What is OPCAT?

The OPCAT token is the first CAT20 token deployed on Fractal Bitcoin, which is based on the Covenant Attested Token (CAT) Protocol, a novel UTXO-based token protocol proposed on Bitcoin. Its birth stems from the need to improve existing Bitcoin token protocols, aiming to solve issues such as reliance on indexers and single functionality. The CAT protocol was proposed by a group of developers dedicated to blockchain technology innovation and has gradually matured through continuous research and testing. With the emergence of Fractal Bitcoin, OPCAT, as the first CAT20 token deployed on it, has opened a new journey, leveraging the features of Fractal Bitcoin and the OP_CAT opcode to extend the smart contract functionality of Bitcoin to new horizons.

In September 2024, the first CAT20 token OPCAT based on OP_CAT was officially launched for minting, temporarily pushing Fractal Network gas to around 5000sats/vB. Here is the tutorial for OPCAT token minting.

1. Environment setup: Install the necessary dependencies, including Git, Node.js, and Docker, and download the relevant code of CAT Protocol.
2. Start Docker container: Run the Fractal full node on the server and set up the local indexer.
3. Build and install CLI tools.
4. Create a wallet and complete the minting and deployment process.

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OP_CAT Protocol

OP_CAT is an opcode in Bitcoin script that is used to concatenate two data fragments on the stack into a larger element. Although its functionality seems simple, it can provide more capabilities for smart contracts in the Bitcoin network, allowing developers to create and process more complex data and transaction logic. However, due to security issues, the OP_CAT opcode was disabled in 2010. With the expansion of the Bitcoin network, the community has renewed its focus on OP_CAT, believing that it may play a key role in scalability and smart contracts. In recent years, there has been increasing discussion about reintroducing OP_CAT, particularly in terms of its potential applications in Bitcoin scalability and Tapscript. In October 2023, a proposal by developers Ethan Heilman and Armin Sabouri to restore OP_CAT through a soft fork gained widespread attention. The proposal aims to enhance Bitcoin script functionality, support more complex contract implementations, and address security and memory usage issues.

Fractal Bitcoin Overview

During the development of Bitcoin, the surge in network transaction volume has led to scalability issues such as longer transaction confirmation times and higher fees. Although the community has explored second-layer solutions such as the Lightning Network, these solutions often require additional infrastructure or complex operations. In this context, the UniSat team has proposed the concept of Fractal Bitcoin, aiming to create an extensible solution that can seamlessly integrate into the Bitcoin ecosystem without major modifications to the Bitcoin core protocol while significantly improving network performance. Fractal Bitcoin introduces a new UTXO model that allows smart contracts to run more efficiently. This paves the way for the development and deployment of decentralized applications while maintaining the security and stability of the Bitcoin network.

OP_CAT Features and Advantages

OP_CAT has a range of impressive features and advantages. It supports fungible tokens (CAT20 standard) and non-fungible tokens (CAT721 standard), meeting diverse needs in different scenarios. In terms of minting rules, OPCAT is highly programmable, allowing token issuers to flexibly define various minting rules through smart contracts, including open minting, and the network will directly reject transactions that exceed the minting limit, ensuring the rationality of token supply. In addition, OP_CAT has cross-chain interoperability, allowing assets to be bridged between different blockchains without trust, greatly expanding the application scope. Furthermore, OP_CAT supports Simplified Payment Verification (SPV), enabling lightweight clients (such as mobile phones) to independently verify the authenticity of tokens without relying on central servers. This has significant advantages in terms of convenience and security, further enhancing the user experience.

1. Enhanced script functionality: With the OP_CAT opcode, Bitcoin’s script capabilities have been significantly improved, enabling developers to create more complex transaction features.
2. Improved Security: OP_CAT is expected to promote innovative insurance pool design, enhance asset security, and reduce the risk of unauthorized access.
3. Dynamic Output Script: This opcode provides greater flexibility for creating whitelists and complex estate planning tools, thereby enhancing the personalization and security of transactions.
4. Interoperability with Layer 2 solutions: OP_CAT can facilitate seamless interaction between Bitcoin and other blockchain networks, building a more closely-knit and efficient digital currency ecosystem.

