- BRC-20 tokens, inspired by Ethereum’s ERC-20 standard, enable the creation of fungible tokens on Bitcoin.
- They leverage Bitcoin’s robust security and decentralization, offering new applications like tokenized assets and decentralized exchanges but they also come with some challenges.
- Users can develop, store, and trade BRC-20 tokens using compatible tools and wallets like Bitcoin Core Wallet and emerging marketplaces like Ordinals Market.
- The BRC-20 token standard broadens the range of digital assets the Bitcoin blockchain can support, bringing new use cases to the network.
The cryptocurrency world continues to evolve with new standards and innovations reshaping the blockchain landscape. Among these advancements, we find BRC-20 tokens, a revolutionary token standard for the Bitcoin blockchain. By enabling the creation of fungible tokens on the Bitcoin network, BRC-20 expands Bitcoin’s capabilities far beyond its original purpose as a peer-to-peer payment system.
In this guide, we’ll explore what BRC-20 tokens are, their significance in the Bitcoin ecosystem, their advantages and challenges, and more.
What Is a BRC20 Token?
A BRC-20 token is a type of fungible token built on the Bitcoin blockchain, inspired by Ethereum’s ERC-20 token standard. While bitcoin (BTC) is primarily used as a digital currency, the BRC-20 standard brings new functionalities to the Bitcoin network such as the ability to create and transfer tokenized assets.
BRC-20 tokens are the creation of a pseudonymous developer named Domo, entering the crypto scene in March 2023. The goal was to experiment with Bitcoin’s potential beyond payments by leveraging Bitcoin’s Ordinals protocol (launched in January 2023) to facilitate token creation and transfer. The Ordinals protocol assigns unique identifiers to individual satoshis (the smallest unit of Bitcoin), allowing metadata to be attached directly to Bitcoin transactions.
What makes Satoshis particularly fascinating is their built-in rarity system. Each Satoshi has a unique “serial number” based on its sequence in the Bitcoin blockchain’s mining process. Consequently, this ordinal numbering allows users to trace the history of every individual Satoshi.
The introduction of the BRC-20 standard marked a turning point for Bitcoin, allowing developers to explore new applications.
BRC20 Tokens in the Bitcoin Ecosystem
Bitcoin has long been regarded as a store of value and a medium of exchange, but BRC-20 tokens significantly broadened its use cases. This new token standard enables the Bitcoin network to support applications traditionally associated with Ethereum and other smart contract platforms, including:
- Decentralized Finance (DeFi): Platforms can leverage BRC-20 tokens for lending, borrowing, and trading.
- Tokenized Assets: Physical assets like real estate and commodities can be represented as BRC-20 tokens on the Bitcoin blockchain.
- Gaming and NFTs: Developers can use BRC-20 tokens to power in-game currencies and NFT ecosystems.
Popular BRC-20 Tokens and Use Cases
Several BRC-20 tokens have emerged as notable examples of the token standard’s potential. Let’s explore a few of these tokens and their use cases.
ORDI
ORDI is the first-ever BRC-20 token, created by Domo as a proof of concept. In addition, it demonstrated the feasibility of fungible tokens on Bitcoin and sparked widespread interest in the standard. Lastly, ORDI remains a benchmark for the BRC-20 ecosystem.
WOJAK
WOJAK is a community-driven BRC-20 meme token, symbolizing the playful and experimental nature of Bitcoin’s evolving ecosystem. As a result, it has inspired other meme coins and social token projects.
Use Cases
So where and how exactly are these tokens being used? BRC-20 tokens find applications in similar sectors as their ERC-20 counterparts on Ethereum.
- Financial Instruments: BRC-20 tokens can represent tokenized stocks, bonds, or other financial products.
- Decentralized Exchanges: Users can trade these tokens on Bitcoin-based DEXs, enabling peer-to-peer trading.
- Community Tokens: Creators and communities can issue BRC-20 tokens to incentivize participation or reward loyalty.
Key Considerations
While BRC-20 tokens offer exciting opportunities, they also come with their share of challenges. This is mainly due to the fact that they’re still highly experimental, which brings a certain degree of uncertainty. Let’s break down the advantages and limitations of this token standard.
