Understanding BRC-20

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In March 2023, a pseudo-anonymous developer by the name of Domo created BRC-20 (Bitcoin Request for Comment 20). Similar to ERC-20 tokens, BRC-20 tokens were developed specifically for Bitcoin.  In this article, we will guide you on how BRC-20 tokens were created, how they work, their advantages and disadvantages, and how to buy and sell them.

How Were BRC-20 Tokens Created?

In January 2023, the Bitcoin Ordinals protocol was released, allowing non-fungible tokens (NFTs) to be recorded on satoshis (sats). Since then, there has been an increase in interest in the creation of fungible tokens on the Bitcoin network. In March 2023, BRC-20 was created to enable the minting and utilization of fungible tokens on the Bitcoin blockchain.

 

The initial BRC-20 token to be released was named "ordi," and Bitcoin wallets promptly introduced tools to accommodate them. In the subsequent months, a plethora of BRC-20 tokens emerged. By May 2023, some BRC-20 tokens had encountered remarkable price surges, leading to substantial market capitalization. Increased transaction costs and significant network congestion were caused by the rise in demand for BRC-20 tokens.

How BRC-20 Tokens Work

To fully understand BRC-20 tokens, it is important to know how Bitcoin Ordinals operate. A process known as "inscription" enables users to add additional information to satoshis using the Ordinals protocol, which is a method for numbering satoshis.

For setting up token contracts, minting new tokens, and enabling token transfers, BRC-20 tokens use Ordinals-encoded JSON (JavaScript Object Notation) data. Presently, the deploy function can be used to create a BRC-20 token, the mint function to mint an amount of BRC-20 tokens, and the transfer function to transfer several BRC-20 tokens.

 

What Are the Advantages and Disadvantages of the BRC-20 Token Standard?

Despite its pros, the deployment, minting, and transfer processes for BRC-20 tokens may not be user-friendly due to the BRC-20 token standard's recent development. Additionally, there are not many tools and support services readily available for BRC-20 tokens.

Advantages of the BRC-20 Token Standard

Compatibility: The integration of Bitcoin Ordinals and BRC-20 tokens with the Bitcoin blockchain is facilitated by their compatibility, allowing for smooth and seamless interaction.

Simplicity: The usage of the BRC-20 token standard is made simple by the use of a streamlined tokenization mechanism.

Security: The BRC-20 token standard offers excellent security, benefiting from the inherent strength of the Bitcoin blockchain.

Growth potential: With the increasing adoption of the BRC-20 standard by various projects, there is great potential for innovation and the emergence of new use cases.

Disadvantages Of The BRC-20 Standard

Lack of smart contract functionality: Smart contracts are not supported by the BRC-20 standard, in contrast to other token standards like the ERC-20 standard used by the Ethereum network.

Reliance on the Bitcoin blockchain: The BRC-20 standard is subject to network constraints because it depends on the Bitcoin blockchain for functionality.

Limited interoperability: The BRC-20 token standard was specifically designed to operate within the ecosystem of the Bitcoin blockchain.

Limited utility: The BRC-20 standard is primarily intended for the tokenization of fungible assets and is not suitable for tokenizing non-fungible assets or implementing advanced token features like conditional transfer or tokenized ownership rights.

Relatively smaller developer community: Fewer developers are working with the BRC-20 standard compared to more widely used token standards like ERC-20.

How to Buy and Sell BRC-20 Tokens

To purchase BRC-20 tokens, it is essential to possess a Bitcoin Taproot-enabled wallet like Ordinals Wallet or UniSat Wallet.

You can follow these steps to buy and sell:

Step 1: Go to unisat.io and connect your wallet

 

Step 2: Navigate to the “Marketplace” tab and click “My Inscriptions”

 

Step 3: Select “List” under “My Inscriptions”

 

Step 4: Select “Inscribe Transfer”

 

Step 5: Select an amount you would like to bundle together for listing and confirm.

 

Step 6: Return to "My Inscriptions" after transactions have been confirmed, and you will find the amount available for listing.

 

Step 7: Choose and confirm the price!

 

The Future of the BRC-20 Token Standard

The constant progress within the blockchain technology industry, along with its growing community and expanding user base, has the potential to enhance the usefulness of the BRC-20 token standard. As with any technology that allows for ongoing development, the future of BRC-20 tokens is influenced by the fluctuations and trends of the blockchain industry and token economy. Nevertheless, driven by the current excitement and enthusiasm, the adoption of the BRC-20 standard is expected to increase in the foreseeable future.

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Category:Crypto

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