Bitcoin Ecological New Star Fractal: Innovation Breakthrough or a Flash in the Pan?

Since September, with the emergence of Fractal igniting community sentiment, market hotspots have once again focused on the Bitcoin ecosystem. A large number of users have flocked to participate in the related assets and gameplay launched by Fractal, leading to high on-chain gas fees. The reasons for Fractal's ability to generate such high enthusiasm are mainly as follows:

First, the overall market is currently sluggish and lacks fresh narratives. Secondly, based on Unisat's previous generous airdrop of Pizza, many users are highly focused on the launch of Fractal, leading to extreme competition even during the testnet phase, with a rough estimate of tens of millions of addresses participating in related testnet tasks, hoping to receive airdrop rewards. Finally, the high returns brought by asset protocols like Cat20, along with the continuous fermentation of the profit effect, further boosted the popularity of Fractal.

Unisat's official hunger marketing strategy has also played a role in driving the momentum. Originally, the circulating supply of the airdropped FB was very small, but as on-chain competition intensified, the price of FB skyrocketed, becoming a "golden shovel" that indirectly accelerated the development of Fractal.

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

Fractal is a native scaling solution based on Bitcoin scaling. It is designed as a second-layer network or sidechain for Bitcoin, serving as a native extension to Bitcoin's first-layer network. While maintaining orthodoxy, it aims to improve transaction efficiency by accelerating block generation speed and increasing block capacity. Its working principle includes full compatibility with the Bitcoin mainnet, while providing faster transaction confirmation times, such as 30 seconds per block, and a block capacity that is 20 times that of the Bitcoin mainnet.

As a native expansion solution, Fractal can start from the Bitcoin main chain to achieve secure asset transfers across various layers. Assets such as Bitcoin, BRC-20, and Ordinals can be bridged through decentralized bridges. The underlying mechanism adopts a dynamically replacing rotating MPC signature mechanism, while also taking into account specific aspects of the BRC-20 standard.

Fractal functions more like the Bitcoin testnet, supporting some features that have not yet been activated on the mainnet, serving as a testing ground, providing a better user experience and performance optimization, and is very suitable for experimentation and innovation in complex applications. At the same time, it allows users to participate and provide feedback in a real interactive environment, similar to the significance of EVM layer2 for Ethereum.

The Fractal network is developed in collaboration between UniSat and Block Space Force. UniSat, as the main developer and promoter, is a leading Bitcoin wallet with over 900,000 active users weekly. It has received undisclosed amounts of funding five times, two of which were led by a certain trading platform, with several capital firms participating.

Block Space Force is a crypto-native fund, with a portfolio that includes well-known projects such as Babylon, Pendle, and Aevo. It also has rich experience in the A9 exit in USD, investing in 100x projects, and developing the most commonly used blockchain applications globally. Overall, among the two project parties, UniSat's resources are more prominent, attracting a large number of loyal users through its successful brand architecture and the previous generous Pizza airdrop, becoming the strongest endorsement for Fractal.

With the support of resources from both 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 from certain wallets and UniSat wallets, and carried out various developer resource funding programs, demonstrating Fractal's ambition for ecosystem development.

The highlight of Fractal lies in the performance optimization and improvements based on the Bitcoin mainnet, as well as the launched asset issuance methods and ecological applications. It can be vividly said that Fractal is an old bottle of Bitcoin mainnet resources filled with new wine in the form of a brand new asset issuance method.

The overall design of Fractal allows assets like Bitcoin, BRC-20, and Ordinals to be bridged through a decentralized bridge. Transactions recorded by users on the Fractal network will then interact or synchronize with the Bitcoin mainnet, providing faster transaction confirmation times and larger block capacity compared to the mainnet.

Fractal enhances Bitcoin transaction speed by recursively expanding layers, establishing multiple tiers of expansion layers on the Bitcoin main chain to form a tree structure. This design allows each layer to further fork, increasing the network's parallel processing capability. Each layer can independently process transactions and dynamically adjust the number of layers as needed. During peak transaction times, it can quickly add levels to handle more transactions, making the network flexible in responding to various loads.

