BRC-20 tokens are the latest innovative asset class, taking its name from ERC-20 tokens, the token standard developed by the Ethereum blockchain and used by the vast majority of tokens produced on that network.
As of May 4th, the entire market valuation of all these tokens was $125M, which is a tiny fraction of Bitcoin’s current value. However, on January 1st, they caused a record-breaking 682,000 daily transactions on the Bitcoin network. In addition, Bitcoin transaction costs have risen to levels not seen since July 2021.
This is a major change. Bitcoin’s strength has always been that it didn’t change, thanks to its hard ceiling of 21 million coins and its reliance on a decentralized community of miners. With the advent of Ordinals and, more lately, BRC-20s, the Bitcoin community is moving in the direction of increased experimentation.
The BRC-20 standard was introduced on March 8 by the anonymous developer domo. Ordinals protocol was utilized for the rollout because it allows for “inscribing” Satoshis (a very tiny unit of Bitcoin) with specific information. Digital information of any kind, including but not limited to photos, music, text, and video, may be used.
When creating BRC-20s, users record crucial information like a token’s supply in the widely used JSON format. Because of this, the tokens are functionally equivalent to one another.
Unfortunately, BRC-20s currently have little use. The token’s inventor has produced documentation detailing its three uses: creating new tokens, minting already generated tokens, and transmitting tokens.
Once there are actual use cases for these tokens, their value might rise. However, the ability to manufacture tokens on Bitcoin itself is a significant improvement over the previous state of blockchain technology, which did not let users to readily create their own money.