BRC-20 vs ERC-20
Token protocols such as BRC-20 and ERC-20 offer diverse features stemming from the distinct technologies of Bitcoin and Ethereum. While each protocol facilitates the generation of tokens on their respective blockchains, their operational methodologies differ significantly.
BRC-20 token standard
In March 2023, the Bitcoin blockchain saw the introduction of a novel system, the BRC-20 standard, designed to facilitate the creation of fungible tokens.
This system leverages the Ordinals protocol, which assigns unique numerical identifiers to SATS (the smallest unit of Bitcoin) at the time of mining. These identifiers are crucial in enabling the tokens to carry and distribute information.
A key feature of the BRC-20 tokens is their traceability across the entire Bitcoin network, achieved without necessitating any changes to the core Bitcoin protocol.
Originally, the Ordinals protocol was developed for creating Bitcoin-based non-fungible tokens (NFTs). However, its capabilities have since been expanded, leading to the development of the BRC-20 standard.
By November 2023, the Bitcoin ecosystem witnessed the creation of over 21 million BRC-20 tokens. In the early phase, meme coins predominantly dominated this new token standard.
ERC-20 token standard
The concept of the ERC-20 token standard emerged in 2015, with its implementation on the Ethereum blockchain occurring two years later. This standard set the stage for the creation of fungible tokens on Ethereum.
ERC-20 tokens are crafted through smart contracts, necessitating the use of Ethereum’s own cryptocurrency, ETH, in their creation process.
The ERC-20 standard lays down specific guidelines, including the definition of token names, symbols, and decimal points. It also standardizes procedures for token transfers, balance checks, and determining the total supply of tokens.
One of the key strengths of the ERC-20 is its support for interoperability within the Ethereum ecosystem. This feature ensures seamless interaction between different tokens and contracts.
The influence of the ERC-20 standard is widespread, underpinning various token types like stablecoins and governance tokens for decentralized finance (DeFi) protocols. To date, the ERC-20 standard has facilitated the creation of over 450,000 different tokens and remains a cornerstone in numerous Ethereum-based projects.
Token standard adoption
The recent surge in popularity of BRC-20 tokens, particularly when meme coins capture the media’s attention, has been noteworthy. A significant part of this interest is due to the fact that meme coins constitute a large segment of the BRC-20 tokens.
In comparison, the ERC-20 standard boasts a broad spectrum of applications, including stablecoins, governance tokens, and utility tokens. This versatility has been a key driver in its widespread adoption. On the other hand, the BRC-20 standard, being relatively new, hasn’t yet experienced a similar level of diverse applications, particularly in areas like utility or governance.
Fungibility
The concept of fungibility is a key technical differentiator between BRC-20 and other tokens. BRC-20 tokens, similar to Bitcoin itself, are fungible, meaning one token can be exchanged for another of the same type without losing value.
This contrasts with Bitcoin Ordinals, which, despite utilizing the same Ordinal Theory as BRC-20, produce non-fungible tokens. Each of these tokens is unique and cannot be replaced by another.
The ERC-20 tokens, a standard in the Ethereum ecosystem, differ from the newer, Bitcoin-based BRC-20 tokens. BRC-20 tokens have gained traction in areas like meme coins and have a burgeoning community. In terms of technical infrastructure, ERC-20 tokens operate on the smart contract technology native to Ethereum. In contrast, BRC-20 tokens leverage Ordinals on Bitcoin’s network without necessitating any alterations to Bitcoin’s underlying code.
The benefits of BRC-20
BRC-20 tokens are gaining traction due to their unique advantages:
- Fungibility: These tokens are interchangeable, making them suitable for trading on exchanges. This feature allows users to engage with the Bitcoin blockchain in a more accessible way, without directly trading Bitcoin.
- Security: Leveraging the established security of the Bitcoin protocol, known for its strong resistance to hacking, BRC-20 tokens offer a high level of safety.
- Compatibility: Designed for seamless integration with the Bitcoin protocol, BRC-20 tokens facilitate easier entry for developers looking to innovate within the Bitcoin ecosystem.
Challenges and controversies surrounding BRC-20
The BRC-20 token standard, while innovative, faces several challenges and controversies within the Bitcoin community:
- Network Congestion and Increased Fees: A significant concern is that BRC-20 tokens might cause transaction backlogs on the Bitcoin network, resulting in higher fees and congestion. This issue has sparked debates on whether the standard aligns with Satoshi Nakamoto’s vision of Bitcoin, which prioritized efficient and cost-effective transactions.
- Perception as Spam: Among Bitcoin maximalists, there’s a sentiment that BRC-20 tokens act as “spam” on the blockchain. This perception poses a considerable hurdle for the acceptance and growth of BRC-20, with concerns about it potentially facilitating scams, especially with the proliferation of memecoins.
- Technical Uncertainty: The experimental nature of the BRC-20 standard raises concerns about potential technical issues and bugs. This uncertainty may hinder its adoption as developers and users might prefer to wait until the standard is more proven and stable.
- Lack of Smart Contract Capabilities: Unlike the ERC-20 tokens on Ethereum, BRC-20 tokens do not include smart contract functionalities. This limitation could make them less appealing for certain applications, particularly those requiring the complex capabilities provided by smart contracts.
These challenges indicate that while BRC-20 introduces new functionalities to the Bitcoin blockchain, it also comes with risks and issues that need addressing. For BRC-20 to achieve broader adoption and effectively compete with established standards like ERC-20, these concerns must be resolved.