Just like other L2s and sidechains have built another highway, Fractal can build countless highways running parallel to the Bitcoin mainnet. Each road can expand the Bitcoin mainnet and can also expand another road. This way, each has its own unique value orientation, and users can solve congestion problems without needing to change their mode of transport.

Fractal adopts the same PoW consensus mechanism as Bitcoin, which means BTC miners can seamlessly transition to Fractal block mining using their current ASICs, GPUs, and other existing hardware, essentially allowing them to have the best of both worlds, improving efficiency through shared workload, and providing additional economic benefits for Bitcoin miners.

The mining method of Fractal is divided into permissionless and merged mining. Out of every three blocks, two are generated through permissionless mining, and one is generated through merged mining. Permissionless mining allows anyone with the right tools to mine Fractal blocks, and anyone can participate in the network by downloading software and running a node. Merged mining is specifically aimed at BTC miners, allowing them to mine BTC blocks and Fractal blocks simultaneously without needing additional hash power.

Fractal has introduced the OP_CAT opcode, which brings more development possibilities to the BTC ecosystem, such as on-chain applications, smart contracts, and more.

The Fractal mainnet mainly consumes two types of tokens: $FB as general gas and $SATS as dedicated gas. The total issuance of $FB is 210 million. After the mainnet goes live, only the tokens produced through mining can circulate, while other tokens have a lock-up mechanism, with private placement tokens locked for six months.

50% for PoW mining, Bitcoin miners can directly mine $FB. 15% for the ecosystem treasury, supporting Fractal ecosystem projects. 15% allocated to core contributors. 10% for community subsidies. 5% for pre-sale. 5% allocated to advisors.

Currently, the official has not clearly stated whether there will be airdrop rewards for users participating in the testnet. Although it is unlikely that some funds will be misused by the team to manipulate the market, 45% is still controlled by the official in the short term, which may pose risks.

The hottest protocol in the Fractal ecosystem is undoubtedly the CAT20 protocol launched by CAT Protocol. Despite potential risks, a large number of users have flocked in to participate due to community sentiment and KOL dissemination, leading to a surge in on-chain Gas fees. The innovation of CAT20 lies in the use of the OP_CAT opcode, which provides flexible and composable rules for complex decentralized applications. Another feature is that transactions are fully validated by miners, reducing reliance on indexers.

BTCTerminal is a relatively well-known project, originally a provider of infrastructure for the Runes protocol, which was later renamed and integrated into Fractal. It has now launched a comprehensive trading market that supports features such as querying Mint progress and wallet balances.

UniWorlds is a metaverse project built on Fractal that develops a community and game toolkit for creating interoperable virtual worlds. As the first major application developed by the UniSat team, it has completed seed round financing.

After the BRC20 function is activated, the on-chain gas remains at a high level, but the performance of major inscription projects is not ideal, with a common situation of startup rounds or studios dominating. Future development still needs to be tested by the market.

From the perspective of retail investors, the new narrative and high popularity brought by Fractal have attracted some on-chain participants. With 50% of the time cost in POW output, retail investors may hold more chips in the short term, and it may currently be a good time to profit.

For miners, they can mine BTC as well as produce FB. If the Fractal ecosystem continues to develop positively, and FB consumption exceeds production, miners may push up the price of FB to gain more benefits. Conversely, stagnation in the ecosystem may lead to a decline in the value of FB. After FB is listed, when its value is fully estimated, it may be the best time for miners to sell, and retail investors also face risks.

The entry of large capital may have a positive impact on ecological development, but it is likely to be dominated by institutional players, weakening the voice of retail investors and prioritizing the interests of VC institutions.

Overall, the Fractal project's innovations are limited, primarily focusing on compatibility and optimization of the mainnet. The ecological development is still in its early stages, and whether new projects can stand out remains uncertain, requiring time and market testing.