Recently, BRC 20 is being discussed very hotly in the Crypto market as a standard for creating Tokens on the Bitcoin network. So is BRC 20 really the future of Bitcoin or is it a cakewalk? Let’s find out with Weakhand in this article.
What is BRC 20?
Overview of BRC 20
BRC 20 was released on March 9, 2023 by an anonymous developer domo is the testing standard used to create and issue Tokens on the Bitcoin blockchain. BRC 20 is created by writing a JSON code to Satoshi through Bitcoin Ordinals.
Below is an example of a JSON snippet attached to Inscriptions that includes information such as: the name of the token, a limit of 1,000 tokens per minting, and a maximum quantity of 21 million tokens.
Example of the JSON code attached to each Satoshi
This JSON code is considered the Contract of each Token using the BRC 20 standard on the Bitcoin network. Although BRC 20 is just a developer test, it has attracted significant user interest in the Bitcoin community.
What is Bitcoin Ordinals?
Bitcoin Ordinals is a method to create Bitcoin Ordinals on the Bitcoin network. Bitcoin Ordinals allows data to be written to Satoshis using Ordinal Theory to give each Satoshi a unique ID identifier. Arbitrary data can then be written to each individual Satoshi. I wrote a quite detailed article about Bitcoin Ordinals, everyone can learn more here.
By benefiting from the Bitcoin network, BRC 20 inherits the high security and decentralization of the Bitcoin network. Users can trade and transfer BRC 20 Tokens just like any other Token. The Weakhand team has an article on instructions for buying and selling BRC 20 Tokens, everyone can read more here.
Pros and cons of BRC 20
Although BRC 20 tokens on the Bitcoin network are considered similar to any other blockchain token, it may be more accurate to call them “semi-alt” because they can only be traded in numbers. predetermined amount.
To mint BRC 20 Tokens on Bitcoin, users must attach a piece of Text (here a piece of code in JSON) to Inscriptions and this is a method to create Ordinals NFT on Bitcoin. The JSON code is used to split the original Ordinals NFT into smaller predetermined parts, so users cannot buy BRC 20 Tokens in any quantity, but can only buy predetermined quantities that the Sellers are selling on the market.
Additionally to determine the balance of BRC 20 Tokens in their wallet, users need to run an off-chain indexing tool. This can jeopardize the assets contained in the user’s wallet.
How Does BRC 20 Work?
Satoshi is the smallest currency unit on the Bitcoin network with 100M satoshis making up one Bitcoin. Each Satoshi on the Bitcoin network is numbered in order of issuance with a numbering system called Ordinal Theory.
Through the SeWit and Taproot upgrades, each block can hold more data, meaning more types of data can be attached to a Block. Since then, Bitcoin developers have discovered new use cases for this feature and created Bitcoin Ordinals and BRC 20.
While Bitcoin Ordinals attaches digital assets to Satoshi, BRC 20 attaches a JSON code to Satoshi. JSON contains executable pieces of code that can be deployed on the Bitcoin network giving the BRC 20 token the same basic functions of a token such as: Supply, mint limit, and token identity.
BRC 20 Use Cases
BRC 20 Tokens can be used like any other Token. While there are many other use cases for the BRC-20 Token still being explored, here are some basic use cases:
P2P trading
Users can trade, buy and sell BRC 20 Tokens on different exchanges such as: Ordinals Wallet, Crypto.com, BKEX, …. In addition, another basic feature that can be mentioned with BRC 20 is that it can be transferred to all wallets on the Bitcoin network.
Decentralized Finance (Defi)
Defi on the Bitcoin blockchain is currently in its early stages and is not yet as developed as the DeFi space on other blockchain platforms. However, the BRC-20 Token could be the first step of a decentralized financial system on top of the Bitcoin blockchain. Unlike Bitcoin, which is simply an asset for P2P trading, BRC-20 Token is considered flexible and has the ability to integrate into DeFi protocols.