The top 6 BRC-20 tokens
ORDI
ORDI stands out as the inaugural BRC-20 token to hit the market, boasting a capped quantity of 21 million. Remarkably, the entire batch of tokens was generated within a mere 18-hour window, despite efforts to produce an additional 1.5 million beyond the initial amount. Following the inception of ORDI, a number of emerging companies have developed innovative solutions, allowing individuals to effortlessly create and manage their own BRC-20 tokens within their digital wallets.
PEPE
PEPE’s rise to prominence was fueled by the triumph of its Ethereum-based meme token. In the initial phase following its launch, the token experienced a significant increase in value, delivering an astounding 38,900% return on investment for those who were among the first to adopt it. This success not only generated excitement for the BRC-20 standard upon which PEPE was structured but also led to a notable surge in the creation of memecoins utilizing the same BRC-20 standard.
VMPX Coin
VMPX Coin, a BRC-20 token, epitomizes the ethos of equitable and fair distribution. This digital currency was developed by Jack Levin, the visionary behind XEN Crypto, and made its debut on May 7, 2023. Notably, VMPX Coin distinguishes itself by eschewing practices like pre-mining or assigning preferential allocations to its founder. This approach ensures the immutability of the coin’s code, reinforcing its commitment to fairness.
PIZA
PIZA, operating under the BRC-20 token standard, is recognized as a memecoin. It’s crucial to note that PIZA is primarily a token for amusement purposes and holds no inherent value. This token is unique in that it lacks a formal team behind it and does not follow a structured development plan.
SATS
SATS operates on the innovative Ordinals BRC-20 token standard, which introduces a unique feature within the Bitcoin network. This standard enables each satoshi, the smallest denomination of Bitcoin, to hold a distinct identity or file, a concept referred to as “inscription.” The name SATS itself is derived from ‘satoshis,’ highlighting its connection to the foundational unit of Bitcoin.
MEME
The MEME token, true to its moniker, isn’t crafted for any specific functional use. It’s a memecoin, born out of the desire to capture the essence of the meme culture. These tokens are generally characterized by their lighthearted and frequently humorous approach to the digital currency sphere. While they may not possess conventional utility, the widespread popularity and active market presence of MEME tokens are indicative of a lively and committed community that supports them.
Current trends in BRC-20 tokens
Towards the end of November 2023, the realm of BRC-20 tokens witnessed a notable surge in interest and participation. A significant increase in the community’s involvement with these tokens was observed, with more members adding them to their wallets. CoinDesk’s article sheds light on this trend, particularly emphasizing the growing popularity of Bitcoin-based tokens, specifically within the BRC-20 category.
Key Highlights:
- Bitcoin Blockchain Tokens Gain Momentum: There’s a marked uptick in the usage of tokens on the Bitcoin blockchain.
- BRC-20 Tokens Ascending: This specific token category saw a remarkable 21% growth in just a 24-hour span in November 2023.
- Front-Runners in the Token Space: TRAC led the way with a staggering 93% increase, followed by MEME with a 69% rise, and NALS also making significant strides with a 36% growth.
- The Role of Ordinals Protocol: BRC-20 tokens are increasingly utilizing the Ordinals Protocol to embed data directly into the Bitcoin blockchain.
- The Impact of ORDI Token: The value of the ORDI token, which is closely tied to the Ordinals Protocol, experienced a sharp increase following its addition to the Binance platform.
- Tokens in Social and Gaming Applications: The trend of using Bitcoin for social applications is on the rise. This includes the introduction of in-game tokens, like Alpha’s, designed to enhance community engagement.
- Bitcoin’s Foray into DeFi: Bitcoin is now making its way into decentralized finance (DeFi). Bitcoin holders are finding new ways to leverage their assets in decentralized apps, which have until now mainly involved tokenized versions of Bitcoin on various blockchains.
What's next for BRC-20
The future of BRC-20 tokens is marked by significant potential for growth and innovation within the Bitcoin ecosystem. These key points highlight what’s next for BRC-20:
- Increased DeFi Involvement: BRC-20 tokens are becoming more integral to the DeFi sector, especially after the 2023 memecoin rally led by tokens like PEPE.
- Innovation Through Ordinals: The introduction of Ordinals and the BRC-20 token standard opens up new possibilities for creating and managing tokens on Bitcoin’s blockchain, potentially leading to a wider range of applications.
- Rise of Trading Platforms: The popularity of BRC-20 tokens is boosting demand for DEX platforms that support their trading, like BitX or OKX Ordinals Market.
- Continued Growth and Caution: As the BRC-20 standard is still evolving, it’s important for users and investors to stay informed and cautious, ensuring they rely on trusted sources and conduct thorough research.
In summary, BRC-20 tokens represent a significant evolution in Bitcoin’s functionality, poised to bring about new applications and greater integration into the broader blockchain and financial landscapes.
The final word
Our exploration of the BRC-20 token standard has uncovered its unique characteristics and the lively debates surrounding it. This innovation challenges us to reconsider the future of digital assets, questioning its influence on Bitcoin’s core values and the world of fungible and meme coins.
Will BRC-20 tokens revolutionize our understanding of digital value and ownership within Bitcoin, or will they remain a niche experiment in the shadow of larger protocols?
As market dynamics shift and debates intensify, we ponder the implications of this change for Bitcoin’s performance and identity. Are we witnessing the onset of a new tokenization era or a cautionary tale in blockchain’s history?
The impact of BRC-20 on Bitcoin’s ecosystem is significant, but its final cost and outcome are yet to be determined.
Where to buy BRC-20 tokens?
To purchase BRC-20 tokens, you can consider several reputable cryptocurrency exchanges. Each offers different features and may vary in terms of liquidity, fees, and user experience:
Binance
OKX
