BRC-20 Tokens: A Primer

In 2009, Bitcoin pioneered the idea of decentralized digital money. Five years later, Ethereum built on Bitcoin's innovation by enabling decentralized applications and smart contracts on its blockchain. With its introduction of ERC-20 tokens in 2015, the Ethereum blockchain could host thousands of cryptocurrencies (tokens) other than ETH. And now, these tokens have landed on the Bitcoin blockchain.

What are BRC-20 tokens?

In January 2023, Bitcoin launched its Ordinals protocol, making it possible to attach extra data to each satoshi on the Bitcoin blockchain. This marks Bitcoin’s major leap towards a more innovative and diversified ecosystem, introducing fungible and non-fungible tokens to the primordial blockchain.

Created in March 2023, the BRC-20 token standard leverages the Ordinal protocol to ‘inscribe’ tokens on satoshis and allows everyone to mint and transfer these tokens. The first ever BRC-20 token, ORDI, was soon released and thousands of other tokens followed suit. The once monotonous Bitcoin blockchain is now teeming with new opportunities.

State of BRC-20 tokens

This new addition to the Bitcoin ecosystem turned out to be an adrenaline shot in the meme coin sector. A month after their inception, the BRC-20 tokens fueled a major upsurge in Bitcoin’s blockchain activities, with Ordinals (ORDI), Pepe (PEPE), and MEME (MEME) leading the charge. A dazzling collection of meme coins were created and minted as people once again flock to the first-ever blockchain to sample its latest invention.

The sudden boom of BRC-20 tokens is not without its downsides. With over 14,000 different BRC-20 tokens (and counting) issued, the Bitcoin network was so congested that hundreds of thousands of transactions were waiting and the gas fee was hiked up to over $30 on May 8. The ecosystem even welcomed its first Ordinal-based DEX, BisoSwap, on May 10, 2023, marking yet another step Bitcoin has taken toward Ethereum.

But BRC-20 tokens are not, and probably can never be ERC-20 tokens. Bitcoin runs on the most primal blockchain and can not run smart contracts like Ethereum. Thus, BRC-20 tokens can never interact with any smart contract natively like ERC-20 tokens. The notion of inscribed satoshis is also quite a novelty, in contrast to the field-tested ERC-20 standard that has gone through several ebbs and flows of the market.

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The future of BRC-20 tokens

Even just an experiment, BRC-20 tokens have gathered enough hype to put most coins to shame. But in the crypto world where excitement fades faster than reality sets in, it’s what stays that matters. As of now, most BRC-20 tokens have been reduced to a fraction of a nano cent, with a few exceptions such as ORDI, the very first BRC-20 token, MEME, the hype manifested, and PEPE, one of the OG memes that finally saw light in the crypto sector.

However, with crucial limitations such as not being EVM-compatible, BRC-20 tokens are inherently limited. They also consume more gas and will fight for precious block space against BTCs. We should tread with caution when considering investing in this sector and conduct thorough research before venturing in.

Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.