The BRC 20 standard has only been around for a short time, but it could open up a huge potential in the Bitcoin blockchain space. With the current BRC-20 and the improvements that will continue to develop in the future, we will see many more use cases of BRC-20.
Difference Between BRC 20 And ERC 20
|
|
BRC 20 |
ERC 20 |
|---|---|---|
|
Blockchain |
Bitcoin |
Ethereum |
|
Smart Contract |
Are not |
Have |
|
Transaction |
Certain quantity |
Arbitrary quantity |
|
Launch time |
March 9, 2023 |
2017 |
The comparison of BRC 20 and ERC 20 is by name only. In fact, BRC 20 and ERC 20 have many differences: ERC 20 is a token standard on Ethereum and BRC 20 is an experimental method to create Tokens on the Bitcoin network.
Being launched for a long time and verified by the Ethereum community helps ERC 20 ensure safety for users and projects on the Ethereum network. Meanwhile, BRC 20 has only been released for a short time and has not yet been approved for safety on the Bitcoin network.
Another noticeable difference is that ERC 20 standard Tokens are created via Smart Contract while BRC 20 does not support Smart Contract and is created via Ordinal Inscriptions on Satoshi using JSON. This makes ERC 20 Tokens able to perform more functions than BRC 20 standard Tokens.
The BRC 20 token is also fully compatible with Bitcoin meaning the operation of protocols supporting BRC 20 does not impact Bitcoin. Bitcoin will not be affected if the BRC 20 token or its protocol encounters any problems. BRC 20 transactions can be accepted on the Bitcoin network but can be rejected by the BRC 20 protocol. For example, if a wallet with 20 ORDI tries to transfer 40 ORDI the transaction will be accepted on the Bitcoin network (because it is considered a normal transaction) but rejected on the BRC 20 protocol because the wallet does not have enough excess ORDI. This is in contrast to ERC 20 tokens, as the ERC 20 protocol resonates with the network Ethereum.
Projects in the BRC Ecosystem 20
Overview of projects in the BRC 20 ecosystem
Projects in the BRC ecosystem 20
Although it has only been launched for a short time, there are already quite a few projects built around BRC 20. Some popular projects include: Ordi, Pepe, OXBT, …. At the time of writing post, total Market Cap across the entire market reached nearly $500M USD with daily volume reaching over $200M USD. However, most of the projects labeled BRC 20 are hype Meme Coins and do not have any official projects. This is understandable because the BRC 20 standard has only been released for a short time and there are not many functions for Tokens other than buying, selling and depositing and withdrawing. So this is also a reason why there have not been many real projects built on the Bitcoin network.
Impact of BRC 20 on the Market
Impact on the Bitcoin network
The appearance of many BRC 20 Tokens has led to a spike in the number of transactions across the entire Bitcoin network. The total market capitalization at one time reached nearly $1B USD, the amount of fees paid in a transaction also increased dramatically, leading to a giant like Binance having to block Bitcoin deposits and withdrawals for a short period of time until The network is stable again.
Impact on the general market
The rise of BRC 20 Tokens is probably partly due to the Meme Coin trend with a typical project, PEPE Coin, increasing several thousand times in just a short period of time, creating extreme excitement for investors. invest in the market. In addition, BRC 20 tokens also created many mixed opinions in the Bitcoin community, Grayscale – a major influencer in the Crypto market made an argument that:
“Using the Bitcoin network to store arbitrary data contradicts the main goal stated in Satoshi’s 2013 white paper, which was for Bitcoin to function as a “peer-to-peer electronic cash system.”
summary
BRC 20 is the latest standard for creating Tokens on the Bitcoin network. Although it is just an experiment and it is not certain that it will exist long term as a standard for creating tokens on the Bitcoin network, developers can rely on this concept for further development in the future. . Above is all the information about BRC 20 in this article, hope everyone has useful knowledge.
