BRC-20 Tokens Explained: Fungible Tokens on the Bitcoin Blockchain

With the BRC-20 standard, fungible tokens can be created directly on the Bitcoin blockchain. How the standard works, how it differs from ERC-20, and what role it plays today alongside Runes.

What are BRC-20 Tokens?

BRC-20 is a standard for fungible tokens on the Bitcoin blockchain. The idea emerged shortly after the introduction of the Ordinals protocol and for the first time brought user-generated tokens directly to Bitcoin – comparable to the ERC-20 standard on Ethereum.

The Origin by Domodata

In January 2023, 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.

This quickly led to the first Bitcoin NFTs. Barely 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 named Domodata published his idea on Twitter on March 9, 2023. Domodata named his invention BRC-20, referencing the well-known ERC-20 tokens of the Ethereum blockchain. The new Bitcoin tokens were intended to be very similar to the Ethereum model.

Domodata designed the first BRC-20 token under the name ORDI and defined a maximum supply of 21 million units – a tribute to Bitcoin’s own cap.

How BRC-20 Tokens Technically Work

Although the basic idea of BRC-20 and ERC-20 is the same, there are differences in how they function. Unlike its Ethereum counterpart, a BRC-20 is not a smart contract. Instead, a JSON script file is stored on the blockchain, which remains associated with a specific satoshi.

Thanks to this technology, users can create their own tokens that exist on Bitcoin according to self-determined metrics. The creator can thus define the maximum supply of the token and how many more can be created in the future.

Every action – whether deploy (creation), mint (issuance), or transfer – requires its own Inscription. The allocation of who owns how many tokens is not natively calculated by Bitcoin, but managed by so-called indexers like Unisat, which read all BRC-20-relevant Inscriptions and determine the current state.

BRC-20 vs. ERC-20: What’s the Difference?

At the same time, BRC-20 tokens cannot interact with smart contracts. The functionality of Bitcoin tokens is therefore comparatively rudimentary. Inventor Domodata himself quickly declared it to be just a gimmick and should never be considered real value.

Whether the user community adheres to this guideline remains questionable. The creation of the ERC-20 token standard contributed to Ethereum’s massive success. Many independent projects were thus able to easily create their own tokens. The most famous ERC-20 token is the stablecoin Tether (USDT).

ERC-20 tokens take on various roles. They serve not only as stablecoins but also as governance tokens, utility tokens, or in-game currency. The Bitcoin equivalent cannot fulfill all these roles.

BRC-20 vs. Runes: What Replaced the Standard?

BRC-20 was the pioneer for fungible tokens on Bitcoin, but it has technical weaknesses that have since been exploited by a successor: Bitcoin Runes.

The Junk UTXO Problem

The biggest criticism of BRC-20 is its inefficient use of the Bitcoin network. Since each token action – creation, mint, transfer – generates its own Inscription, numerous superfluous transaction remnants, known as “junk UTXOs,” are created. These burden the blockchain and increase network fees for all users. During the peak of the BRC-20 hype in 2023, this led to massively congested blocks and double-digit dollar fees per simple Bitcoin transaction.

Runes as a Technical Advancement

Arising from this criticism, Casey Rodarmor developed the Runes protocol in 2024, which went live just in time for the Bitcoin halving in April 2024. Runes is rewritten from the ground up, is not based on Ordinals, and uses the UTXO model more efficiently. A single transaction is sufficient for a simple transfer – BRC-20 requires three.

Today, Runes has largely replaced BRC-20 as the dominant standard for fungible tokens on Bitcoin. BRC-20 continues to exist and has an active community, but it now plays only a minor role in trading volume statistics.

In addition to Runes, there were other attempts to address the weaknesses of BRC-20. The ORC-20 standard was introduced in 2023 as a technically superior successor, but it never gained widespread adoption and remained a niche project.

Well-known BRC-20 Tokens

Despite being technologically surpassed by Runes, some BRC-20 tokens have established themselves:

• ORDI – The very first BRC-20 token, designed by Domodata. Considered a blue chip of the ecosystem and listed on major crypto exchanges like Binance, OKX, and Bybit.
• SATS – Named after Bitcoin’s smallest unit, with a maximum supply of 2.1 quadrillion units (corresponding to the total number of possible satoshis).
• RATS – One of the first major memecoin successes on Bitcoin.

Where can you trade BRC-20 Tokens?

Trading BRC-20 tokens requires a compatible Bitcoin wallet with Taproot support. Established platforms include:

• Unisat: Pioneer platform with its own marketplace and Inscription tool
• OKX: Offers BRC-20 trading directly via its integrated marketplace
• Binance, Bybit, and other CEXs: Some larger BRC-20 tokens like ORDI are also tradable on centralized exchanges

Volatility is extreme for BRC-20 tokens. In cases of low demand, especially for tokens without underlying utility, a total loss cannot be avoided.

Conclusion: BRC-20 Surpassed, but Not Gone

BRC-20 was the standard that first made fungible tokens on Bitcoin conceivable. Technically, it has long been surpassed by Runes – more efficient, cheaper, better integrated into Bitcoin’s UTXO model. Nevertheless, BRC-20 lives on: ORDI and some other tokens have established themselves as fixtures in the ecosystem.

In the long term, BRC-20 is likely to play a secondary role alongside Runes. New projects almost exclusively choose Runes today.