BRC-20 tokens are the latest innovation of the Ordinals Protocol and have taken over timelines across Crypto Twitter in recent weeks.
BRC-20 is an experimental token standard that has enabled the deployment, minting, and transferring of fungible tokens on the Bitcoin blockchain. While total market capitalization for these tokens has even touched US$1B, the tokens themselves are relatively simplistic and do not have any smart contract functionality, like ERC-20 or BEP-20 tokens.
Due to the minting frenzy in early May, the Bitcoin mempool saw high congestion, and transaction fees on the network spiked.
Many in the ecosystem have welcomed higher fees, given the importance of supplementing miner revenue as block rewards decline over time. However, others have been more critical in discussing the disadvantages of pricing out users in more price-sensitive areas.
In this early stage of the market, BRC-20 tokens bring considerable risks and need more supporting infrastructure. As stated by the founder, this is an experiment, and potential risks should be rigorously scrutinized.
Ordinals, Inscriptions, and BRC-20 tokens have helped to demonstrate that there is clear organic demand for Bitcoin blockspace outside of the traditional monetary use case. This could be a critical factor for the long-term sustainability of the Bitcoin security model.
Developments in Bitcoin layer-2s, infrastructure support for BRC-20, and further token design innovation are the likely next steps in this saga.
BRC-20 Tokens: A Primer
Binance Research (Shivam Sharma)
May 18th, 2023