We explain: BRC-20

What is BRC-20?

Are you familiar with BRC-20 tokens? 

These tokens are an experimental addition stored on the Bitcoin blockchain. In contrast to the token standards commonly associated with EVM chains, BRC-20 tokens serve as a means to store a script file within Bitcoin. 

@domodata, the creator of BRC-20 tokens, coined the name in a playful reference to Ethereum’s ERC-20 token standard. While various methods exist to create tokens on different chains, the emergence of BRC-20 tokens might boost Bitcoin’s demand for fee payments and block space usage.

Ordi, the first BRC-20 token

The inaugural BRC-20 token, named “ordi,” prompted Bitcoin wallet developers to swiftly develop tools for its integration. Subsequently, numerous other BRC-20 tokens entered the market, including some characterized as meme tokens.

By May 2023, several BRC-20 tokens had experienced significant price surges, establishing substantial value. The heightened demand for these BRC-20 tokens resulted in escalated Bitcoin transaction fees and substantial congestion across the Bitcoin network.

BRC-20 vs ERC-20

BRC-20 tokens should not be confused with the more common ERC-20 tokens that you might be acquainted with, as they differ in several significant aspects.

Firstly, BRC-20 tokens are generated and exchanged within the Bitcoin network, not on Ethereum. Consequently, they rely on Bitcoin’s proof-of-work security mechanism, diverging from Ethereum’s proof-of-stake system. To manage and trade BRC-20 tokens, a Bitcoin wallet such as UniSat Wallet is necessary.

Secondly, BRC-20 tokens boast a simpler nature compared to ERC-20 tokens. Due to Bitcoin’s blockchain limitations that exclude smart contracts, BRC-20 tokens cannot participate in alternative applications like decentralized exchanges or lending protocols.

However, the utility of BRC-20 tokens should not be underestimated. Through the Ordinals protocol, users can craft digital assets, including text, images, audio, or video, and embed them onto a satoshi. Once inscribed, these assets become tradable or swappable across the peer-to-peer Bitcoin network.

In fact, the initial token contract implemented using the BRC-20 standard witnessed rapid success, selling out entirely with all 21,000,000 ordi tokens minted in under 18 hours.

Pros and cons of the BRC-20 tokens

As Bitcoin solidifies its position in the realm of cryptocurrencies, the introduction of the BRC-20 token standard has unlocked fresh opportunities. 

Here are some of the few advantages of BRC-20 tokens:

Fungibility: Fungibility denotes an object’s interchangeability with another item of equal value. The Ordinals protocol, initially tailored for non-fungible tokens (NFTs), has been extended via BRC-20 to facilitate the minting of fungible tokens.

Security: BRC-20 tokens operate on the secure Bitcoin protocol, renowned for its robust security measures and resilience against hacking attempts, bolstering the blockchain’s resistance to manipulation.

Compatibility: Engineered to seamlessly align with the Bitcoin protocol, BRC-20 tokens effortlessly integrate into the Bitcoin ecosystem, including wallets, data providers, and software tools.

However, akin to any nascent innovation, BRC-20 tokens come with their set of limitations:

Limited Ecosystem: Despite its growing popularity, the BRC-20 standard boasts a smaller ecosystem in comparison to established token standards like ERC-20. This scarcity translates to fewer available developers, tools, and resources for constructing and managing BRC-20 tokens.

Limited Adoption: Bitcoin predominantly functions as a store of value rather than a platform for token creation and management. This inherent characteristic might impede the widespread adoption of BRC-20 tokens, particularly due to their absence of smart contract capabilities akin to ERC-20 tokens.

Potential Gas Fee Surge: Concerns from long standing Bitcoin community members revolve around BRC-20 tokens occupying valuable block space, potentially leading to heightened gas fees for transactions.

How to mint BRC-20

Begin by accessing a platform catering to decentralized finance, gaming and digital collectibles to mind Bitcoin Tokens.

Follow these steps:

  1. Set up a compatible wallet that supports custom BRC-20 tokens.
  2. Enable BRC-20 token functionality in your wallet by inputting the token standard’s contract address, symbol, and decimal details.
  3. Acquire Bitcoin (BTC) through reputable exchanges, peer-to-peer transactions, or borrowing from acquaintances.
  4. Deposit the obtained BTC into your wallet by locating your BTC addresses, initiating the withdrawal process on the exchange, and verifying the transaction.
  5. Register your wallet by selecting the “Connect Wallet” feature and adhering to the provided instructions.
  6. Initiate the token minting process by inputting necessary token information, defining functionality, and validating the transaction through your wallet.
  7. Manage and trade the minted tokens on through sections like “My Tokens” and the “Marketplace.”
  8. Increase token value and visibility by promoting them on social media platforms, cryptocurrency forums, and Bitcoin-related news outlets.
  9. Integrate your BRC-20 tokens into various decentralized applications (dApps) such as DeFi, NFTs, and DAOs to enhance their utility and market value.
  10. Keep track of your BRC-20 tokens’ progress using dedicated tools and resources like BRC-20.io or Coinranking.com.
Older Post
Newer Post