Introducing BRC-20: Tokens on the Bitcoin Network
Uncover the trending phenomenon of BRC-20 tokens, triggered by the Taproot upgrade on the Bitcoin network. Explore the reasons behind their popularity, the challenges they pose, and two methods to acquire them, including using centralized exchanges or the Ordinals wallet.
Recently, the Bitcoin Network has experienced a rapid surge in transaction costs, posing challenges for users seeking to transact small amounts of money, as was traditionally viable on the Bitcoin blockchain.
This surge in transaction costs can be attributed to factors such as increased network congestion due to the introduction of BRC-20 tokens. As a result, users are looking for alternative solutions that offer lower transaction fees and faster processing times, such as the Bitcoin Lightning Network, a layer 2 solution.
In the following sections, we will dive into the new world of BRC-20 tokens, exploring their functionality, ways of acquiring them, and potential impact on the Bitcoin Network.
What is a BRC-20 Token?
BRC-20 tokens have emerged as an experimental token standard on the Bitcoin blockchain, enabling the creation and transfer of fungible tokens via the Ordinals protocol. This novel token standard, introduced in March 2023 by an anonymous developer known as Domo, has gained substantial attention in the first half of the year.
Though they may seem similar to Ethereum's well-known ERC-20 tokens, it's crucial to understand that BRC-20 tokens work in a different way. Unlike the Ethereum tokens, BRC-20 tokens don't rely on smart contracts for their operation. This means they might not be as attractive as ERC-20 tokens, which have proven several practical uses on the Ethereum blockchain.
However, it is important to remember that we haven't fully discovered the complete possibilities and real-world applications of BRC-20 tokens. Therefore, it may be wise to approach them with caution due to their experimental nature.
How BRC-20 Tokens Work - The Ordinals Protocol
The Ordinals protocol presents a new system for numbering satoshis, the smallest units of Bitcoin.
By assigning a unique serial number to each satoshi and tracking them throughout transactions, Ordinals enables users to make individual satoshis distinct by attaching additional data to them. This process, known as "inscription," forms the core functionality of Ordinals.
To understand the concept, it's important to know that a satoshi is the smallest unit of Bitcoin. It's named after Satoshi Nakamoto, the pseudonymous creator of Bitcoin. One Bitcoin can be divided into 100,000,000 satoshis, and each satoshi is worth 0.00000001 BTC.
Through the Ordinals protocol, the Bitcoin blockchain gains a new dimension, enabling the identification and differentiation of individual satoshis and opening up possibilities within the Bitcoin ecosystem.
This innovative protocol not only provides a system for numbering satoshis but also empowers the creation of unique non-fungible tokens (NFTs) and fungible tokens on the Bitcoin network.
Why are BRC-20 Tokens only trending now?
BRC-20 tokens have recently gained popularity following the introduction of the Taproot upgrade on the Bitcoin network in 2021.
This upgrade, which enabled the addition of data to the block space on Bitcoin, created the possibility of "minting tokens" with unique properties.
In the first half of 2023, a meme coin season emerged on Ethereum, led by tokens like PEPE and followed by others such as WOJAK, TURBO, and LADYS. Curiously, this trend extended to the Bitcoin network, attracting a significant amount of degen traders and causing network congestion and delays in transaction processing.
- In less than a month, PEPE reached a market capitalization of U$1.8 Billion. (The chart displays the daily closing market cap.)
How to buy BRC-20 Tokens
If you're a real degen trader seeking to jump into the hype of BRC-20 tokens, there are two methods you can explore to acquire them.
The first option is to use a centralized exchange that supports BRC-20 tokens, such as OKX, where you can easily trade these tokens just like any other asset.
Alternatively, you can purchase BRC-20 tokens directly through the Ordinals wallet. To get started, follow these step-by-step instructions:
1 - Visit ordinalswallet.com and create your Ordinals wallet. Always remember to do it safely, for more information, check our article explaining crypto custody.
2 - Once your Ordinals wallet is established and connected, navigate to the BRC-20 section.
3 - Inside the BRC-20 section, you'll find a list of available tokens. To initiate a purchase, simply select your desired token and click the "buy" button.
By following these steps, you can acquire your own BRC-20 token. It's important to note that BRC-20 tokens are highly volatile and still in the experimental stage, lacking real use cases.
→ Important note: BRC-20 tokens are not supported on Metamask, so please avoid sending or receiving any tokens through that wallet. Instead, follow the provided instructions from the Ordinals wallet to ensure a secure and appropriate method of funding.
The introduction of BRC-20 tokens on the Bitcoin blockchain has brought significant advancements to the crypto space.
These experimental tokens offer new possibilities for creating and transferring fungible tokens directly on Bitcoin.
While caution is needed due to their experimental nature, BRC-20 tokens demonstrate the potential for innovation in the Bitcoin ecosystem.
However, it's worth noting that BRC-20 tokens have sparked mixed reactions from the crypto community. Some individuals are critical of these tokens, arguing that they deviate from the original purpose of Bitcoin. With high fees on the network, concerns arise about the challenges faced by users when transferring funds.
On the other hand, supporters of BRC-20 tokens think that innovation is really important for the network to expand. They view these tokens as a way for developers to try out new ideas and improve the basic structure of the Bitcoin blockchain.
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