BRC-20: Bitcoin’s New Token Standard
Since the development of Bitcoin Ordinals, web3’s new twist on NFTs, token standards are finding their way onto the Bitcoin blockchain. Built on top of the ordinal layer, BRC-20 tokens are offering new possibilities for the future of Bitcoin and its place in web3.
Unlike popular altcoins like Ethereum or BNB, bitcoin offers no smart contract features which originally made token standards within the network impossible, but the ability to engrave individual sats with ordinals is opening the door to web3 that Bitcoin was originally locked out of.
What is BRC-20?
BRC-20 is a token standard unlike any other on the web3 market because it doesn’t use a smart contract. This means that, while there are some limitations on how the new tokens can be exchanged with others, it is cheaper in the long run as less gas needs to be paid by users to support the smart contract feature.
This adds another layer of security as well to the tokens and the projects currently being built around them because, without smart contracts, there are fewer vulnerabilities for bad actors to target with hacks. Efficiency can also be improved with the new token standards as the lack of a smart contract means that BRC-20 coins are peer-to-peer only, reducing traffic congestion that can be created by DeFi platforms during high activity.
How are BRC-20 tokens exchanged?
Obviously, without the inclusion of smart contracts, many might be wondering: how are BRC-20 tokens traded? Without smart contracts, there are no DeFi exchanges to swap tokens or lending protocols to deposit liquidity.
To solve this problem, BRC-20 tokens are traded through Atomic Swaps, a peer-to-peer exchange where both the buyer and seller agree on a price rate and the number of tokens being exchanged. Although this isn’t ideal compared to more structured methods of exchange on Ethereum, BRC-20 is still highly developmental and services could appear soon if investors find enough reasons to consider BRC-20 tokens more seriously.
Investing in BRC-20 tokens
Due to how recent BRC-20 tokens are there have not been any major projects started with them yet. So far, the market for BRC-20 coins has been littered with the same memecoins that we see on Ethereum (especially after the wave of value created by Pepe).
Some of the current tokens that have gained significant exposure on the Bitcoin network as BRC-20 tokens include PEPEBRC, MEME BRC-20, PIZABRC, and NALS. While these projects don’t propose the greatest utilities, they’ve received significant speculative interest from investors which has caused many of the tokens to double and even triple in value since they began in late March and early April.
The future of Bitcoin is evolving
As exciting as new developments on the Bitcoin network can be, BRC-20 still has a way to go before it can be truly innovative. So far, most of the tokens being traded on the Bitcoin network are experiments just to see how well they work. It will take some time before the right minds are exposed to the new technology and can create something more practical and interesting for ordinary crypto investors.
However, the development of BRC-20 tokens does show us that the Bitcoin network is capable of evolving through its open-source nature. Unlike Ethereum, Bitcoin has been largely ignored in the web3 discourse, but the introduction of token standards on the blockchain proves that Bitcoin won’t become outdated anytime soon and that it could soon provide many of the same features and utilities that we all thought were unique to Ethereum.