Advantages of BRC-20 Tokens
- Built on Bitcoin: Leveraging Bitcoin’s robust security and decentralization, BRC-20 tokens inherit the network’s reliability.
- Simple and Accessible: The Ordinals protocol enables straightforward token creation without the complexity of smart contracts.
- Expands Bitcoin’s Use Cases: BRC-20 tokens allow Bitcoin to participate in DeFi, gaming, and tokenized assets, bridging the gap between Bitcoin and popular smart contract platforms such as Ethereum.
- Immutable and Transparent: BRC-20 token transactions are immutably recorded on the Bitcoin blockchain, providing a transparent and accountable ledger.
Limitations and Challenges of BRC-20 Tokens
- No Smart Contract Support: Unlike Ethereum’s ERC-20 tokens, BRC-20 tokens lack native smart contract functionality, limiting their programmability.
- Scalability Concerns: Bitcoin’s network is not optimized for high transaction volumes, leading to potential congestion during peak activity.
- High Transaction Fees: Since these tokens share Bitcoin’s blockchain, network fees can spike during periods of heavy usage.
- Limited Tooling: The ecosystem around BRC-20 tokens is still developing, with fewer tools and platforms compared to Ethereum.
How to Start with BRC20 Tokens
Getting started with BRC-20 tokens involves understanding their development, storage, and trading. Here’s what you need to know:
The BRC20 Token Development
Creating a BRC-20 token involves leveraging the Ordinals protocol to inscribe metadata onto Bitcoin transactions. The process typically includes:
- Defining Token Properties: Specify the token’s name, symbol, total supply, and other characteristics.
- Using Ordinals Tools: Utilize wallets or development tools compatible with Ordinals to inscribe metadata onto Bitcoin transactions.
- Deploying the Token: Once the metadata is inscribed, the token can go live on the Bitcoin blockchain.
How to Store and Use BRC20 Token
Storing BRC-20 tokens requires a secure and compatible wallet that supports Bitcoin Ordinals. Some of the most popular options include:
- Ordinals Wallet: Provides full control over your Bitcoin and Ordinals transactions.
- Orange Wallet: A popular browser extension wallet with an intuitive interface.
- Xverse Wallet: Available on Chrome, iOS, and Android, Xverse offers a user-friendly interface for managing BRC-20 tokens.
Using BRC-20 tokens is as simple as transferring them to another Bitcoin address or interacting with applications that support them.
BRC20 Token Marketplace
While still in its early stages, marketplaces for BRC-20 tokens are beginning to emerge. For example, platforms like OKX offer a dedicated Ordinals Market for BRC-20 tokens where users can buy, sell, and trade.
What Is the Difference Between BRC20 and ERC20?
BRC-20 and ERC-20 are both token standards, but they differ significantly in functionality and underlying technology.
| Feature | BRC-20 | ERC-20 |
|---|---|---|
| Blockchain | Bitcoin | Ethereum |
| Smart Contracts | Not natively supported | Full native support |
| Token Creation | Ordinals-based inscriptions | Solidity-based smart contracts |
| Use Cases | DeFi, basic token transfers, tokenized assets | DeFi, gaming, NFTs, complex dApps |
For a more in-depth look at ERC-20 tokens, check out our ERC-20 guide.
Final Thoughts
BRC-20 tokens have enabled tokenized assets, decentralized finance, and enhanced interoperability on the Bitcoin blockchain, unlocking new possibilities for the network and its users.
While they are still in the early stages of their development, we can no doubt expect more tools, platforms, and use cases to emerge for these tokens.
How to Deploy BRC-20 Tokens?
Deploying BRC-20 tokens involves defining their properties, inscribing metadata using Ordinals tools, and activating them on the Bitcoin blockchain.
How to Make BRC-20 Tokens?
Creating BRC-20 tokens requires using Bitcoin transactions to inscribe metadata, specifying token details such as name and total supply.
How to Mint BRC-20 Tokens?
Minting involves issuing new tokens based on predefined metadata, which can be managed using compatible wallets or platforms.
