DeutschAfter the Bitcoin Ordinals protocol took the largest cryptocurrency community by storm, an ingenious programmer is using the new development to advance his own invention. Thanks to BRC-20 tokens, individual, fungible tokens can be created on the BTC blockchain. Are they threatening Ethereum?
BRC-20: What Can the New Bitcoin Tokens Do?
In January, independent developer Casey Rodarmor surprised the Bitcoin scene. He developed the Ordinals Protocol, which enables so-called inscriptions on the Bitcoin blockchain. Since then, data can be attached to individual Satoshis.
The first Bitcoin NFTs quickly emerged and enjoyed incredible popularity. Almost two months later, another programmer used the protocol to enable fungible user-generated tokens on Bitcoin for the first time instead of non-fungible tokens.
The user with the name Domodata published his idea on Twitter on March 9, 2023. A day earlier, he had carried out initial tests, which an unknown interested party joined.
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Domodata named his invention BRC-20, in reference to the well-known ERC-20 tokens of the Ethereum blockchain. The new Bitcoin tokens are said to be very similar to the Ethereum model.
Thanks to the new technology, users can create their own tokens that exist on Bitcoin according to self-determined metrics. The creator can thus determine the maximum supply of the token and how many of them can be created in the future.
Domodata designed the first BRC-20 token under the name Ordi and defined a maximum supply of 21 million units.
Are BRC-20 Tokens also Smart Contracts?
Although the basic idea of BRC-20 and ERC-20 is the same, there are differences in how the tokens work. A BRC-20 is not a smart contract – unlike its counterpart on Ethereum. Instead, a JSON script file is stored on the blockchain, which remains associated with a specific Satoshi.
At the same time, BRC-20 tokens cannot interact with smart contracts. The functionality of the new Bitcoin tokens is therefore comparatively rudimentary. Inventor Domodata himself quickly explained that it was just a game and should never be seen as real value.
Whether the user community adheres to this requirement remains questionable. The creation of the ERC-20 token standard helped Ethereum to its massive success. Many independent projects were able to create their own tokens in an uncomplicated way. The best-known ERC-20 token is the stablecoin Tether (USDT).
Can Bitcoin Tokens Displace Ethereum’s ERC-20?
The inventor’s cautionary words are not unfounded. The tokens have no actual function. Due to the lack of smart contract compatibility, they cannot compete with the ERC-20 tokens.
ERC-20 tokens take on a wide variety of roles. They serve not only as stablecoins, but also as governance tokens, utility tokens, or as in-game currency. The Bitcoin equivalent cannot take on all of these roles.
Nevertheless, there are initial projects that are based on the new technology. These include the developers of the Ordinals application UniSats, who designed a marketplace specifically for BRC-20 tokens.
By the end of April 2023, over 4,000 different BRC-20 tokens are already listed on the marketplace. The most popular token named Meme records over 3,200 individual blockchain addresses as owners at the time.
Under the name Taro, the studio Lightning Labs is developing an application that should allow users to create their own tokens. Taro builds on the Lightning payment network, which in turn uses the Bitcoin blockchain as a consensus layer. The BRC-20 tokens based on Ordinals exist natively on Bitcoin.
