BRC-20 tokens have become the talk of the town in the world of cryptocurrencies, but what exactly are they, and why should we pay attention? What are their unique characteristics compared to the Ethereum-based ERC20 tokens, and what is their potential impact on the decentralized finance (DeFi) ecosystem?
A New Token Standard on the Bitcoin Network
BRC-20 tokens are a novel type of tokens that operate on the Bitcoin network. Like ERC20 tokens on Ethereum, they empower developers to create tokens and construct decentralized applications (dApps) on the Bitcoin blockchain. This groundbreaking concept originated as an experiment by a Twitter user named @domodata, who showcased the deployment of token contracts and the minting and transfer of tokens using ordinal inscriptions of JSON data.
While ERC20 tokens gained popularity due to Ethereum’s smart contract capabilities, BRC-20 tokens leverage the security and stability of the Bitcoin network for dApps and token projects. In contrast to ERC-20 tokens that rely on smart contracts, BRC-20 tokens offer new possibilities for Bitcoin, including implementing DeFi and non-fungible tokens (NFTs) – features previously exclusive to Ethereum and other blockchains.
Wallets, Tracking Transactions, and Gas Fees
To store and manage BRC-20 tokens, users require a compatible wallet. Wallets like the Ordinals Wallet support the new Bitcoin token standard, with more options likely emerging as the ecosystem expands. Tracking transactions and wallet balances can be accomplished through blockchain explorers like Blockchair. Similarly to ERC20 tokens, BRC-20 token transactions necessitate gas fees to compensate miners for processing transactions and securing the network. These fees fluctuate depending on network congestion and may range from $10 to $20.
Marketplaces such as Unisat and the MagicEden NFT platform enable users to purchase BRC-20 tokens directly from other individuals. Before engaging in trading, users may need to mint tokens and accumulate points to gain access to BRC-20 marketplaces. Users must conduct thorough research before minting or purchasing BRC-20 tokens, as some projects may prove to be of low quality or “shitcoins” that could swiftly lose value.
BRC-20 Tokens and the Future of DeFi
With the continuous growth of the BRC-20 token ecosystem, we may witness the emergence of decentralized finance (DeFi) applications on the Bitcoin network, potentially ushering in a new era of DeFi. The prospects of BRC-20 tokens will be influenced by various factors, including the success of dApps built on the Bitcoin network, the expansion of the BRC-20 token ecosystem, and Bitcoin’s ability to handle increased demand.