The BRC-20 token standard is an experimental fungible token that was created by X user @domodata in March 2023.
Its name, BRC-20 is a play on Ethereum’s ERC-20 token standard; however it does not have the ability to interact with smart contracts like the EVM due to the limitations of the Bitcoin blockchain.
What is BRC-20?
BRC-20 is an experiment by domodata on the Bitcoin blockchain. It allows users to inscribe data such as code, images, video or text into Ordinals, not to be confused with Ordinals protocol.
The BRC-20 token standard for the Bitcoin blockchain helps play a vital role in the advancement of Bitcoin’s network, they are still limited and do not function like ERC-20 tokens. Smart contracts on ERC-20 are more versatile and have more use cases, whereas BRC-20 tokens are limited to token transfers and minting.
BRC-20 tokens are fungible, meaning they are interchangeable and have equal value, this has helped it to become a popular addition to the Bitcoin blockchain community.
A Bitcoin ordinal wallet is required to mint BRC-20 tokens, there can be a limit for each mint and you cannot store your BRC-20 tokens on a wallet like MetaMask, as this was developed for Ethereum ERC-20 standard tokens.
You can use a special BRC-20 website to inscribe your own BRC-20 token and create an NFT, this helps to unlock new use cases for the Bitcoin network, with potential uses within DeFi protocols and other blockchain applications.
Completing BRC-20 transactions does add more stress to the Bitcoin blockchain, the network can only process around 7 transactions per second (tps) and as a result, there have been reports of over 300,000 transactions in a queue waiting to be completed which also increased fees for transactions.
How can BRC-20 tokens be used?
A BRC-20 token is immutable, once it is created it cannot be modified by any counterparty. BRC-20 benefits from Bitcoin’s network popularity and prestige whilst also allowing users to send peer-to-peer, with transaction fees charged in Bitcoin.
A Satoshi is the smallest unit of Bitcoin you can own, a hundred million Satoshi’s make up one Bitcoin. BRC-20 tokens are stored on a Satoshi.
The Ordinals protocol writes information to each Satoshi, such as pictures, text, audio or video. Due to the limit of the Bitcoin network, this information is then stored in the form of an NFT or token.
The world of DeFi is still new on the Bitcoin blockchain, this doesn't stop BRC-20 tokens from being at the forefront of innovation, BRC-20 tokens are flexible and can be integrated into DeFi protocols on the Bitcoin network. More use cases for BRC-20 are still being explored as it is very new, so expect there to be a lot more innovation in the future.
The first BRC-20 tokens created contained JSON data defining the token name, a limit of 1,000 tokens per mint and a maximum number of 21 million tokens.
A list of current BRC-20 tokens can be found here.
There are a couple of ways to purchase BRC-20 tokens:
Via an exchange where they are listed, one example is Kucoin where the Ordinals (ORDI) token is listed.
You can also use Ordinals Wallet which is a non-custodial wallet and marketplace built for Bitcoiners, there are other hubs for BRC-20 tokens you can use like Unisat, both allowing you to create and sell your own tokens.
The Bitcoin blockchain is slowly becoming a more active network for developers and innovation. BRC-20 tokens are just the start of a potential boom in development on Bitcoins blockchain, alongside innovation, there will be changes to how they work and function over time.
Using BRC-20 tokens is a new fun way to use the Bitcoin network, whether they become the standard method on Bitcoin’s blockchain or another innovative method comes about and takes its place remains to be seen.
For now, BRC-20 is something everyone who uses the Bitcoin network should know about and look to experiment with.
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This article is intended for educational purposes and is not financial advice.