BRC-20 is a homogeneous token standard created using ordinal inscriptions on the bitcoin blockchain.

Should Bitcoin be used only as digital gold, or should it implement more complex functions? The emergence of Ordinal NFT has aroused a new round of attention to bitcoin, and the community has begun to try to use the irreversible modification of the bitcoin network to store data.

One such innovation is the use of a standard called BRC-20 to create native, fungible tokens on bitcoin. The BRC-20 token cleverly circumvents the programmable limitations of the bitcoin network, and uses ordinal inscriptions to create semi-homogeneous tokens.

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What are Bitcoin Ordinals?

First, let's take a brief look at Ordinals. Ordinals engraved the data in the smallest unit of bitcoin, "satoshi" (satoshi). It uses a method calledordinal theoryA logical ordering system that assigns each satoshi a unique serial number, and then engraves arbitrary data in each satoshi.

The data engraved in Satoshi can be images, video, audio, text or even complete applications, such as a simplified version ofDOOMimage description

Many types of data can be embedded in inscriptions, but there is now a growing use case for textual data to be inscribed within each Satoshi.

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What is the BRC-20 Token Standard?

The BRC-20 token was originally launched in a demo by an anonymous developer on March 9, 2023releaseof. This developer used an experimental standard to create native, fungible tokens on the bitcoin network. It is worth noting that the BRC-20 standard does not use smart contracts like the mainstream token standards on the EVM blockchain, but stores script files in the bitcoin network, and uses this file to share tokens with each satoshi one by one. correspond. BRC-20 tokens embed JSON data in ordinal inscriptions so users can deploy, mint, and transfer tokens.

The first batch of BRC-20 tokens contains the following JSON data, which defines the name of the token, the amount minted each time (up to 1000), and the total amount (up to 21 million):

Although according to the creators of BRC-20, these tokens are only to explore the feasibility of creating homogeneous tokens in the bitcoin network, they have aroused strong attention in the bitcoin community. Others have also started experimenting with creating their own BRC-20 tokens. At the same time, Ordinals infrastructure providers, including wallet services and trading markets, have also begun to integrate BRC-20, allowing users to mint and trade BRC-20 tokens.

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Analysis of the advantages and disadvantages of BRC-20 token

Although BRC-20 tokens are regarded as homogeneous tokens, it is more accurate to say that they are "semi-homogeneous tokens" because they can only be traded in set increments.

To mint BRC-20 tokens, users must first create a mint JSON NFT, defining the number of mint tokens. Then, users have to pass the priority gas auction mechanism to have the opportunity to complete the minting. If you want to trade BRC-20 tokens in the bitcoin network, the seller must create a transfer NFT, divide the original mint NFT into several small parts, and then sell the tokens to buyers. If a buyer wants to buy a certain amount of BRC-20 tokens, he needs to first find a seller who sells that amount of tokens.

In addition, users who want to view the balance of BRC-20 tokens in their wallets must run an off-chain indexer, which runs a set of rules to interpret the inscription. However, it is not enough to have a full bitcoin node to complete these tasks.

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BRC-20 vs. ERC-20 

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Future Prospects for Bitcoin Network Tokens

Although BRC-20 is not the first attempt to create assets in the bitcoin network, earlyColored Coinsand the recentTaroAll related attempts have been made, but BRC-20 has adopted an innovative method to create native semi-homogeneous tokens in the bitcoin network.

While even the creators of BRC-20 are uncertain about its long-term viability, the open source developer community may seize this opportunity to innovate and continue to push new boundaries of bitcoin scripting functionality.