introduction
The BRC-20 token is an experimental and inefficient token standard designed to create alternative to the Bitcoin blockchain. Inspired by Ethereum's ERC-20 token, the BRC-20 token utilizes the Bitcoin ordinance protocol to insert data into individual Satoshis, making it transferable and tradeable.
The origin of the BRC-20 token
The BRC-20 token standard was introduced in March 2023 by a pseudonym developer named Domo. The development took place shortly after the launch of the Bitcoin Ordinance Protocol by Casey Rodarmor in January 2023. NFT on the Bitcoin blockchain. The first BRC-20 token was deployed at “Ordi”, which quickly gained popularity and led to the creation of many other BRC-20 tokens.
The introduction of the BRC-20 token is aimed at bringing the flexibility of funnel tokens to the Bitcoin network, similar to the way ERC-20 tokens expanded the Ethereum Ecosystem. However, the BRC-20 token is very different from the Ethereum counterpart in terms of functionality and implementation.
How the BRC-20 token works
The BRC-20 token uses the ordinarys protocol to engrave JSON data into the Satosh. This data defines the properties and functions of tokens such as expansion, construction, and transfer. Unlike Ethereum's ERC-20 token, the BRC-20 token does not use smart contracts and is more restrictive in functionality. However, their simplicity makes asset tokenization easier on the Bitcoin network.
Development and Mint: The process begins by expanding the token by incorporating its properties into Satoshi. Once expanded, the tokens are minted in a specified quantity and can be transferred between users via Bitcoin transactions. The JSON data contains details such as the name of the token, maximum supply, and construction conditions.
Token Transfer: BRC-20 token transfer includes creating a new inscription specifying the transfer details. This inscription is included in Bitcoin transactions and is immutable and verifiable on the blockchain.
Pros and Cons
Strong Points:
- Simplicity: No smart contracts simplify token creation and transfer, making it accessible to a wider range of users.
- safety: Taking advantage of Bitcoin's robust security features ensures a high level of trust and immutability.
Cons:
- Lack of smart contracts: Unable to use smart contracts limits the capabilities and potential use cases of BRC-20 tokens.
- Network Dependencies: BRC-20 tokens are subject to prioritization of Bitcoin, which is more security and decentralized than transaction speeds, and can result in higher fees during periods of high demand.
- Network congestion: The popularity and poor design of these tokens led to increased transaction fees and network congestion, especially as promotions and popularity were at peak levels. As popularity declined, so did the crowds.
- Limited interoperability:BRC-20 tokens are customized specifically for the Bitcoin network and cannot interact with other blockchain ecosystems.
Practical applications and examples
Decentralized Application Token: Developers create new tokens for their distributed application (DAPP). By etching token details into Bitcoin transactions using the preface protocol, developers can directly manage tokens on the Bitcoin blockchain without the need for additional layers or complex smart contracts. This token can be used within DAPP for a variety of functions, including access control, rewards, and governance.
Tokenized assets: If a company wants to use BRC-20 tokens to tokenize assets such as stocks and real estate on the Bitcoin blockchain, the company can engrave tokens representing these assets, providing a secure and transparent transfer of ownership. It makes it possible. This simplifies the process of buying and selling or transferring ownership of these assets while taking advantage of Bitcoin's robust security.
Loyalty Points System: Businesses can implement a loyalty points system using BRC-20 tokens. By creating and managing loyalty points as tokens, customers can earn, transfer and redeem points directly on the Bitcoin blockchain. This ensures transparency and security, reduces the risk of fraud, and increases customer trust.
Community Token: Community groups can decide to create their own tokens to promote a variety of activities and rewards within the community. Using the BRC-20 token, groups can engrave tokens that members can use to participate in the event, vote for community decisions, or contribute rewards. This promotes a sense of ownership and engagement among community members.
BRC-20 tokens are often sold as solutions for the various applications listed above, from decentralized apps to tokenized assets, but in reality they frequently attract speculative trading and gambling . While they utilize the secure network of Bitcoin, their main use is quickly creating and trading meme tokens and low value digital assets. This reflects a wider trend in the crypto world. There, the promise to solve real problems is often hidden by focusing on short-term profits and speculative investments. The true value of Bitcoin lies in its role as security, decentralization and sound money. This is often rushed overlooked to take advantage of the latest token trends.
Runes protocol: a newer, more efficient solution
The Runes protocol introduced by Casey Rodarmor provides a more efficient and scalable alternative to the BRC-20 token. By utilizing Bitcoin's UTXO model and OP_Return OpCode, Runes manages to reduce network congestion and improve performance to avoid creating non-densed UTXOS. Unlike BRC-20, which relies on JSON inscriptions that can inflate networks, Runes offers a streamlined process for token creation and transfer, seamlessly integrating with Lightning networks, and a variety of wallets Supports types. This makes Runes an excellent option for developers looking to create and manage tokens for the Bitcoin blockchain with greater efficiency and flexibility.
