Key Highlights
- BRC-20 is an abbreviation for Bitcoin Request for Comment 20.
- BRC-20 is a token standard that uses the Bitcoin ordinals to create fungible tokens on the Bitcoin blockchain.
- ORDI is the first BRC-20 token created by a pseudonymous Bitcoin developer, Domo, on March 9, 2023.
- The craze of BRC-20 tokens is causing congestion and fee hike issues in the Bitcoin blockchain.
Crypto is a fast-paced world where innovation knows no bounds. Recently, a new contender called 'BRC-20 Token' has emerged out of the blue, captivating the attention of Crypto enthusiasts, bitcoin maximalists, and Web3 advocates. In only a few days of its launch, BRC-20 has become a topic of debate in the different corners of the digital asset ecosystem. A key reason for this innovation to be a hot topic of discussion is the effect of BRc-20 tokens on the Bitcoin blockchain, the foundation of the crypto market.
But what exactly in BRC-20 is causing a stir?
We will know that in the blog below. We will also explore the origin, working, and future of BRC-20 tokens.
What are BRC-20 Tokens?
BRC-20 stands for Bitcoin Request for Comment 20.
It is a new experimental token standard that allows creating, minting, and transferring different fungible tokens on the Bitcoin Blockchain. BRC-20 tokens are the Bitcoin version of ERC-20 tokens without Smart contract programmability.
Despite being associated with the Bitcoin blockchain, BRC-20 tokens are currently experimental, and users must be extremely cautious with them.
What is the Origin of BRC-20 Tokens?
The Origin of BRC-20 tokens goes back to November 2021, when Bitcoin got its Taproot upgrade. As we know, Satoshi is the smallest unit of Bitcoin currency. A hundred million Satoshis together make one Bitcoin. A numbering system assigns a number to each Satoshi of Bitcoin to maintain their issuing order. This numbering system is called Bitcoin ordinals.
Before the Taproot upgrade, these ordinals could only tag a unique sequence number to each Satoshi. However, due to a loophole in the Taproot upgrade, it became possible to attach additional data to each Satoshi. The data can be any image, audio, video, text, code or application, making Satoshis the immutable bearer of multiple kinds of public data. The users can still spend the Satoshis as usual. Since then, Bitcoin developers have been trying to bring new use cases for the Bitcoin blockchain utilizing the data-bearing quality of Satoshis.
It led to the creation of Bitcoin NFTs in January 2023 and then BRC-20 tokens on March 9, 2023.
A Pseudonymous programmer named Domo created the BRC-20 token standards making it possible to mint different kinds of fungible tokens on the Bitcoin Blockchain.
The first BRC-20 token was the “ORDI” token, with a total supply of 21,000,000 tokens and 1000 tokens/mint limit. A few days after the launch of ORDI, multiple other BRC-20 tokens launched, most of which were meme tokens. As BRC-20 tokens are associated with the Bitcoin blockchain, they experienced a stellar demand instantly after their launch.
How Does BRC-20 Token Work?
The process of numbering Satoshis and allowing users to attach some extra data is called 'Inscription'.
For developing a BRC-20 token, users can inscribe text-based JSON (JavaScript Object Notation) files in a Satoshi. A JSON includes a transfer function, a minting function, and a deploying function as key components, making it possible to establish a rough minting mechanism for BRC-20 tokens. Thus, each BRC-20 token comes with a deploy function, a minting function, and a transfer function. The BRC-20-supported wallets comprehend the JSON script files functions for performing the deploying, transferring, and minting of the relevant BRC-20 token as needed.
An important thing to note is that while BRC-20 tokens use Bitcoin ordinals, not all ordinals are BRC-20 tokens.
Through the innovation of BRC-20 tokens, anyone can create and deploy their own BRC-20 token based on Bitcoin. Since they do not involve any complex Smart contracts, BRC-20 tokens are way simpler to deploy and build than ERC-20 tokens. Bitcoin blockchain, the most secure blockchain so far, processes all the transactions of BRC-20 tokens.
Over 14,307 BRC-20 Tokens exist at the time of writing, with more tokens adding up every day. Though the Bitcoin developer Domo, who launched the BRC-20 tokens himself described them as an experiment, the popularity of BRC-20 tokens is witnessing an astronomical surge.
Which are Some Famous BRC-20 Tokens?
Now that we understand the concept and workings of BRC-20 tokens let’s know a bit about some famous tokens built on BRC-20 standards.
Ordinals (ORDI)
It is the first BRC-20 token created by the Bitcoin developer who goes under the name Domo. It is the first-ever project that utilized the Bitcoin ordinal protocol to initiate the tokenization of assets. ORDI token has a capped supply of 21,000,000 with a per-mint limit of 1000 tokens. The majority of ORDI tokens were airdropped.
