What’s all the fuzz about BRC-20?

BRC-20 tokens have been given this name to assimilate them to Ethereum’s ERC-20 tokens: the fungible, interoperable tokens that flow through DeFi. BRC-20 tokens are not exactly that*. They’re more like NFTs (based on the Ordinal theory) with huge supply, which makes them somehow fungible, and they’re not interoperable. They’re just a gimmick at the moment. A playful technical device. This makes them unfit to become the foundations of DeFi on Bitcoin, but a perfect solution for memecoin mania. BRC-20 tokens were born in early March and boomed recently, riding the wave of memecoins unleashed by the $PEPE tsunami.

*This hasn’t stopped some devs from deploying Uniswap V2 on Bitcoin, though, using BRC-20

BRC-20 tokens have attracted millions of dollars in degen spending and have slowed Bitcoin’s throughput in recent days. But they’ve also generated a new stream (a rapid, rather?) of revenue to miners. And that’s something to think about.

Bitcoin resists fraudulent activities and hacking attempts thanks to miners. Miners put their computing to work to validate transactions and, in return, for their efforts. They are rewarded with newly minted bitcoins. This is what’s generally referred to as the “security budget”: the BTC the network spends to keep miners happy at work.

But Bitcoin’s emission schedule is designed to reduce the number of new bitcoins generated over time through a process known as halving, which occurs approximately every four years. As the emission rate of new bitcoins reduces, the security budget becomes more uncertain, which could potentially lead to a reduction in the overall security of the network.

Bitcoin will do well to find new revenue streams for miners. BRC-20 will probably not be the solution, but they’re probably a step in the right direction.