What are BRC-20 Tokens?
BRC-20 is an experimental token standard introduced in early 2023 that enables the creation and transfer of fungible tokens on the Bitcoin blockchain.
Inspired by Ethereum’s ERC-20 standard, BRC-20 leverages the Ordinal Theory to inscribe token data onto Bitcoin’s smallest unit, the satoshi, without modifying the network’s fundamental structure.
Unlike ERC-20 tokens, which use smart contracts, BRC-20 tokens rely on JSON inscriptions embedded within Bitcoin transactions. This approach enables token functionality while maintaining Bitcoin’s decentralized and secure nature.
By expanding Bitcoin's utility beyond a store of value, BRC-20 introduces new possibilities for asset tokenization and decentralized applications (dApps) within the Bitcoin ecosystem.
What are the main functions of BRC-20 Tokens ?
BRC-20 tokens bring new functionalities to Bitcoin by enabling fungible token transactions without modifying its core protocol.
While still in an experimental phase, these tokens offer unique advantages that differentiate them from other blockchain token standards.
No Smart Contracts – Unlike Ethereum’s ERC-20, BRC-20 operates solely through Bitcoin’s Ordinal inscriptions.
Fungibility – BRC-20 tokens are interchangeable, meaning each unit holds the same value.
Bitcoin Native – Transactions are recorded directly on the Bitcoin blockchain, ensuring security and immutability.
Experimental & Evolving – BRC-20 is in its early stages, with ongoing development and potential limitations.
How do BRC-20 Tokens Work?
BRC-20 tokens function through Ordinal inscriptions, which store JSON-based token data on the Bitcoin blockchain. This process follows three main steps:
Deployment – A JSON file defining the token’s parameters (name, supply, and limit per mint) is inscribed onto Bitcoin.
Minting – Users can create BRC-20 tokens by interacting with inscribed deployment data.
Transferring – Tokens are moved between wallets using Bitcoin transactions containing inscription data.
Benefits of BRC-20 Tokens
Enhanced Bitcoin Utility
BRC-20 extends Bitcoin’s functionality beyond transactions, allowing tokenization similar to Ethereum and Solana. This new capability enables the issuance of various assets, including stablecoins and governance tokens, on the Bitcoin network.
By leveraging Ordinals, BRC-20 opens doors to decentralized applications (dApps) that previously relied exclusively on Ethereum or other smart contract platforms.
Security & Decentralization
Since BRC-20 tokens exist on Bitcoin’s blockchain, they inherit its security, immutability, and decentralized nature. This ensures protection against censorship and unauthorized modifications while benefiting from Bitcoin’s robust proof-of-work consensus.
Additionally, as transactions are permanently recorded on the blockchain, BRC-20 tokens maintain a high level of transparency and verifiability.
New Market Opportunities
BRC-20 enables tokenized assets, meme coins, and other innovative use cases on the Bitcoin network. With the rise of Ordinals, new NFT-like applications and DeFi integrations are emerging, expanding Bitcoin’s utility beyond just payments.
Projects are experimenting with ways to bridge Bitcoin-based assets to other blockchain ecosystems, increasing liquidity and interoperability.
Challenges and Limitations of BRC-20
While BRC-20 expands Bitcoin's capabilities, it also presents challenges that impact its adoption and long-term viability.
Lack of Smart Contracts – Without smart contract functionality, BRC-20 tokens lack programmability and automation, limiting their use in complex DeFi applications.
Scalability Issues – High transaction volumes can congest the Bitcoin network, leading to increased transaction fees and slower processing times.
Experimental Status – BRC-20 remains an evolving standard with uncertain regulatory and technical futures, making long-term adoption uncertain.
