BRC-20 tokens are offering new opportunities for Bitcoin buyers
As the first blockchain and cryptocurrency, Bitcoin (BTC) paved the way for everything that has come since: intangible tokens (NFTs), smart contracts, tokenization, layer-2 solutions, and the rest. Because of Bitcoin's value to the cryptosphere, the protocol rarely changes, establishing the bedrock that underpins the rest of the market. With hundreds of billions of dollars and global trust in a decentralized network at stake, it doesn't make sense to intervene.
While swinging Bitcoin's codebase has brought stability and reliability, it has also made Bitcoin a bit… well, boring. Once the Bitcoin ecosystem has established a hub of innovation and a hive of activity, that momentum has shifted to second- and third-generation chains whose architectures are better able to support multiple use cases and applications. At least that was until the emergence of Ordinals, a technology that sparked a new wave of innovation in Bitcoin.
In the year Throughout 2023, the Bitcoin ecosystem is growing rapidly. Emerging asset classes, typified by Ordinals NFTs and BRC-20 tokens, have sparked widespread community enthusiasm, leading to a significant increase in BTC miners' earnings.
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Now, tokens can be issued on the Bitcoin network through projects whose security is anchored on the Bitcoin blockchain. And the best part? Mods don't need to change a single line in Bitcoin code. Additionally, the BRC-20 standards are rapidly evolving, positioning them to be an important new component in the BTC ecosystem in the future.
A coin creates many symbols
Ordinals is a protocol built on top of the Bitcoin blockchain. Each bitcoin can be divided into 100 million units, known as sats. Each of these sats can be uniquely identified using tokens and transmitted over the Bitcoin network along with this information. The concept of ordinals, developed by Casey Rodermore, has proven remarkably successful. It has opened the floodgates for a wave of Bitcoin-based NFTs. Because of this, an infinite number of tokens can now be traded in Bitcoin.
At first they were held captive by tech-minded bitcoiners who met the highest bar for inventing and trading Ordinal. The process, of course, requires sending sat to a Taproot-compatible wallet and writing metadata along with the transaction. Initially, this required running a Bitcoin node and familiarity with the command line interface, but code-free solutions have emerged and are responsible for including Ordinal, especially for the benefit of the Ethereum community.
NFTs were the first use case for the Ordinals protocol, but the same technology could be used to issue coins similar to the ERC-20 tokens that Ethereum supports. In fact, the token level issued for these Bitcoin-native assets has the same naming structure: BRC-20.
There are already projects to issue BRC-20 Bitcoin-based tokens, which will form a startup token ecosystem around Bitcoin and virtual currencies. A number of these tokens caught the market's imagination, finding their way to Tier-1 exchanges and spreading the word about the BRC-20 raid in the process.
From SAT to SATS
Most of the communities that have sprung up around Ordinals and Bitcoin are first and foremost focused on fun. Play, collect, speculate, communicate and interact before serious things like enterprise or institutional use. $ SATS is a perfect case in point. Bitcoin's own memecoin, SATS is naturally a BRC-20 token, but it's also much more.
A total supply of 2,100,000,000,000,000 $ SATS is literally 100 million times the supply of Bitcoin. In other words, there's an SAT for every SAT. Projects like this may not be changing the world, but they are making Bitcoin fun again, and in the process educating newcomers on key features embedded in Bitcoin's architecture.
Other BRC-20 tokens have carved out market share while strengthening the case for Ordinals over Bitcoin. The combined market capitalization of all BRC-20 tokens is slightly higher than $1.4 billion as of December 7 – much of which can be attributed to ORDI – suggesting there is plenty of room for growth.
Taproot enabled tokens are possible
The idea of issuing tokens on the Bitcoin network cannot be found in the Bitcoin white paper: that use case was not considered in 2008. In fact, it was not even possible to do that then. In the year This was made possible by the Taproot update that went live on the Bitcoin network in November 2021. Three months later, formal practices emerged, and the resulting NFTs were followed by various BRC-20 token projects.
Taproot allows data to be added to block space, providing a means of creating tokens on top of Bitcoin. A single satoshi has been created and information about the entire set of fungal symptoms has been attached. This is done using JSON data where the token name, token, availability and similar attributes are added. Although they share the same naming structure as ERC-20, BRC-20 tokens obviously work very differently. This is not surprising as this is technically a network solution not designed to support tokens.
While the architecture may be unusual, the net result is the same. Just as communities formed around shared tokens and common interests following the launch of Ethereum's ERC-20 tokenization phase, something similar is happening with Bitcoin. BRC-20s are not liked by all Bitcoiners, it is worth noting: some except for the block space that the tokens take, which can increase the fees. Others simply aren't interested in anything that isn't pure BTC.
Look forward
When Ethereum launched, it had the ability to support a rich and diverse ecosystem of token-based projects — and that's exactly what it ultimately did. It took time to establish communities and build utilities. Bitcoin and the BRC-20 standard are currently what Ethereum was in 2017: full of untapped potential.
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The key infrastructure connecting Bitcoin tokenization to EVM chains is being completed, with MultiBit's latest project moving forward here, launching a two-way bridge for BRC-20 and ERC-20 transfers. After 12 months, what does the BRC-20 landscape look like, and what opportunities does it present to those brave enough to get in early? In the year The rise of ERC-20 tokens and ICOs in 2017 saw the price of Ether (ETH) rise thirtyfold in one year. While the current market dynamics are different, the potential for Bitcoin to replicate Ethereum's success is promising.
For a growing group of fans who perceive Ethereum as stagnant and inconsistent with Bitcoin maximalists, ordinary and BRC-20 tokens have become crypto fun again. For them, the move represents a return to Bitcoin's experimental, creative roots. If there's a chance to make some money down the road by promoting their awareness of Bitcoin and spreading memories in the bargain, all the better.
Gracie Chen is the CEO of crypto derivatives exchange Bitget, overseeing market expansion, business strategy and corporate development. Prior to joining Bitgate, she held executive positions at Fortune 500 unicorn company Accumulus and venture-backed VR startups XRSPACE and ReigVR. She was also the first investor in BitKeep, Asia's leading decentralized wallet. In the year In 2015, she was honored as a Global Shaper by the World Economic Forum. She graduated from the National University of Singapore and is currently pursuing an MBA at the Massachusetts Institute of Technology.
This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.
