BRC 20? This is Bitcoin Chain?
BRC-20 is an experimental standard for fungible tokens on the Bitcoin blockchain. The Taproot and Ordinals protocol made the BRC-20 standard possible. BRC-20 tokens unlock new capabilities for the Bitcoin network, such as their use in DeFi protocols and blockchain applications.
BRC-20 is an experimental token standard for fungible tokens designed specifically for the Bitcoin blockchain. Fungible tokens are fungible which means that each token unit has the same functionality and intrinsic value. The emergence of standards such as BRC-20 brings the concept of tokenization to the Bitcoin network, expanding its capabilities beyond decentralized digital currencies. BRC-20 can be considered an experimental standard for creating altcoins on the Bitcoin blockchain.
The Taproot upgrade, which increased Bitcoin's block data capacity, was instrumental in enabling the Ordinals protocol that later became the basis for the BRC-20 token. The presence of the Ordinals protocol, implemented by software engineer Casey Rodarmor in January 2023, allows data to be inscribed into individual satoshis (the smallest unit of Bitcoin) using Ordinal Theory. The numbering and inscription system of the Ordinals protocol allows the creation of fungible and non-fungible tokens (NFTs) on the Bitcoin network.
The BRC-20 token created by pseudonymous blockchain analyst Domo in March 2023 utilizes an ordinal inscription mechanism for the creation and transfer of fungible tokens on the Bitcoin blockchain. In contrast to traditional token standards such as ERC-20 on Ethereum, BRC-20 tokens do not have support for smart contracts and rely on ordinal inscription for their functionality. ERC-20 tokens are created via smart contract code, while BRC-20 tokens are created by inscribing a JSON file to each satoshi. Although highly experimental, the simplicity of the BRC-20 standard without the need for complex smart contracts allows for easier tokenization of assets on the Bitcoin network.
Although this standard is still in the experimental stage, its increasing acceptance and utilization shows growth potential in the medium and long term. The increasing number of projects adopting the BRC-20 token highlights its potential to reshape the Bitcoin blockchain with new uses and innovative products. However, challenges such as network congestion, scalability issues, and lack of smart contract functionality may pose obstacles to widespread adoption of BRC-20. To overcome these challenges, developers are exploring the use of Bitcoin Layer 2 and other scalability solutions.
