Introduction To BRC-20 Token Standard 

Decentradecoded has written this article to give our readers a comprehensive introduction to BRC-20 tokens. BRC-20 tokens have gained much popularity recently because of the increase in the speculations of meme coins on the Bitcoin Blockchain. In this article, we will explore what BRC-20 tokens are, how they function, and whether investing in them as a crypto investor will be in your best interest. 

BRC-20 Tokens – What They Are!

BRC-20 tokens are fungible crypto assets using a dubbed experimental Bitcoin Token Standard (BRC-20). The standard was created by a pseudonymous developer called “Domo” as an experiment. After the experiment, Domo announced the standard would be implemented on the 9th of March 2023. 

History of BRC-20 Token Standard (When Were BRC-20 Tokens Created?)

What are BRC-20 Tokens? A Complete Beginners' Guide

Domo got inspired to build the BRC-20 standard by looking at the Sats Names standard. It involved developing Web 3.0 identities on the Bitcoin Blockchain using Ordinals.

The BRC-20 standard stands for Bitcoin Request for Comments, and the Ordinals protocol launched in January 2023 made it possible.

BRC-20, which began as an experiment, is no longer what you can refer to as the fun and simple standards. The ecosystem is now riding the waves of highs in the crypto world.

In case you are wondering what FUNGIBILITY means, it is a term that describes tokens that are equal in value to and indistinguishable from one another. For instance, John has $10, and Mary has $10. The $10 belonging to both John and Mary is equivalent. Hence, they can trade the money with each other. In the same vein, 1BTC equals another 1BTC.

Non-Fungible is the opposite of Fungible. These Non-Fungible Tokens (NFTs) are distinguishable and unique. No two NFT tokens are the same. For instance, one Bored Ape Yacht Club (BAYC) differs from another BAYC. Hence, you cannot trade one with another. Each BAYC has its unique characteristics, attributes, and price.

The Bitcoin Ordinal Inscription Theory – How The BRC-20 Tokens Work

What are BRC-20 Tokens? A Complete Beginners' Guide

The Theory refers to a method of identifying and tracking individual Satoshis (SATS) within the Bitcoin Supply currently in circulation. The methodology also associates these individual Satoshis with unique data.

The Ordinal software allows people to attach texts, videos, or images to satoshis. This attachment process is called “inscribing.” Ultimately, the technique creates “inscriptions,” known as Bitcoin-Native NFTs. In the Ordinal Theory, every Satoshi gets an ordinal number starting from 0.

Aside from allowing NFT creation on the Bitcoin Blockchain, you can also use the ordinal theory to facilitate the development of fungible tokens via the BRC-20 Token Standard. 

You can create and transfer BRC-20 tokens using JSON data inscription in a Sat. It means that programmers can keep the script file in a Sat, allowing them to mint and transfer the fungible tokens on the base layer of the Bitcoin blockchain.

When you deploy a BRC-20 token, the only function that will exist is the ‘deploy.’ This function sets a unique parameter for that token. For example, it can be the total supply of the token. However, going live does not mean the token exists yet. 

Any buyer interested in them must mint them by creating the real tokens by inscribing the Mint function into an ordinal. Immediately, the specific BRC-20 hits its supply limit; it will index all the ordinals. Hence, the valid tokens for the token will be the only ones that fall into a specific inscription category. 

Bitcoin Tokens (Meme Coins on The Bitcoin Blockchain)

What are BRC-20 Tokens? A Complete Beginners' Guide

So far, meme coins are the principal use case of the BRC-20 token standard on the Bitcoin Blockchain. These are cryptocurrencies developed using inspiration from memes that are famous on the internet. 

For instance, the inspiration behind the Pepe BRC-20 token came from the meme frog Pepe. People have used this meme in 2008 on platforms like MySpace.

In addition, other famous meme coins like Shiba Inu and Dogecoin now have versions of the BRC-20 standard. 

