The recent surge in hype surrounding BRC20 tokens is believed to have driven up Bitcoin transaction fees. However, there are good reasons to suggest that the hype may not last for long.
While the Bitcoin community is known to occasionally exaggerate the importance of certain developments, some see BRC20 tokens as a serious threat to Bitcoin's existence. They argue that these tokens are responsible for driving up fees and should be immediately reviewed. Others see BRC20 tokens as a long-term solution for miner financing on the blockchain. The hype has led to a mix of fear, uncertainty, and enthusiasm, all of which can be overwhelming.
However, the hype around BRC20 tokens may be unfounded. These tokens are not new or innovative, and tokens on Bitcoin have existed since 2014, including Mastercoin, Counterparty, and Omni. Even the most successful token, Tether (USDT), started as a token on Bitcoin. But it wasn’t until Ethereum came along in 2016 that these tokens really made their way into wallets.
The Ethereum Virtual Machine (EVM) became a cross-blockchain standard and the entire token economy, including developers, entrepreneurs, and investors, enthusiastically migrated to Ethereum. This marked the beginning of ICOs, DeFis, and automated NFT auctions. The integration of Ethereum with smart contracts brought something new to the market, which was in great demand.
Now, Bitcoin is reinventing tokens with BRC20, based on Taproot and Ordinals. While the technical aspects of BRC20 tokens are intriguing and appear to be successful, they do not introduce anything new. Inscriptions do not add the concept of NFTs, and BRC20 tokens are not similar to tokens on Ethereum. The applications are accordingly unoriginal, such as trading images as NFTs and memecoins. As of 2021, these types of applications are already available.
So why should the token economy turn to Bitcoin? BRC20 tokens have no technical advantages, only disadvantages. They lack smart contracts, which are not very compatible with existing ones. They have no unique selling point or USP. Only minimalists believe that only Bitcoin is decentralized and truly secure. The Bitcoin community has built a mythology around the currency, but this should only be relevant to a few tokens.
BRC20 tokens or other tokens on Bitcoin may find a niche market associated with them in the future, such as collectibles. However, this does not apply to current tokens. Enthusiasm for them will soon dry up.
Meanwhile, there is a banking crisis in the US that has killed victims like First Republic Bank. Bob Mitchell, chief investment officer at JPMorgan Asset Management, doesn't think the crisis is over yet. He believes that the banking industry is one of the most heavily regulated and heavily capitalized industries on the planet, and the collapse of First Republic Bank should never have happened. The regional banking system is vital to the US, and regional banks rely heavily on the FDIC and the Federal Home Loan Bank for additional cash. Mitchell believes that when these two programs expire, we don't know how they will operate.
In conclusion, the hype around BRC20 tokens is likely to fade. These tokens do not introduce anything new to the market, and they have no technological advantages over other tokens. Enthusiasm for them will soon dry up. Meanwhile, the banking crisis in the United States is not over, and it is unclear how the regional banking system will function when the FDIC and Federal Home Loan Bank programs expire.
