Innovation happening across the Bitcoin ecosystem? We’re here for it. Join us as we research the new frontier of blockchain technology – the BRC-20 token standard. Let’s unravel what it’s all about and how to get involved. We aim to answer some of the burning questions and break down the complexities for our readers.
Introduction to the BRC-20 tokens: Highlights
Despite the absence of smart contract support in Bitcoin's base layer, the Taproot upgrade empowered developers to embed text and images within designated BTC transactions.
Following the innovation, the Ordinals pioneered a method to directly embed content into the tiniest units of BTC termed satoshis;
With satoshis capable of fitting text, visuals, music, and even complete games, the creation of NFTs within the Bitcoin ecosystem became more tangible than ever;
The BRC-20 represents a novel token standard utilizing Ordinals inscriptions for the minting and transfer of fungible tokens on the Bitcoin blockchain;
Bitcoin’s novel token standard differs from Ethereum ERC-20, where it’s not a smart-contract governed token but an inscription on the blockchain itself;
Whereas the new installment of tokens is limited in functionality at the current stage of development, the crypto community remains optimistic about discovering new applications for this emerging technology.
Let’s decode Ordinals, review inscriptions as the process of storing information and files within the Bitcoin blockchain, and learn how to actively engage and participate in this new narrative
From Ordinals to BRC-20
The history of BRC-20 tokens is tied to the inception of Ordinals, hence let’s uncover how the two concepts are connected.
Created by the innovative mind of Casey Rodarmor, Ordinals is a protocol that embeds notes known as 'inscriptions' in a single satoshi, the smallest fraction of a Bitcoin. Picture it as adding a personalized touch to a dollar bill.
The term 'Ordinals' embodies its purpose—a method of numbering sats. Consequently, each sat gains a distinctive identifier, allowing for a diverse range of data to be associated with different satoshis.
The versatility of Ordinals is not limited to text notes alone. The protocol accommodates a spectrum of inscriptions, ranging from images to interactive games. To illustrate, here’s a fun shooting game recreated on the blockchain using the Ordinals theory:
Image from Ordinals
This flexibility opens the door to manifold creative possibilities, pushing the boundaries of what can be achieved within the BTC blockchain. One notable use case is unlocking the potential to create Bitcoin NFT.
More to that, the evolution of Ordinals has naturally given rise to the new token standard, marking the next phase in Bitcoin's technological journey.
Understanding BRC-20 token standard
The Bitcoin token following the ‘-20’ standard emerged as an equivalent to ERC-20 assets on the Ethereum network, facilitated by the innovative Ordinals technology.
Definition and characteristics
Similar to ERC-20, an advanced Bitcoin tokenization standard extends its capabilities to the creation of various fungible tokens, with a notable spotlight on the popular category of meme coins.
However, what sets BRC-20 tokens apart is their nuanced semi-fungible nature somehow comparable to Ethereum’s ERC-1155 standard. This uniqueness is attributed to the inherent finiteness of Bitcoins and satoshis which translates into a finite number of Ordinals.
It's also crucial to note that the new token norm is a separate use case derived from the Ordinals technology. It serves as an alternative method for tokenization within the Bitcoin ecosystem. Thus, it's crucial not to misinterpret BRC-20 assets as synonymous with Bitcoin NFTs.
The process of creating BRC-20 tokens
Setting up a BRC-20 token involves linking JSON-formatted text to a satoshi which results in several inscription steps.
Step 1: The ‘deploy’ inscription
After deciding on the name of the token and its overall supply, the first step is to inscribe a 'deploy' function. Here's an example of what this inscription might look like if we created a GetBlock (GETB) token on Bitcoin:
{
"p": "brc-20",
"op": "deploy",
"tick": "getb",
"max": "200200",
"lim": "200",
}
Let's break down the parts for clarity:
- "p": denoted the protocol type;
- “op”: specifies the functions to execute;
- “tick”: a four-character symbol of the asset;
- “max”: signifies the maximum token supply;
- “lim”: indicated the maximum quantity available per mint.
The ‘deploy’ method initiates the token registration within the system. ‘Mint’ and ‘transfer’ functions are also enabled by the new standard.
