BTC’s stablecoin aggregation could empower DEIX tokens, presenting a feasible solution for the aggregation of inscription assets across the entire blockchain.
5. Community Governance and Transparency: DEIX could consider introducing a community governance mechanism to allow users to participate in decisions regarding the rebalancing of inscription assets. This would enhance platform transparency and increase user trust.
When experimenting and implementing these ideas, it is advised for the platform to address cross-chain issues, enhance transparency, collaborate with other ecosystem projects, and ensure the healthy development of the DEIX platform.
