BRC-20 vs ERC-20: A Battle of Token Standards on Web3
With over 14,709 tokens minted using the "Bitcoin Request for Comment" (BRC-20) standard and a total market cap of almost $1 billion, the BRC-20 token standard has taken center stage in recent times. But how does it compare to the ever-prominent ERC-20 token standard and will it overtake the latter as the dominant token standard in Web3?
In this article, we will delve into what BRC-20 is, explore its key features, and compare it with the well-established ERC-20 standard.
BRC-20, often referred to as a "Web3 native" token standard, is a groundbreaking innovation that operates on the Bitcoin blockchain. It was introduced in March 2023 and has quickly gained attention within the cryptocurrency community. BRC-20 is built on the principles of the ordinals protocol, a novel approach to token creation and management.
Text-based Ordinals are the most commonly inscribed Ordinal on Bitcoin by far. Source: Dune Analytics
Currently, the majority of Ordinals inscriptions are text-based, with over 55,000 of the inscriptions in April being represented as BRC-20 tokens.
The growth of Bitcoin Ordinals has been nothing short of remarkable. On April 2, these unique inscriptions reached a staggering 58,179, shattering the previous all-time high of 31,692 recorded on March 9, marking an impressive 83.5% increase, according to data from Dune Analytics. Total inscriptions have since surpassed the 400,000 mark in October, further underscoring its explosive growth.
Growth of Ordinals inscriptions. Source: Dune Analytics
This unprecedented surge can be primarily attributed to the introduction of BRC-20 tokens by pseudonymous on-chain analyst known as Domo in early March. What's fascinating is that while Ordinals themselves function as nonfungible token (NFT)-like "digital artifacts" that carry data in various formats such as text, JPEG images, PDFs, video, and audio on the Bitcoin network, the BRC-20 token standard harnesses the power of Ordinal inscriptions to deploy token contracts, mint tokens, and facilitate token transfers. In essence, this mirrors the functionality of Ethereum's ERC-20 token standard, introducing a new layer of versatility and programmability to the Bitcoin ecosystem.
The enabling factor behind the introduction of Ordinals and BRC-20 tokens on the Bitcoin network was the Taproot soft fork, which was implemented on November 14, 2021. This upgrade represented one of the most significant improvements to Bitcoin since the activation of Segregated Witness (SegWit) in 2017. Like its predecessor, Taproot aims to enhance network privacy and efficiency but on a grander scale, with expectations of a more profound impact over the coming years.
BRC-20 vs ERC-20
Let's now dive into the comparison between BRC-20 and ERC-20, exploring their differences, use cases, and future prospects.
Origin and Blockchain Ecosystem
BRC-20: BRC-20 tokens operate on the Bitcoin Blockchain, which has a well-established reputation as the pioneer blockchain, and is set to continue this rise in time to come.
ERC-20: ERC-20 tokens, on the other hand, are based on the Ethereum blockchain, one of the early entrants into the blockchain industry. Ethereum's smart contract capabilities and extensive developer community have established ERC-20 as the dominant standard for token creation.
Token Creation and Management
BRC-20: BRC-20 tokens are created and managed using ordinal inscriptions, which involve storing JSON data directly on the Bitcoin blockchain. This approach provides a unique level of programmability without relying on smart contracts.
ERC-20: ERC-20 tokens are created and managed through Ethereum's smart contracts. These self-executing agreements automate the issuance, distribution, and management of tokens, providing flexibility and security.
Both BRC-20 and ERC-20 tokens are fungible, meaning that they are interchangeable with another of the same type and can be exchanged on a one-to-one basis, allowing for seamless trading and integration into various compatible applications and platforms.
Transaction Fees and Scalability
BRC-20: BRC-20 tokens operate on the Bitcoin blockchain, which has faced some criticism regarding transaction fees. The design of ordinal inscriptions contributes to these fees, which can make BRC-20 transactions relatively more expensive compared to other blockchains.
ERC-20: Transaction fees on the Ethereum network have also been a topic of concern, particularly during periods of high network congestion. Ethereum's scalability challenges have led to slower transaction processing times and higher fees during peak periods, leading many Web3 users to resort to scalability solutions, such as Layer 2s.
*It's important to note that transaction fees can vary widely based on network usage, gas fees, and the specific blockchain on which a token operates.
Use Cases and Adoption
BRC-20: BRC-20 tokens have found utility in various use cases, which include peer-to-peer transfers, remittances, and potential integration into DeFi protocols.
ERC-20: ERC-20 tokens have become integral to the functioning of major cryptocurrency exchanges and DeFi platforms. The extensive adoption and compatibility of ERC-20 have solidified its position as a dominant token standard. ERC-20 tokens are used for various applications, including trading, lending, borrowing, and yield farming on DeFi platforms. NFTs, another notable use case, have gained immense popularity and are primarily built on the ERC-20 standard. The vibrant ecosystem of ERC-20 tokens offers users an array of choices, while the robust infrastructure of the Ethereum blockchain ensures the security and reliability of these tokens.
BRC-20: The BRC-20 ecosystem is evolving, with the development team actively working on enhancing its features to make it more accessible to developers. As the DeFi space continues to expand, BRC-20 is expected to play a significant role in the world of cryptocurrencies.
ERC-20: ERC-20 tokens are well-established and widely adopted, but they face challenges related to scalability.
BRC-20's Growing Ecosystem
Despite its relatively recent introduction, BRC-20 is already making its mark, with tokens like PEPE, ORDI, and VMPX showcasing its potential. These tokens cover a range of use cases, from revolutionizing rewards and loyalty programs to digital collectibles and art. In contrast, ERC-20 boasts a substantial presence in the cryptocurrency market, with hundreds of tokens built on this standard. The total market capitalization of ERC-20 tokens is in the hundreds of billions of dollars, reflecting their significant impact on the industry.
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Step 1: Select "All Mainnets" at the top of your main homepage.
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Step 3: Return to your main homepage and tap on "Swap", which will bring you to the Bitget Swap dashboard.
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Step 5: Select "Confirm" and proceed with the on-screen instructions to complete your BTC purchase.
You may also manage your BRC-20 assets on Bitget Wallet by tapping on "Profile", followed by "BRC20 / NFT Asset". Here, you may opt to receive BRC-20 assets, including NFTs, over the Bitcoin Mainnet using your Bitget Wallet Taproot address.
In the evolving landscape of Web3 and blockchain technology, both BRC-20 and ERC-20 have their unique strengths and applications. BRC-20, with its ordinal inscriptions and Bitcoin integration, offers a fresh perspective on token standards and has rapidly gained traction. Its flexibility and potential in the DeFi space make it a compelling choice for developers and users.
On the other hand, ERC-20 has a well-established position in the cryptocurrency ecosystem, and its adoption extends across various industries, including decentralized finance, gaming, and digital collectibles. While it faces scalability challenges, Ethereum's ongoing developments aim to address these issues and enhance its performance.
BRC-20 and ERC-20 are set to coexist, each contributing to the growth and innovation within the crypto industry. As the Web3 era continues to unfold, we can expect further advancements and competition between these two prominent token standards, ultimately benefiting the broader blockchain ecosystem.
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