What is the BRC 20 token standard for Bitcoin?
Learn about the BRC-20 token standard for the Bitcoin blockchain and the tokens that have been minted with it to date.
Main Content:
- BRC-20 tokens are an experimental standard for the Bitcoin blockchain. Inspired by Ethereum’s ERC-20, BRC-20 allows developers to create and transfer fungible tokens using the Ordinals protocol.
- Unlike the ERC-20 token standard, BRC-20 does not make use of smart contracts. It uses ordinal inscriptions of JSON data to display, mint, and transfer tokens.
- With the recent push, a total of 14,200 different tokens have been minted (and counting) using the BRC-20 standard (at the time of writing) — such as the ORDI, the first BRC-20 token.
Brief introduction to the BRC-20
For the Bitcoin blockchain, the BRC 20 token development standard is an experimental fungible token standard. In March 2023, Domo, an anonymous on-chain analyst, created it. BRC 20 tokens, which are modeled after Ethereum’s ERC-20, let programmers create and send fungible tokens via the Ordinals protocol. But BRC-20 tokens don’t use smart contracts like ERC-20 does.
The BRC-20 token standard uses ordinal inscriptions of JSON data to display, mint, and transfer tokens. As of May 8, 2023, 14,200 different tokens have been minted using the BRC-20 standard, such as ORDI, the first BRC-20 token.
Introduction to the Bitcoin Ordinals Protocol
Developed by Casey Rodarmor , the Ordinals protocol allows for the creation of Bitcoin Ordinals NFTs. The goal of ordinal theory is to provide each satoshi with a unique identity, allowing them to be traced, transferred, and imbued with individual meanings through inscriptions. This allows one satoshi to be different from another, thus becoming non-fungible.
A sequential number is assigned to every Satoshi by the Ordinals protocol. To be precise, each satoshi is numbered in the order in which it is mined and can be registered with data — such as images, text or videos — through a Bitcoin transaction. Entries can have a maximum size of 4 MB .
The main advantage of inscriptions recorded using the Ordinals protocol is that essential data (such as text and images) are contained in the Bitcoin blockchain development service. For many, this means a higher level of immutability .
What is the functionality of BRC-20 tokens?
To generate BRC-20 tokens, you start by creating a script file that contains vital information about the token. This information includes details such as the token name, symbol, and total supply. Then, they have to deposit the required amount of Bitcoin into a special address on the bitcoin blockchain, which is called the “ordinal ledger.”
Once this bitcoin deposit is made, they can create BRC-20 tokens by initiating a transaction in the ordinal ledger. This transaction must carry the script file that contains all the essential information of the token.
As soon as the transaction is confirmed, BRC-20 tokens are created. The person can then send these tokens to others or use them in various applications.
Advantages and disadvantages of BRC-20
Pros:
BRC-20 tokens represent an emerging token standard that effectively harmonizes with the bitcoin blockchain. They provide a series of promising advantages.
Built on the basis of the Bitcoin blockchain, renowned for its unparalleled security and decentralized structure, BRC-20 tokens establish a high level of security and protection against fraudulent activities.
In particular, these tokens adhere to the principle of fungibility, which means their ability to be exchanged and represent various values indifferently.
This inherent adaptability makes them an ideal candidate for various applications, such as loyalty programs and crowdfunding platforms.
Additionally, BRC-20 tokens are transferable, meaning they can be seamlessly transmitted and received between different wallets connected to the bitcoin network. This inherent feature ensures ease of use and broad accessibility across a diverse user base.
It is worth noting that transaction fees associated with BRC-20 tokens are settled in bitcoin , which is one of the most affordable cryptocurrencies. This profitability characteristic makes them an economical option for both companies and individuals looking for agile transactions.
With its versatility extending to applications spanning loyalty programs, crowdfunding platforms, and decentralized exchanges , BRC-20 tokens emerge as an adaptable solution that addresses a spectrum of challenges. This breadth of usefulness underscores its potential to serve as a multifunctional instrument in various settings.
Cons:
However, it is important to recognize that BRC-20 tokens carry certain potential risks. These tokens operate on the basis of the ordinals protocol , a technology that is still in its early stages of development. This means that there is a chance of finding bugs or vulnerabilities as the technology evolves.
Another aspect to take into account is scalability. The bitcoin network, although robust, does not offer the same scalability as other prominent blockchains such as ethereum. This could translate into congestion issues should BRC-20 tokens gain popularity.
Additionally, it is worth noting that BRC-20 tokens have not garnered the same level of widespread support as other established token standards, such as ERC-20. This swing in support could lead to an increase in demand for the tokens. This variation in support could result in a limited number of wallets and exchanges accommodating these tokens compared to their more widely accepted counterparts.
Key differences between BRC-20 and ERC-20 tokens
There are significant differences between BRC-20 and ERC-20 tokens that deserve attention.
For starters, ERC-20 tokens operate on the Ethereum blockchain, while BRC-20 tokens find their home on the Bitcoin blockchain.
The Ethereum blockchain takes the lead in terms of scalability compared to the Bitcoin blockchain. On the other hand, the decentralized architecture and security of the bitcoin blockchain design.
Another divergence lies in the application of smart contracts. BRC-20 tokens do not employ smart contracts , while ERC-20 tokens actively use them. Smart contracts are like little digital assistants that run on the blockchain; They are experts at automating transactions and other various tasks, adding a layer of efficiency to the process.
Furthermore, the BRC-20 token generation process involves the use of the ordinals protocol, unlike ERC 20 token development, which are based on the ERC-20 standard. The ordinals protocol stands out as a newer and more fortified method of token creation.
Conclusion
One consideration to take into account is the extent of scalability. Although the bitcoin blockchain has impressive security features, it is important to recognize that it is not as adaptable as the ethereum blockchain.