Step 2: Acquiring new tokens
Creating a ‘mint’ inscription allows acquiring new tokens to your wallet by passing the amount key as ‘amt’:
{
"p": "brc-20",
"op": "mint",
"tick": "getb",
"amt": "2000"
}
Once minted, tokens can be submitted to exchanges for sale at a desired price, traded through dedicated marketplaces, or sent to another wallet.
Step 3: Sending tokens
For moving tokens between wallets, it’s required to craft another inscription by adjusting the ‘mint’ function given above to 'transfer'.
These three key options would be enough to create and move BRC-20 tokens around. It's worth noting that each of these steps involves a small network charge, and the exact amount can vary significantly depending on the up-to-minute Bitcoin fee rate.
To give you an estimate, here's the expected cost to process the transaction containing the actual script from 'Step 1' as of November 22, 2023:
Image from UniSat
BRC-20 token applications
As a new concept in the blockchain space, BRCs are making their initial strides in the market. While meme token projects currently dominate the scene, testing the capabilities of the Ordinals protocol.
ORDI and MEME, breaking ground as the inaugural meme coins with inscriptions, set the stage for the Bitcoin debuts of NALS, PIZA, and PEPE. Presently, this dynamic quintet commands an impressive 72% of the total BRC-20 market, as reported by CoinGecko.
Image from CoinGecko
While there’s not much application to these tokens other than trading for now, developers are rigorously exploring ways to add fundamental value to this emerging asset class.
Let’s review some potential utility they may bring to the world of BitFi, decentralized finance on Bitcoin.
Tokenization
The creation of Ordinals has made launching digital assets more accessible and intuitive for people without the complexities of deploying Solidity codes. This approach also provides an added layer of security, by leveraging the robustness of the Bitcoin network.
P2P transfers
Newly deployed fungible tokens on Bitcoin offer a seamless experience for users. These tokens can be directly transferred from one user to another in routine Bitcoin transactions, eliminating the need for smart contract interactions.
Fueling decentralized applications
BRC-20 tokens are expected to step into the decentralized finance arena, enabling users to stake, lend, and borrow within various applications.
Stablecoins
In May this year, Stable, a fiat on and off-ramp provider launched a #USD stablecoin based on the new Bitcoin standard. This move allowed BTC holders to store a fair equivalent of USD on Bitcoin, use it for payments, and get easier access to newly minted BRC tokens.
The current temporary suspension of #USD minting, resulting from Stably's former custodian's bankruptcy, doesn't overshadow the initiative's key takeaway: highlighting the potential for BTC stablecoins built on the new standard.
Overall, the introduction of a new type of tokens has not only broadened the functionalities of the world's first cryptocurrency but also made Bitcoin a dynamic platform for development.
BRC-20 Tokens vs. ERC-20 Tokens
Though both fall within the same asset class, the distinction between the two types of tokens becomes clearer upon closer examination.
ERC-20 tokens on Ethereum have necessitated the mastery of Solidity coding, a well-established routine in the crypto community. On the flip side, the BRC-20 creators defied convention, taking a unique route by inscribing data directly onto the satoshis of Bitcoin fully residing on-chain.
N.B. Explore our tutorial guiding you through the steps of creating an ERC-20 Solidity contracts.
Ethereum's ERC-20 tokens thrive in an established environment of tools and frameworks available to developers to seamlessly integrate their tokens into the ecosystem. In contrast, Bitcoin tokens are venturing into uncharted territory and haven’t yet garnered the support of the wider developer community.
H3: A comparative analysis
Let’s explore the clash of crypto standards further and compare distinct characteristics as well as important metrics of BRC and ERC-20 assets in their current state, as of Q4 2023:
| # | Features | ERC-20 | BRC-20 |
|---|---|---|---|
| 1 | Settlement Protocol | Ethereum | Bitcoin |
| 2 | Type | Fungible | Fungible, with a touch of uniqueness |
| 3 | Core Technology | Smart Contracts | Ordinals Inscriptions |
| 4 | Implementation Date | 2017 | 2023 |
| 5 | Market Capitalization | $9.4T | $680M |
| 6 | Upgradeability | Modifiable, providing flexibility in code evolution | Immutable, ensuring robust security |
| 7 | Token Interactions | Facilitated via smart contracts | Direct transfers between wallets |
| 8 | Interoperability | Versatile compatibility, including EVM chains and beyond | Exclusive to Bitcoin's network |
| 9 | Storage Solutions | MetaMask and many other ETH-compatible wallets | Taproot Wallets supporting Ordinals |
| 10 | Top Tokens by Market Cap | USDT, BNB, USDC, TRON, LINK, WBTC | ORDI, TRAC, MOON, PEPE, MEME, PIZA |
Amidst Ethereum's dynamic competition, Bitcoin Ordinals is gaining attention and captivating new audiences attracted to the unique technology so the observed landscape may swiftly transform.