Pepe Ordinals (PEPE)
PEPE Ordinal is the BRC-20 version of the popular ERC-20-based PEPE coin, one of the most trending meme coins in 2023. While the PEPE token uses ERC-20 standards, PEPE Ordinals uses the Bitcoin blockchain and follows BRC-20 standards. Although both (PEPE and Pepe Ordinals) share a similar name and logo, they are fundamentally different. And since both are meme coins, they are highly volatile in price.
Meme Ordinals (MEME)
Meme Ordinal (MEME) is another famous BRC-20 token. It is the second BRC-20 token created on 8th March 2023 with a total supply of only 99,999 MEME and a circulation supply of 93,999, with a 6000 burned supply at the time of writing. Those who want to buy Meme Ordinals (MEME) can do that through any Ordinal supported Wallet. They can download the wallet, deposit BTC to their wallet address, and purchase MEME through BRC-20 Marketplace available in the wallet.
VMPX Coin (VMPX)
Jack Levin, the founder of XEN crypto, created a VMPX coin on the Bitcoin blockchain. He launched VMPX on May 7th, 2023, based on the “First principles”. Under these principles, the token has no special allocation for its founder and has no predetermined token supply. According to Jack, VMPX follows these rules to keep a fair and equal distribution.
Apart from these tokens, many other popular BRC-20 tokens exist, like NALS, ALEX Labs, WHEE, ZBit, Bank Ordinals, Piza, etc.
What is the Difference Between BRC-20 Tokens & ERC-20 Tokens?
Since both ERC-20 and BRC-20 tokens sound very similar, people often confuse one with the other. To avoid that confusion, let's discuss their points of distinction briefly.
- The biggest difference between BRC-20 and ERC-20 tokens is their blockchain. While ERC-20 tokens are based on the Ethereum blockchain, BRC-20 tokens use the Bitcoin blockchain.
- If we talk about the speciality of both kinds of tokens, ERC-20 tokens are very versatile due to the highly programmable nature of their underlying Ethereum blockchain. ERC-20 tokens allow the incorporation of complex Smart contracts into them. On the other hand, BRC-20 tokens do not offer much versatility and programmability. Since they use a very secure Bitcoin blockchain, they have a security layer against cyber threats.
- Since Ethereum works on a scalable PoS consensus, it can process transactions faster than the Bitcoin blockchain, which works on a slower PoW consensus. As a result, BRC-20 token transactions take more time than ERC-20 tokens.
- ERC-20 token standards are reliable and well-established in the Crypto space. Hundreds of dApp projects, cryptocurrencies, and even NFTs use the ERC-20 standard. However, BRC-20 has come into existence very recently. They are still experimental and surrounded by multiple debates that we will discuss in the below sections.
How to Buy BRC-20 Tokens?
You can buy a BRC-20 token through any Ordinal supported Crypto wallet. Many BR-20 token wallets in the market allow you to deposit Bitcoin and purchase different BRC-20 tokens. These wallets also let you send, receive or manage your BRC-20 tokens.
You can also buy some BRC-20 wallets from centralized or decentralized exchanges if they have listed these tokens.
Why are BRC-20 Tokens a Topic of Debate?
Along with experiencing a rising popularity, BRC-20 tokens are also causing debates and discussions everywhere. It's because of the following reasons:
- The first and foremost reason for BRC-20 tokens to get negative feedback is their effect on the Bitcoin blockchain. BRC-20 tokens bring heavy traffic to the Bitcoin blockchain with their transactions. Not only do they clog the Bitcoin network with pending transactions, but they also surge the transaction fee. Recently, many crypto trading platforms had to temporarily halt their Bitcoin transactions due to this situation. With the scalability challenges associated with the Bitcoin blockchain, it is facing a high load, with more and more people coming up for BRC-20 tokens. Some platforms have even considered alternative Bitcoin layer solutions like the Lightning network to process their transactions in the Bitcoin blockchains without delay.
- Many Bitcoin maximalists think that BRC-20 tokens are unethically using the popularity and reputation of the blockchain by associating themselves with it. By doing so, these tokens attract less experienced crypto investors into risky investments.
- Satoshi created Bitcoin as a peer-to-peer transaction system. Thus, the creation of BRC-20 does not align with the vision of Satoshi for Bitcoin. It is also a big reason BRC-20 receives huge heat from the Bitcoin community. As per Bitcoin Maximalists, BRC-20 tokens and Bitcoin ordinals are polluting the blockchain with irrelevant data.
- Some BRC-20 tokens, like PEPE Ordinals, confuse newcomers in the crypto space by overwhelming them with similar-looking cryptocurrencies with entirely different fundamentals.
Conclusion
BRC-20 tokens are the latest hot topic in the crypto space. While some are welcoming them with open arms, others are raising eyebrows over them. Despite being very new, BRC-20 tokens managed to make a market of millions of dollars. With more and more people associating with them, the saga of BRC-20 tokens is getting wilder every day. However, no one should forget that these tokens are still at their initial stage and hence risky. As a smart crypto investor, one must take all the precautions before investing money in an experimental innovation.
