What are BRC-20 tokens? An introduction

Introduction

BRC-20 tokens are an experimental and inefficient token standard designed to create fungible tokens in the bitcoin block chain. Inspired by ethereum ERC-20 tokens, BRC-20 tokens take advantage of the bitcoin ordering protocol to register data in individual satoshis, making them transferable and negotiable.

Origins of the BRC-20 chips

The Token BRC-20 standard was introduced by a pseudonym developer called Domo in March 2023. This development occurred shortly after the launch of the bitcoin ordinal protocol in January 2023 by Casey Rodarmor, which allowed users to register data in Individual satoshis, which allows the creation of the creation of creation, which allows creation, which allows the creation of creation, allowing Satoshis, which allows creation, which allows creation, which allows creation, which allows creation. nft in the bitcoin block chain. The first BRC-20 file was “Ordi”, which quickly gained popularity and led to the creation of numerous other BRC-20 tokens.

The introduction of BRC-20 tokens aimed to bring the flexibility of the fungible tokens to the bitcoin network, similar to how ERC-20 tokens expanded the ethereum ecosystem. However, BRC-20 tokens differ significantly from their ethereum counterparts in terms of functionality and implementation.

How the BRC-20 tokens work

BRC-20 tokens use the ordinal protocol to register JSON data in Satoshis. These data define the properties and functions of Token, such as implementation, minting and transfer. Unlike ERC-20 tokens in ethereum, BRC-20 tokens do not use intelligent contracts, which makes their functionality more limited. However, its simplicity allows to the easier asset to the bitcoin network.

Deployment and coin: The process begins with the implementation of a Token registering its properties in a Satoshi. Once implemented, tokens can be coined in specified amounts and transferred among users through bitcoin transactions. Json's data includes details such as the name of the Token, the maximum supply and the coinage conditions.

Token transfer: The transfer of BRC-20 tokens implies creating a new registration that specifies the transfer details. This inscription is included in a bitcoin transaction, which makes the transfer immutable and verifiable in the block chain.

Pros and cons

Pros:

1. Simplicity: The absence of intelligent contracts simplifies the creation and transfer of tokens, which makes it accessible for a broader range of users.
2. Security: Take advantage of bitcoin security characteristics guarantees a high level of trust and immutability.

Cons:

1. Lack of intelligent contracts: The inability to use intelligent contracts restricts functionality and possible cases of use of BRC-20 tokens.
2. Network: BRC-20 tokens are subject to the prioritization of bitcoin of safety and decentralization over the speed of the transaction, which can result in higher rates during high demand periods.
3. Network congestion: The popularity and bad design of these tokens led to higher transaction and congestion rates of the network, particularly at the time of launch, since the promotion and popularity are at the maximum levels. As popularity decreased, so congestion did.
4. Limited interoperability: Being specifically adapted for the bitcoin network, BRC-20 tokens cannot interact with other blockchain ecosystems.

Applications and practical examples

Decentralized application tokens: A developer creates a new token for a decentralized application (DAPP). When recording the details of the Token in a bitcoin transaction using the ordinal protocol, the developer can administer the token directly in the bitcoin block chain without the need for additional layers or complex intelligent contracts. This token can be used within the DAPP for several functions, such as access control, rewards or governance.

Tokenized assets: If a company wants to token your assets, such as actions or real estate, in the bitcoin block chain, with BRC-20 tokens, the company can register tokens that represent these assets, allowing a transfer of safe and transparent property. This can simplify the process of purchase, sale or transfer of the property of these assets while taking advantage of bitcoin's robust security.

Loyalty points system: A company could implement a loyalty points system using BRC-20 tokens. When creating and administering loyalty points as tokens, customers can win, transfer and exchange points directly in the bitcoin block chain. This guarantees transparency and security, reducing the risk of fraud and increasing customer confidence.

Community Tokens: A community group can decide to create their own token to facilitate various activities and rewards within the community. Using BRC-20 tokens, the group can register tokens that members can use to participate in events, vote on community decisions or rewarding contributions. This encourages a sense of property and commitment between community members.

BRC-20 tokens are often marketed as solutions for a variety of applications as described above, from decentralized applications to tokenized assets, but in practice, they often attract speculative trade and gambling. Although they use the safe network of bitcoin, its main use has quickly become the creation and trade of tokens of low -value digital memes and assets. This reflects a broader trend in the cryptographic world, where the promise to solve real world problems is often eclipsed by an approach to short -term gains and speculative investments. bitcoin's true value lies in his safety, decentralization and paper as solid money, which is often overlooked in the hurry to exploit Token's latest trends.

Rune protocol: a newer and more efficient solution

The runes protocol, introduced by Casey Rodarmor, presents a more efficient and scalable alternative to BRC-20 tokens. When using the UTXO of bitcoin and the OP_RETURN Operation Code, the runes manage to avoid the creation of non -scare UTXO, thus reducing the congestion of the network and improving performance. Unlike BRC-20, which is based on JSON's inscriptions that can block the network, the runes offer a simplified process for the creation and transfer of tokens, integrating perfectly with the Lightning Network and admitting a variety of types of wallets. This makes the runes a higher option for developers who seek to create and manage tokens in the bitcoin block chain with greater efficiency and flexibility.