UNDERSTANDİNG SRC20

The rapidly evolving blockchain industry is giving rise to new token standards that expand the field’s horizons. The SRC-20 token is one such specification that has generated much interest recently.

Using the same Bitcoin transaction infrastructure, SRC-20 tokens provide a novel method of embedding data. This guide discusses how the SRC-20 token standard differs from BRC-20 and how it might affect the Bitcoin ecosystem.

Understanding SRC-20 Tokens

SRC-20 tokens, also called “Bitcoin’s nonfungible tokens (NFTs),” rely on the Bitcoin Stamps protocol. This protocol, inspired by Counterparty and colored coins, allows users to embed data in Bitcoin transactions, creating a platform for secure and tradeable art.While similar to the BRC-20 standard, SRC-20 tokens employ distinct approaches to data embedding. The development of SRC-20 tokens dates back to the concept of colored coins, which aimed to differentiate specific units of Bitcoin by adding metadata.

While colored coins did not gain significant traction, they inspired subsequent innovations such as the BRC-20 and SRC-20 standards. Bitcoin Ordinals, launched by Casey Rodarmor, further paved the way for SRC-20 tokens.

Built on the BRC-20 standard, Ordinals allowed the inscription of digital concepts onto the Bitcoin blockchain. However, SRC-20 tokens differ from Ordinals because they enhance data immutability, addressing concerns regarding censorship and limitations.

The Technology Behind SRC-20 Tokens

Before anyone can understand how SRC-20 tokens work, it is essential to explore their underlying technology. SRC-20 tokens utilize the Counterparty protocol, an open-source, peer-to-peer protocol built on the Bitcoin blockchain. The “OP_Return” function stores up to 80 bytes of data within a transaction and utilizes multi-sig via several outputs for larger files.

By converting an image to text and encoding it as a Base64 file, the protocol reconstructs the original image within the Bitcoin network.