The blockchain industry is constantly evolving. Each ecosystem is working towards improving its network and enhancing the users’ experience. As years passed by, we witnessed the emergence of new token standards, a trend started by Ethereum. Before Ethereum introduced us to smart contracts, launching a cryptocurrency required hard forking or soft forking an existing blockchain; or even building a new blockchain from scratch.
Through smart contracts, everyone can now launch their own tokens on existing blockchains. Of course, this is only valid for blockchains that are compatible with smart contracts. Understanding that 1st generation blockchains such as Bitcoin, Litecoin, and Bitcoin Cash are not compatible with smart contracts, one would assume that you cannot launch tokens on these blockchains. However, the most recent developments tell us otherwise. In the past few weeks, the BRC-20 tokens have been trending and hyped up to the core. For your information, BRC-20 is a token standard on Bitcoin; and yes, you heard that right.
Until today, we have seen various Ethereum token standards, with ERC-20 and ERC-721 being the most prominent ones. Nevertheless, no one saw a Bitcoin token standard coming. We must note, however, that the BRC-20 Bitcoin token standard is experimental. So, what are BRC-20 tokens? What is the Bitcoin token standard? What does BRC-20 mean for Bitcoin? Will Litecoin and Bitcoin Cash follow the steps of Bitcoin? How does tokenization affect the overall market performance of Bitcoin? Throughout this article, we will answer every single one of these questions and dive deeper into the BRC-20 standard and its implications for the market.
What Are BRC-20 Tokens?
BRC-20 tokens, an exciting concept, are the work of an anonymous developer named Domo. Launched on March 9, 2023, these tokens have reshaped the way we perceive Bitcoin. Some crypto enthusiasts believe that BRC-20 tokens highlight Bitcoin’s potential beyond being simply digital gold. Bitcoin advocates, however, do not like this experimental token standard, mainly because it forces the blockchain to work in a way that it wasn’t designed to.
Unlike the typical token standards on Ethereum Virtual Machine (EVM) blockchains that leverage smart contracts, the BRC-20 standard deploys a unique mechanism. It allows users to store a script file on Bitcoin, which subsequently assigns tokens to individual satoshis, Bitcoin’s smallest unit. The process employs JSON data embedded into ordinal inscriptions, providing users with the capability to deploy, mint, and transfer tokens.
The JSON data initially used for BRC-20 tokens included the token’s name, the limit per minting process, and a maximum cap of the total supply. The sample looks similar to this:
This token standard, despite its experimental nature and fungibility, has gathered considerable attention within the Bitcoin community. Crypto enthusiasts have been intrigued by this concept. This led to many experimenting with the creation of their own BRC-20 tokens. Additionally, infrastructure providers associated with ordinals, including wallet services and marketplaces, have begun integrating BRC-20. This move enables their users to mint and trade BRC-20 tokens more easily. Of course, this, in return, has contributed to the growing ecosystem surrounding this token standard.
Top BRC-20 Tokens
Since the concept of BRC-20 tokens first arose, many projects made their debut in the crypto market. As of today, there are over 45 known cryptocurrency tokens that use the BRC-20 token standard. This is, however, without counting the non-fungible token (NFT) projects launched on the Bitcoin blockchain.
Five of the biggest BRC-20 tokens as of right now are:
- Ordinals (ORD) – $309 million market capitalization
- BOB (BOB) – $44 million market capitalization
- Bonk (BONK) – $17 million market capitalization
- PEPEBRC (PEPE) – $10 million market capitalization
- piza (PIZA) – $9 million market capitalization
These cryptocurrency tokens built on the Bitcoin ecosystem account for most of the value in this ecosystem. Last week, the joint market capitalization of BRC-20 tokes neared $1 billion as Ordinals reached a market capitalization of $500 million. This would be a huge milestone for the Bitcoin ecosystem.
