What Is BRC-20?
BRC-20 is a new standard for fungible tokens on the Bitcoin network. It uses sequential numbering to encode data in the smallest units of BTC, known as satoshis. This standard allows tokens to exist side by side with Bitcoin on its native blockchain, much like ERC-20 tokens in the Ethereum network.
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The origin of BRC-20 and the first tokens
The introduction of Bitcoin Taproot in 2021 made it possible to create the BRC-20 standard, which utilizes sequential numbering to add more data to each satoshi.
Interestingly, it was non-fungible tokens (NFTs) that made their debut on the Bitcoin network initially. In January 2023, they were created using the Bitcoin Ordinals protocol. Following the rise in popularity of Bitcoin NFTs, enthusiasts began exploring the creation of regular tokens.
The first BRC-20 token was minted by a Twitter user named @domodata in March 2023. This token was given the ticker symbol ORDI. Soon after, new variations emerged, mostly in the form of meme coins (PEPE, MEME, WZRD).
The tweet introducing the first BRC-20 token Source: Twitter
Distinguishing BRC-20 from ERC-20
While the BRC-20 token standard bears some resemblance to ERC-20, it possesses its own unique characteristics and significant differences. One notable distinction is the minting method. Ethereum tokens rely on smart contracts, whereas BRC-20 tokens are created by adding JSON (Javascript Object Notation) code to satoshis. This code defines the token's parameters and features, such as the ticker symbol and maximum supply.
Due to the implementation of smart contracts, ERC-20 tokens offer a wider range of functionality compared to Bitcoin tokens. However, BRC-20 tokens are more decentralized, as multiple wallets can participate in the minting process.
Challenges and prospects
The introduction of Bitcoin NFTs and BRC-20 tokens has presented significant challenges for the Bitcoin network. This has led to increased transaction volume, higher transaction fees, and substantial backlogs. However, it has been a boon for miners who have benefited from this situation.
Within the network, passionate debates have ignited regarding the legitimacy of BRC-20 tokens. Some consider it a senseless idea that only harms Bitcoin, while others are excited about the new possibilities it brings.
However, it's important to note that the BRC-20 token standard is still in its experimental and early stages. Its future trajectory remains uncertain. There may be unforeseen issues associated with BRC-20, as well as potential solutions that have yet to be discovered.
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