BRC-20 Tokens: All Things to Know About the New Standard on the Bitcoin Blockchain

    The BRC-20 token standard of Bitcoin holds the potential to revolutionize the entire Bitcoin blockchain.

    For those interested in Bitcoin, it is common knowledge that the blockchain has traditionally supported only one cryptocurrency, BTC. However, with the advent of BRC-20 tokens, this scenario has changed.

    Since its launch in March 2023 by an anonymous developer called Domo, the BRC-20 market has been expanding rapidly. ORDI, the first and most popular BRC-20 token, initially started as a meme but now boasts a market cap of over $500 million. Other BRC-20 tokens such as VMPX, MEME, BANKBRC, and PEPEBRC have also been introduced on, which is the first exchange to facilitate BRC-20 trading.

    So, what exactly is BRC-20, and how does it differ from the similarly named ERC-20?

    What is BRC-20? 

    The BRC-20 token standard is an experimental fungible token protocol designed for the Bitcoin blockchain. It was introduced in March 2023 by an anonymous on-chain analyst, Domo. Inspired by Ethereum’s ERC-20, the BRC-20 tokens enable developers to generate and exchange fungible tokens using the Ordinals protocol. However, unlike ERC-20, the BRC-20 tokens do not rely on smart contracts.

    The BRC-20 token standard leverages Ordinals inscriptions of JSON data to deploy, mint, and transfer tokens. As of 8 May 2023, over 14,200 tokens have been created using the BRC-20 standard, including ORDI, the first BRC-20 token.

    BRC-20 Tokens and Ordinals

    The primary role of BRC-20 tokens is to facilitate the exchange of fungible assets using the Ordinals protocol.

    In January 2023, the introduction of the Bitcoin Ordinals protocol created a buzz in the Bitcoin community as it opened up possibilities for Bitcoin-based NFTs.

    Unlike Ethereum, the Bitcoin blockchain has never supported any crypto asset other than Bitcoin itself. While some may prefer this, others see it as a constraint to the blockchain’s growth. Numerous Bitcoin users are looking for new ways to utilize the blockchain, and NFT capabilities could satisfy this craving.

    Enter the Ordinals protocol, which utilizes satoshis, a minute fraction of one BTC. Each BTC coin consists of 100 million satoshis.

    In essence, the Ordinals protocol permits data inscription on satoshis, these tiny fractions of Bitcoin. Using this protocol, additional data can be inscribed on a satoshi before it is included in a transaction. Once the satoshi is adorned with the extra data, it is transformed into an Ordinal. The inscription data contains a unique number that directs you to the location of the Bitcoin-based NFT.

    It’s worth noting that Ordinals are non-fungible, whereas BRC-20 tokens are entirely fungible.

    This difference makes BRC-20 tokens valuable. With this standard, users can generate and mint Bitcoin-based tokens using the Ordinals protocol, just like Ethereum users can create and mint tokens using the ERC-20 standard.

    Pros of BRC-20

    Although still in its early stages, BRC-20 is gaining momentum as more people explore its potential benefits:

    • Security: BRC-20 tokens are located on the Bitcoin blockchain, which inherits the high level of security provided by the Bitcoin protocol. Bitcoin employs the Proof of Work (PoW) consensus mechanism and boasts a large network of miners helping to secure the blockchain, making it one of the most secure blockchains available.
    • Compatibility: BRC-20 tokens are natively compatible with the Bitcoin blockchain, making integration into the Bitcoin ecosystem hassle-free. Moreover, existing Bitcoin developers can conveniently design and incorporate BRC-20 tokens.
    • Fungibility: BRC-20 tokens are fungible, meaning they can be easily traded on various platforms, providing a straightforward alternative for those new to Bitcoin trading.

    Cons of BRC-20

    The Bitcoin community is divided regarding the pros and cons of Ordinals and BRC-20. While some regard them as an innovative experiment, others see them as a deviation from Satoshi Nakamoto’s original vision for Bitcoin. Some of the drawbacks of BRC-20 include:

    • Limited ecosystem: Despite gaining popularity, BRC-20 remains a relatively new token standard with a smaller ecosystem than ERC-20. As a result, resources, developers, and tools for building and managing BRC-20 tokens are scarce.
    • Potential high transaction fees: The surge in BRC-20 token activity has led to an increase in transaction fees on Bitcoin, proportional to the growth in BRC-20 transactions.

    What’s the Difference Between BRC-20 and ERC-20?

    BRC-20 and ERC-20 tokens have several notable differences.

    As mentioned earlier, BRC-20 and ERC-20 token standards operate on separate blockchains. BRC-20 is Bitcoin-based, while ERC-20 is Ethereum-based. Consequently, BRC-20 and ERC-20 tokens use different consensus mechanisms.

    Ethereum operates on a proof of stake mechanism, where validators stake ETH to secure the network and verify ERC-20 token transactions. In contrast, Bitcoin uses the older proof of work mechanism, where miners solve complex computational problems to verify transactions.

    Another significant difference is that ERC-20 tokens utilize smart contracts, which execute transactions automatically when specific conditions are met. Ethereum’s smart contract feature is a standout feature. BRC-20 tokens, on the other hand, do not use smart contracts. Instead, they rely on Ordinal protocol inscriptions to function as fungible assets.

    It’s worth noting that you’ll need a Bitcoin wallet to mint or trade BRC-20 tokens.

    Currently, ERC-20 tokens are the preferred option over BRC-20 tokens for various reasons. If you value smart contracts, you may find the BRC-20 standard lacking. Additionally, ERC-20 tokens are widely supported by DeFi services, while BRC-20 tokens are experimental and have only recently launched. If you want to purchase ERC-20 tokens, you can easily do so from popular exchanges, such as Binance, UniSwap, and Coinbase. This is not yet possible with BRC-20 tokens.

    However, if the BRC-20 standard becomes more popular, adoption may soar in the future.

    Final Words

    The impact of BRC-20 tokens on the Bitcoin blockchain remains to be fully revealed as they are still in the early stages of development. This presents an opportunity for improvements in design and optimization to be made in the future. In fact, a new standard called ORC-20 has been created to address the limitations of BRC-20 and improve its functionalities.

    The rapid growth of BRC-20 tokens signifies Bitcoin’s evolution beyond its original purpose as a means of exchange and store of value. Its potential to play a larger role in the future of the Bitcoin blockchain is promising and shows that innovation and progress continue to drive development in the world of cryptocurrency.

    Most Popular

    Related Posts