BRC-20 standard. | Credit: Shutterstock
Key Takeaways
- BRC-20 tokens enable the creation and management of fungible tokens on the Bitcoin blockchain, expanding options for consumers and businesses.
- The Taproot upgrade allows users to inscribe any data onto satoshis, the smallest denomination of Bitcoin.
- BRC-20 tokens on the Bitcoin blockchain have seen significant growth, with thousands of tokens issued and a cumulative market capitalization exceeding $1 billion.
- While similar to ERC-20 tokens on Ethereum, BRC-20 tokens have distinct technical specifications and programming languages.
The Ordinals protocol and the BRC-20 standard
The BRC-20 token standard, which was created expressly for the Bitcoin network, has been the subject of intense discussion in the cryptocurrency industry. As it offers a foundation for producing fungible tokens within the Bitcoin ecosystem, this standard is gaining popularity.
Unlike non-fungible tokens (NFTs), which are unique and often used to represent digital art or collectibles, fungible tokens are interchangeable and can be used for transactions, just like physical currency.
The Bitcoin Request for Comment or BRC-20 token standard is unique because it was created using Ordinals and Inscriptions, which are saved on the Bitcoin base chain. Essentially, the token standard originated with the development of the Ordinals protocol , which allows users to inscribe any file on the Bitcoin blockchain. This protocol served as the foundation for the creation of the BRC-20 standard, which enables the creation and management of fungible tokens on the Bitcoin blockchain.
Ordinal inscriptions are digital assets that are inscribed on satoshis, the smallest denomination of Bitcoin (BTC). This unique type of digital asset, similar to non-fungible tokens, was made possible by the recent Taproot upgrade launched on the Bitcoin network on November 14, 2021. These small BTC denominations are aptly named after the pseudonymous creator of Bitcoin, Satoshi Nakamoto.
With the Taproot upgrade , users can inscribe any type of data onto a satoshi and store it on the Bitcoin blockchain, making it an immutable and transparent record of the information. With the help of this innovation, digital asset ownership and transfers may now take place with a higher level of security and anonymity, enabling decentralized and peer-to-peer transactions. As consumers and developers find new uses for this technology across a range of sectors and applications, it is anticipated that the use of ordinal inscriptions will develop and grow.
Users can create and manage their own fungible tokens on the Bitcoin blockchain using the BRC-20 token standard. These tokens can be used for a variety of functions, including rewards, payments, or other kinds of transactions. This expands options for consumers while also giving businesses and organizations additional opportunities to benefit from blockchain technology.
BRC-20 standard: Fueling the resurgence of memecoins
According to data from Ordspace, which tracks BRC-20 data, there are around 11,000 tokens issued (as of May 8, 2023) on the Bitcoin blockchain available on the open market, with a cumulative market capitalization of $1.6 billion . Conversely, the market capitalization of ERC-20 tokens is $18.79 million.
Among these, the tokens of Ordinals Marketplace Ordi (ORDI) have emerged as the most valuable BRC-20 token, with a market capitalization of $220 million and 7,300 unique ORDI token holders. Notably, ORDI is the first BRC-20 token deployed on Bitcoin, adding to its value proposition among holders.
Pepe tokens, which are different from the ones issued on Ethereum, rank second among BRC-20 issuances on Bitcoin with a market capitalization of $17 million.
BRC-20 tokens vs. ERC-20 tokens
The BRC-20 and ERC-20 are both token standards used for creating and managing fungible tokens on their respective blockchains. While the BRC-20 is designed specifically for the Bitcoin blockchain, the ERC-20 is used on the Ethereum blockchain. Both standards have similar functionalities and allow for the deployment, minting, and transfer of tokens, but they differ in their technical specifications and programming languages used.
The road ahead
Bitcoin is continuing to innovate and evolve beyond its original purpose as a store of value and medium of exchange, and the BRC-20 tokens are a prime example of this growth. Despite being in the early stages of development, these tokens have already shown rapid growth and have the potential to play a significant role in the future of the Bitcoin blockchain.
As BRC-20 tokens are still experimental, there is room for further design choices and optimization improvements in the future. It will take some time to determine the full impact of BRC-20 tokens on the Bitcoin blockchain, but their introduction highlights the ongoing evolution of Bitcoin and its potential for further advancements.
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