What Is the BRC-20 Token Standard?

The BRC-20 token standard is an experimental token standard that uses ordinal inscriptions to enable the minting and transfer of fungible tokens on the Bitcoin blockchain. The BRC-20 token standard is similar to the ERC-20 token standard on Ethereum and EVM blockchain networks.

Key Takeaways

• Against the original design of the Bitcoin blockchain, BRC-20 runs parallel with the Bitcoin coin on the Bitcoin network, just like smart contract tokens on the Ethereum blockchain.
• BRC-20 tokens are created by attaching a JSON to satoshis through Bitcoin ordinals. The JSON code bit defines every characteristic of the BRC-20 token including the minting, and distribution, the bitcoin network decodes this information once they are deployed.
• BRC-20 tokens are minted and spent like normal tokens. A Bitcoin ordinal wallet is required to mint BRC-20 tokens, and there is a limit for each mint.
• The BRC-20 token standard has seen a rise to prominence with the market capitalization reaching over $600 million and thousands of BRC-20 tokens minted already. Notable BRC-20 tokens include the Ordinal token (ORDI) and OXBT.

The BRC-20 token market sits at an excess of $600 million and has seen over $200 million in daily trading volume at the time of writing. These figures are contributed by over 14,000 BRC-20 tokens. Like the Ethereum blockchain, Bitcoin enthusiasts can now create, mint, and transact tokens (other than bitcoin) on the Bitcoin blockchain.

BRC-20 token standard tokens are a technological progression on the Bitcoin blockchain, and let’s take a look at what they are and why they’re shaking things up.

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What are BRC-20 Tokens?

BRC-20 tokens started out as an experiment to create fungible tokens on the Bitcoin network.

BRC-20 tokens are created through JSON inscriptions on satoshis through Bitcoin ordinals. They resemble smart contract tokens with the JSON defining the core features of the BRC-20 token. However, unlike smart contracts where conditions can be changed, inscriptions are immutable as they are inscribed directly to a satoshi, and thus cannot be modified by any counterparty.

In addition to benefiting from Bitcoin’s popularity and prestige, BRC-20 tokens inherit the security and the decentralization of the Bitcoin network and can be sent between peers, just like any other cryptocurrency.

While BRC-20 tokens function like ordinary crypto tokens, they are powered by an almost different back-end technology and are created in a completely different way. BRC-20 tokens are minted by the Bitcoin community, where each ordinal wallet can freely mint BRC-20 tokens once they are deployed. There is usually a limit and total mints cannot exceed the total supply.

How Are BRC-20 Tokens Created?

Satoshis are the smallest unit of currency on the Bitcoin network, where a hundred million satoshis make up one Bitcoin. Every satoshi on the Bitcoin network is numbered in the order of issuance and is transferred in this order. This numbering system is known as ordinals. Ordinals identify satoshis as single units and are able to tag them with specific data. Previously, ordinals only tagged satoshis with order numbers.

A loophole in the 2021 Bitcoin Taproot upgrade opened up the possibility of attaching even more data to each satoshi using the ordinals protocol. Ordinals turn satoshis into bearers of public data. However, satoshis with extra public data can still be spent like the normal ones.

Since then, Bitcoin developers have been exploring use cases of this new ability, giving rise to ordinals NFTs and BRC-20 tokens.

Ordinal NFTs are non-fungible and are created by attaching a digital asset file such as images to a satoshi. BRC-20 tokens are fungible and are created in a different way.

While ordinal NFTs attach digital assets to satoshis, the BRC-20 token standard attaches a JSON (Javascript Object Notation) code to satoshis using the ordinals protocols. The JSON contains pieces of executable code bits that can be deployed on the Bitcoin network. These define every aspect of the token including the supply, minting limit, and the token’s Identity.

On successful deployment, any Bitcoin ordinals wallet can connect to the network and mint the token, which can be spent like any other cryptocurrency. ORDI is the first fungible token created using the BRC-20 standard on the Bitcoin blockchain. It currently trades at $17.89 with a market cap of over $350 million at the time of writing.