Top BRC-20 Tokens on Bitcoin Blockchain

Ordi was the first BRC-20 token standard. Domo minted the token on March 8th, 2023. The token is one of the BRC-20 tokens with the most oversized market caps. There are over 14,000 BRC-20 tokens in the ecosystem, according to brc-20.io. However, aside from Ordi, the other BRC-20 tokens with significant market caps are:

  • Pepe
  • Meme
  • Nals
  • Piza

What are The Effects of BRC-20 Tokens on Bitcoin?

In the last few weeks, BRC-20 tokens have gained much traction in the crypto ecosystem, leading to increased BRC-20 transactions. Amazingly, according to Dune Analytics, the number of BRC-20 transactions has surpassed that of non-BRC-20 token inscriptions and Bitcoin transactions.

BRC-20 tokens bring many benefits to Bitcoin miners because the tokens increase transaction volumes, which means more transaction fees are paid to the miners. Aside from that, BRC-20 tokens have aided in bringing more new and existing investors to invest in the Bitcoin Blockchain. This factor has also led to an increased rate of adoption for bitcoin.

Furthermore, the BRC-20 token standard has encouraged more crypto ecosystem developers to build and optimize existing token standard designs for fungible tokens on the Bitcoin Blockchain. According to Domo, the innovation will help the Bitcoin community agree on the best practices for the Bitcoin token standards.

The truth is that although the BRC-20 token standard presents the Bitcoin community and miners with these lovely advantages, it has its downsides, too. For instance, the Bitcoin maximalists are concerned about the increasing demand for more Bitcoin block space. There are speculations the BRC-20 tokens will clog the Bitcoin network and create a long line of unconfirmed transactions.

Notably, the transactions of BRC-20 tokens on the Bitcoin network shot up transaction fees to as high as $30 for one transaction. According to some Bitcoin maximalists, this increased transaction fee and the long queue of unconfirmed transactions on the network defeats Bitcoin’s goal of becoming a global open monetary network.

BRC-20 and ERC-20 Token Standards – What is the Difference?

ERC-20 is a token standard that allows you to create tokens on the Ethereum network using smart contracts. On the other hand, BRC-20 is a method that will enable you to use ordinal inscriptions to create fungible tokens on the Bitcoin network. The major difference between the two token standards is that the BRC-20 token standard has more constraints and is more straightforward than the ERC-20 token standard. The reason for this simplicity is the programmability limitation of the blockchain network.

Is BRC-20 Tokens Worth Investing In?

BRC-20 token standard tokens may have started as a fun experiment with no monetary value. However, it is one of the hottest and surging ecosystems in the crypto world. The total market cap of BRC-20 tokens is over $1B.

What are BRC-20 Tokens? A Complete Beginners' Guide

In less than a year, the ecosystem has seen tremendous growth. It shows that the ecosystem is thriving, and it is probably one of the niches that will produce the next set of crypto billionaires. Remember, the ecosystem is just taking off. Hence, investing rightly now could bring massive profits.

However, this post is not financial advice. Ensure you do your due diligence, invest in only sold projects in the BRC-20 token standard ecosystem, and invest only what you can afford to lose.

How and Where Can You Buy BRC-20 Tokens?

BRC-20 tokens are now listed on prominent CEX (Centralized Exchanges) like Gate.io and Binance. Hence, you can easily buy them using fiat deposits or exchanging them with tradable pairs.

In addition, you can sell and buy BRC-20 tokens through a completely permissionless method on ALEX Protocol Decentralized Exchange (DEX). All you need to do is connect your decentralized wallet (Trust Wallet, MetaMask, etc.) to the ALEX decentralized protocol, buy the token from the DEX, and transfer it to your decentralized wallet. 

Final Thoughts

The BRC-20 token standard is a perfect example of the innovative and dynamic nature of the crypto ecosystem. What started as a fun experiment is gradually becoming one of the biggest things rocking the ecosystem.

In addition, the advent of BRC-20 shows many untapped opportunities in the crypto world, and getting into this space now is not too late. It brings to light the possibilities in the Bitcoin network and the deep innovation levels within blockchain technology. 

However, although the technology and its assets are soaring to the moon, do your due diligence to invest wisely and invest what you can afford to lose. May the bulls be upon us.