Storing BRC-20 Tokens
Seeing to the unique nature of ‘inscribed’ tokens, it's essential to select Bitcoin wallets specifically modified to accommodate Ordinals. Notably, this token standard is incompatible with popular wallets like Metamask or TrustWallet, so it's crucial to explore alternatives.
Now, onto options:
UniSat
The platform that facilitates BRC-20 token storage and also provides a user-friendly interface for deploying tokens – no coding required. Additionally, UniSat doubles as a marketplace, offering a comprehensive solution for Ordinals enthusiasts.
Sparrow
Crafted for power users, Sparrow is an open-source desktop wallet that gives users a high degree of customization to specify how transactions are structured and control the distribution of outputs.
Ord Wallet
Tech-savvy explorers might consider the Ord wallet by the Ordinals Protocol team. This CLI wallet based on Bitcoin Core offers a unique experience where users can directly inscribe content on the Bitcoin blockchain via their own node. While charming in its experimental nature, note that Ord operates in a trial phase without guaranteed support.
Whichever option you choose, ensure you use Taproot addresses, identifiable with the prefix 'bc1p' to receive Ordinals. This adds an extra layer of compatibility and security to your transactions.
Purchasing BRC-20 Tokens
Leading exchanges such as Binance, KuCoin, and Huobi have embraced the growing popularity of prominent BRC tokens, making them readily available for trading. Take the ORDI token, for instance, which can be traded against various assets like USDT and BTC across different markets:
Image from CoinMarketCap
In addition to established exchanges, a limited number of marketplaces are emerging as hubs for trading various Ordinals. The UniSat platform mentioned earlier also serves as a gateway to its marketplace, catering to diverse Ordinals holders and their trading needs. Simply replenish your wallet with some bitcoin, and you're ready to embark on your exploration.
Evaluating the BRC-20 Token Standard
As our exploration is coming to an end, let’s sum up where ordinals and its new token standard shine and dig into some areas that pose challenges for this token model.
BRC-20 Pros
Speaking generally, the new much-anticipated addition to Bitcoin encourages innovation on the network. If we’re being more specific:
- The rising popularity of Ordinals has created a novel use case for BTC generating a renewed demand for Bitcoin;
- By eliminating insecurities inherent in contracts, BRC-20 tokens gain the security of the Bitcoin network;
- The widespread adoption of an emerging asset class is a chance to stress-test the network’s resilience under varying transaction volumes and fuel its ongoing evolution;
- The ease of minting without relying on smart contracts.
The last point may be seen as both beneficial and concerning. While it fosters a free and open market, the influx of tokens could potentially lead to a devaluation of their worth over time.
Cons of BRC-20
As Bitcoin takes its first steps towards becoming a programmable blockchain, it encounters familiar complexities:
- The current ecosystem lacks decentralized applications (dApps) dedicated to curating BRCs, particularly in terms of available marketplaces;
- As the spotlight intensifies, the Ordinals space may witness an upswing in malicious activities;
- Escalating transaction volumes associated with inscriptions already results in unprecedented high fees and trading delays, significantly impacting network functionality. This is particularly evident in the Bitcoin mempool, which becomes overwhelmed, hindering seamless operations;
Image from Mempool.Space
On the bright side, while increasing fees pose a challenge to users, it also serves as an incentive for miners to continue securing the network. More to this, increasing demand for block space hints at an exciting future, pushing the boundaries of scaling solutions.
Summing up
The new Bitcoin token standard is making its presence felt loudly and clearly. After an impactful debut in 2023, BRC-20 tokens promise growth and make it a subject worth watching closely. Yet, amidst the excitement, understanding the inherent risks is imperative since the crypto community is stepping into uncharted territory which is yet to be proven true and tried.
To unleash its full potential, the ecosystem supporting BRC-20 tokens needs further development. Developers can take a significant stride in this direction by tapping into GetBlock's services with few-click access to Bitcoin nodes and 50 more blockchains. Join now, be part of the transformation.
