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