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BRC-20

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Table of contents
    1. 0.2. How BRC-20 Works
    2. 0.4. BRC-20 vs. ERC-20
    3. 0.6. Use Cases of BRC-20

BRC-20 is a token standard on the Bitcoin network, inspired by Ethereum’s ERC-20 standard but designed specifically for Bitcoin. It allows the creation of fungible tokens on the Bitcoin blockchain, enabling decentralized applications and smart contracts. Unlike other token standards that use smart contract functionality, BRC-20 operates through the Bitcoin network’s existing features, leveraging ordinal inscriptions and ordinal theory.

How BRC-20 Works

BRC-20 tokens function by utilizing Bitcoin’s “Ordinals” protocol, which assigns unique serial numbers to satoshis (the smallest units of Bitcoin). These satoshis can then carry additional data, such as token balances, making them tradable. The BRC-20 standard does not require new consensus changes or a separate blockchain. Instead, it leverages Bitcoin’s proof-of-work (PoW) security and decentralized nature.

BRC-20 vs. ERC-20

While both BRC-20 and ERC-20 enable the creation of fungible tokens, the key difference is that BRC-20 operates within Bitcoin’s blockchain and does not involve Ethereum’s virtual machine. This makes BRC-20 tokens simpler but also less versatile compared to Ethereum-based tokens. The BRC-20 standard does not support advanced smart contracts like ERC-20 but offers a simpler and more secure way to issue tokens within Bitcoin’s ecosystem.

Use Cases of BRC-20

  • Tokenization: BRC-20 allows the creation of Bitcoin-based assets or tokens, which can represent anything from digital art to commodities.
  • Decentralized Finance (DeFi): Developers can use BRC-20 tokens to build decentralized finance applications within the Bitcoin network.
  • Governance: BRC-20 can be used for decentralized governance systems where token holders vote on protocol decisions.