In the fast-paced world of cryptocurrency, technological advancements and upgrades are happening at an astonishing pace. Staying informed of these developments can be both daunting and imperative, as you wouldn’t want to overlook the next big thing in crypto. The blockchain industry has grown significantly from relying solely on the Bitcoin blockchain to many blockchains such as Ethereum, Binance Smart Chain, Solana, and many others.
These networks have spawned many protocols and token standards, each offering unique features. BRC-20 tokens are the latest tokens and token standards to make headway in the crypto world. So, as an investor looking for the next big opportunity, understanding BRC-20 tokens is of great importance.
This article covers everything you need to know about the BRC-20 token standard and provides a quick buying guide to get you started.
What is the BRC-20 token standard?
The BRC-20 token standard was developed as an experimental fungible token standard by crypto enthusiast Domo in March 2023. It aims to facilitate the creation and transfer of tokens using the ordinal protocol on the Bitcoin blockchain.
Unlike tokens built on the ERC-20 standard on the Ethereum network, BRC-20 tokens do not rely on smart contracts. Instead, BRC 20 tokens rely on Bitcoin ordinal enrollments originally implemented on the Bitcoin blockchain in January 2023 by software engineer Casey Rodarmor.
JSON data written on Satoshis is used to program them, giving them non-fungible qualities similar to NFTs (Non-Fungible Tokens). However, despite possessing NFT-like characteristics, Satoshis remain fungible, meaning they are interchangeable and have equivalent value. Some popular BRC-20 tokens include PEPE, ORDI, WOJAK, etc.
BRC-20 (Bitcoin Ordinals) vs. Other Token Standards
The BRC-20 token standard derives its name primarily from the ERC-20 token standard on the Ethereum network. However, BRC-20 tokens differ significantly from other token standards, with the ERC-20 token standard being the most popular among them.
To create tokens on the Ethereum network, smart contracts must be written and deployed on the network. In contrast, to create BRC-20 tokens on the Bitcoin network, the ordinal protocol is used to register Satoshis using JSON. BRC-20 tokens run alongside BTC on the Bitcoin base chain, meaning any activity on BRC-20 tokens will not affect Bitcoin. On the other hand, ERC-20 tokens and other token standards work in conjunction with their parent networks, and any activity on them reflects directly back to their parent network.
Another major factor that distinguishes BRC-20 tokens from tokens issued by other standards, such as ERC-20, BEP-20, etc., is their community-driven distribution. The Bitcoin community and anyone else can mint BRC-20 tokens, although there are restrictions on how many tokens a wallet can mint. This decentralized approach to token distribution and minting sets BRC-20 tokens apart. In contrast, with other token standards, sourcing, minting, distribution, etc. tokens can be controlled by a single entity, which undermines the decentralized nature of tokens.
What are BRC-20 tokens?
The smallest unit of Bitcoin is Satoshi, and as mentioned before, 100 million Satoshis make one BTC. On the Bitcoin blockchain, each Satoshi is assigned a unique ordinal number in the order in which it is issued. This Satoshi numbering system is known as ordinals. Initially, these ordinals only served as digital identifiers, but after the Bitcoin Taproot upgrade in 2021, the ordinals protocol could be used to tie up more data with Satoshis. This gave rise to Bitcoin ordinal NFTs and BRC-20 tokens, ORDI being the first BRC-20 token created.
How are BRC-20 tokens created?
Use cases for BRC-20 tokens
Although the BRC-20 token standard is still in its infancy, it has several important use cases. Here are some of its use cases:
The price of Bitcoin has already reached unprecedented levels, and there is little to no room for degen games. Several BRC-20 tokens, such as PEPE and WOJAK, are listed on major cryptocurrency exchanges, allowing people to trade them.
Similar to other crypto assets, BRC-20 tokens can be used to conduct peer-to-peer (P2P) transactions. They are also a form of digital assets that can be spent between peers and community members. Since BRC-20 tokens operate on the Bitcoin network, they benefit from the efficiency and security features associated with the network. It should be noted that transaction fees must be paid in BTC when transferring tokens.
Decentralized finance and other financial products
DeFi protocols have grown by leaps and bounds since the DeFi summer of 2019. This has been driven primarily by the expansion of the Ethereum network and other Ethereum Virtual Machine (EVM)-enabled chains. Until recently, the Bitcoin network was not prominently involved in the DeFi ecosystem or other financial products such as yield farming and liquidity pools. With the introduction of the BRC-20 token standard, which allows the creation and integration of tokens on the Bitcoin network, there has been a change. Unlike Bitcoin, BRC-20 tokens can now be integrated into decentralized exchanges, lending protocols, yield farming platforms, and other DeFi applications.
How to buy BRC-20 tokens?
Some popular BRC-20 tokens and even their derivative contracts can be purchased easily through centralized exchanges. To purchase or create a new BRC-20 token, follow the steps below.
- Visit www.ordinalswallet.com to create an ordinal wallet. Be sure to save the seed phrase safely.
- Send BTC from a centralized exchange to your wallet to pay transaction fees.
- Click on BRC-20 to see the list of BRC-20 tokens.
- Select the token you want to buy and choose the best selling price available. Click “Buy Now” and the token should appear in your wallet.
BRC-20 tokens hold significant potential for the Bitcoin protocol, representing a notable technological advancement within the ecosystem. By addressing previous limitations of the Bitcoin protocol, BRC-20 tokens open up possibilities for various use cases and have the potential to drive new developments in decentralized finance (DeFi) and blockchain interoperability.
However, it is essential that users approach investments in BRC-20 tokens with caution, as with any investment in the cryptocurrency space. Given the nascent stage of development and evolving nature of BRC-20 tokens, it is essential to conduct thorough research, assess the associated risks and exercise caution when engaging in BRC token-related activities. -20.
1. What are BRC-20 tokens? BRC-20 tokens are built on the Bitcoin network using the ordinal protocol.
2. How do you buy BRC-20 tokens? Some popular BRC-20 tokens, such as PEPE, can be purchased on centralized exchanges, while others – through www.ordinalswallet.com.
4. What is the difference between BRC-20 and ERC-20 tokens? ERC-20 tokens are built on the Ethereum network and follow the ERC-20 token standard deployed using smart contracts. On the other hand, BRC-20 tokens are built on the Bitcoin blockchain and follow the BRC-20 token standard without the need for smart contracts.