The principle and technical implementation of OP_CAT: deployment, minting, transfer and burning

The core principle of OP_CAT is to use Bitcoin Script to manage and verify tokens at Layer 1, ensuring that all rules are guaranteed by the Bitcoin consensus, without relying on additional indexers or third parties. Its technical implementation mainly relies on recursive covenants to maintain the token state, ensuring the validity and consistency of tokens in the transaction process through specific script conditions. In operations such as token minting, transfer, merge, and burn, OP_CAT strictly follows predefined rules, which are encoded in Bitcoin scripts and verified by miners. For example, when minting new tokens, specific conditions must be met, such as correct signatures, compliant token IDs, etc., otherwise the transaction will be rejected. This mechanism ensures the security and traceability of tokens, making OP_CAT stable on the Bitcoin network and laying a solid foundation for its use in complex decentralized application scenarios. CAT20 represents fungible tokens, similar to ERC20, suitable for payment, staking, and decentralized finance (DeFi) applications. CAT721 is a non-fungible token (NFT) standard used to store unique assets such as artwork, game items, etc.

1. Deployment Phase: Establishing Token Infrastructure
   To deploy the OP_CAT token, you need to go through two transactions:

- Commit phase: The user first creates a transaction, writes the basic information of the token into the transaction output script, and generates the identifier (transaction hash) for the token.
- Reveal phase: Using the output of the previous transaction as input, write the token rules and distribution mechanism into the chain by rewriting the Bitcoin script logic and P2TR address features.

1. Minting process: Add token supply
   Token minting must be based on the ‘minter’ mechanism. Each minting operation must adhere to specific rules, such as generating multiple parallel minter outputs to control the token minting volume in the network. The V2 version of the minter by default supports higher concurrency.
2. Token Transfer: Strictly Follow Quantity Consistency
   When transferring tokens, the number of tokens in the transaction inputs and outputs must be consistent. A single transaction may contain multiple types of tokens, but the input and output quantities of each token must be consistent.
3. Token burning: Reduce the supply
   Token destruction is completed by transferring the tokens to a regular address. This completely removes the tokens from the protocol and makes them unusable.

Source: OPCATOfficial Website Whitepaper

Potential Applications of OP_CAT

1. Decentralized Finance (DeFi)
   OPCAT can be used to create decentralized exchanges (DEX), automated market makers (AMM), and lending protocols, expanding the application of Bitcoin in the DeFi field.
2. NFT and Digital Asset Management
   The CAT721 standard provides strong support for non-fungible tokens, allowing for fully on-chain storage and trading of digital assets, suitable for artworks, game items, and certification records.
3. Cross-chain application
   The cross-chain functionality of OP_CAT has opened up new opportunities for asset bridging and multi-chain applications. For example, users can seamlessly transfer assets from the Ethereum network to the Bitcoin network through OP_CAT.
4. Enterprise-level applications
   By customizing token rules through smart contracts, OP_CAT is suitable for enterprises to issue stablecoins, loyalty points, or other alternative tokens.

Summary

OP_CAT has brought Bitcoin into a new era of smart contracts and token applications. With its fully on-chain design, strong security, and flexible token management mechanism, OP_CAT injects unprecedented vitality into the Bitcoin ecosystem. Whether in the fields of DeFi, NFT, or cross-chain applications, OP_CAT demonstrates broad prospects. In the future, with the further development of the community and continuous technological optimization, OP_CAT is expected to become an important cornerstone of the Bitcoin ecosystem.

OPCAT has dropped from its recent high of nearly 1.6u to around 0.46u before this post (December 30, 2024). Please trade with caution and be aware of the risks.

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