Nevertheless, this surge in activity caused Bitcoin transaction fees to skyrocket to new highs, with individuals having to pay $30 for transactions. While high fees are common on the Ethereum blockchain, Bitcoin is known for its cheap transactions. Experts and Bitcoin advocates are blaming the BRC-20 token standard for this sudden surge in fees.
BRC-20 vs. ERC-20
BRC-20 and ERC-20 are closely related token standards, with BRC-20 using the ERC-20 model as motivation. However, differences emerge in how versatile they are, the level of acceptance they receive, their mechanism, and their maturity in regard to the crypto industry.
When it comes to ERC-20 tokens, they are considerably better. Currently, they provide more flexibility for cryptocurrency traders, mainly due to their long-established presence in the market. In contrast, the relatively recent introduction of BRC-20 tokens means they do not provide such flexibility for traders. This longevity doesn’t necessarily downplay BRC-20’s potential, but it does highlight the need for increased caution when trading such tokens. This comes as a warning given the volatile nature of trends in the crypto world. ERC-20 tokens also enjoy broader acceptance across various crypto wallets.
Smart contracts enthusiasts might find BRC-20 less appealing as it utilizes ordinal notation rather than smart contracts. As stated before, the BRC-20 token standard does not allow the creation of traditional smart contracts on the Bitcoin blockchain. Nevertheless, it does allow something else called ordinal notion; this carries out functions similar to smart contracts. Despite this, the new BRC-20 standard has gained a significant number of supporters who eagerly anticipate its trajectory in the market. As BRC-20 gains more fame, a growing number of traders are considering the possibility of it competing with the well-established ERC-20 standard.
Other than investor attention, the skyrocketing popularity of the BRC-20 token has unfortunately attracted criminal activities as well. Scammers are capitalizing on this new trend, leading to an upsurge in BRC-20 token scams and rug-pulling events.
The BTC-20 Token Standard Is Overwhelming For Bitcoin’s Ecosystem
Before we move on to Bitcoin Ordinals, it’s crucial to note that the Bitcoin blockchain, on which BRC-20 operates, often grapples with scalability issues and high transaction fees. This allegedly happens because of its proof of work consensus mechanism. Conversely, Ethereum, where ERC-20 resides, utilizes a proof-of-stake mechanism, generally considered more efficient. Also, Bitcoin advocates and believers are not supporting this new trend of BRC-20 tokens. This is because the Bitcoin blockchain is not built for such “experiments.”
Calling it BRC-20 (copying ERC-20) is a subversive attempt to make Bitcoin beta to Ethereum’s alpha.
Very bad marketing for Bitcoin.
— Chris Blec (@ChrisBlec) May 8, 2023
Nevertheless, the transaction fees on Ethereum are still very high and sometimes exceed $100 per transaction despite its migration to a proof of stake mechanism. For context, Ethereum used to be a proof of work network but migrated to a proof of stake network. The implications of these distinct mechanisms on their respective tokens add another layer to the BRC-20 vs. ERC-20 comparison.
The Bitcoin Ordinals; The New Type Of NFTs
Bitcoin Ordinals have emerged as a hot topic of conversation within the Web3 community. Introduced by software engineer Casey Rodarmor on January 21, this protocol has gained swift attention. Until today, there have been over 640,000 Ordinals already minted. However, the comprehension and acquisition of these Ordinals remain doubtful to many, mainly due to the high entry barriers.
Looking to trade Ordinals Inscriptions (aka Bitcoin NFTs)?
You’ll have to string together a web of tedious tasks to make it happen. Here’s everything you need to know. 🧵
— nft now (@nftnow) February 13, 2023
Bitcoin Ordinals fundamentally reimagine how the single units of Bitcoin can be used. For your information, single units of Bitcoin are called satoshis or sats. A single Bitcoin comprises 100,000,000 satoshis. The innovative Ordinals protocol facilitates the inscription of data on each of these satoshis. This then results in the creation of an Ordinal. This data, interestingly, can foster something similar to smart contracts, thereby enabling the formation of non-fungible tokens (NFTs) directly on the Bitcoin blockchain.
While this process suggests a straightforward connection between NFTs and Ordinals, the relationship is slightly more nuanced. Although it’s expedient to depict Ordinals as Bitcoin’s version of NFTs, there are some crucial differences between the two. Therefore, a deeper understanding of these distinctions is important for anyone interested in engaging with Bitcoin Ordinals. This understanding will not only help prospective buyers and creators navigate this fresh concept but also prepare them to tackle the associated risks and potential rewards.
Bitcoin Ordinals vs. Traditional NFTs
Non-fungible tokens (NFTs) built on Ethereum or Ethereum Virtual Machine blockchains typically utilize the Interplanetary File System (IPFS), a decentralized file storage system, to link to off-chain data. For instance, some NFT creators modify the metadata of individual NFTs to enhance image resolution. NFT owners might then be requested to update their metadata on platforms like OpenSea to view the enhanced images.
This capability of NFTs to change their metadata exposed an imperfection that software engineer Casey Rodarmor aimed to rectify with the introduction of the Bitcoin Ordinals protocol. In Rodarmor’s view, conventional NFTs are “incomplete” as they rely heavily on off-chain data. Conversely, Ordinals are “complete” since all the data they require is inscribed directly on-chain. This distinctive feature led Rodarmor to label Ordinals as digital artifacts, rather than Bitcoin NFTs.
Furthermore, while traditional NFTs often include creator royalties, digital artifacts don’t. Rodarmor believes an Ordinal embodies the ideal form of what NFTs should and can be, aligning closely with the inherent characteristics of inscriptions.
This narrative suggests that Bitcoin Ordinals might not only represent a cultural shift for Bitcoin but could potentially also offer technical advancements over traditional NFTs. For those ready to engage with this potential revolution, the subsequent steps involve understanding how to purchase, receive, and securely store these new digital artifacts.
Top Bitcoin Ordinal Projects
There have been several Bitcoin Ordinal projects launched over the past few months. Each one of them has had its share of fame and attention. Of course, however, the Ordinal Punks is the one that stands out more because it is based on the CryptoPunks project. Without further adieu, let us take a look at the top Bitcoin Ordinal projects.
The Ordinal Punks is a Bitcoin Ordinal project launched some months ago. Just a few weeks after its debut, Ordinal Punks began getting worldwide attention, with some individual Punks selling for hundreds of thousands of dollars. While this sector of the Bitcoin ecosystem is extremely young, Punks is just one of the few projects that emerged there. To wrap it up, Ordinal Punks is a set of 100 Bitcoin NFTs minted within the first 650 Inscriptions on the Bitcoin network.
Yuga Labs recently ventured into the Ordinals realm with a collection named “TwelveFold.” Out of the 300 pieces, 288 were auctioned while the remaining 12 were retained for contributions, donations, and charitable purposes. Yuga Labs’ artistic team meticulously crafted the collection’s dot-like pieces using 3D modeling, algorithmic construction, and premium rendering tools.
Degods on Bitcoin is currently leading in 24-hour volume on Bitcoin, exceeding the combined value of all other Ordinal projects. Originally a major player within the Solana ecosystem, the DeGods community is now expanding its influence across multiple blockchain networks. The DeGods team, in a recent interview with nftnow, expressed their aspiration to become the “number one NFT community on every chain.”
OnChainMonkey (OCM), an Ethereum-based collection, presents a unique contrast. With the 20,219th Inscription, the OCM team minted 10,000 Ordinals into a single Inscription, making it one of Bitcoin’s inaugural 10k collections. The team emphasized that the size of the Inscription is under 20,000 bytes, suggesting a scalable method for future collections to create NFTs on Bitcoin without overloading the network.
Taproot Wizards is another innovative project that starts from Inscription #652. Udi Wertheimer, a Web3 developer, has crafted a collection of hand-drawn NFT wizards. Notably, this project is credited with the largest block and transaction in Bitcoin’s history, measuring a whopping 4MB.