Understanding BRC20: Experimenting with the Bitcoin Script
What is BRC-20?
BRC-20 is an experimental token standard built natively on the Bitcoin blockchain, leveraging advancements such as the Taproot upgrade and the Ordinals Protocol.
It enables the creation, minting, and transfer of fungible tokens on the Bitcoin network through Ordinals and Inscriptions, concepts introduced to enhance the functionality.
Key Concepts Behind BRC-20
Fungible:
BRC-20 tokens are fungible, meaning each token is identical to every other token of the same type.
Utilizes Ordinals and Inscriptions
Ordinals is a protocol that allows for numbering and tracking individual satoshis (the smallest unit of Bitcoin), making them unique.
Inscriptions involve attaching arbitrary data, such as text or scripts, to satoshis using the Ordinals protocol. BRC-20 tokens use these inscriptions to create and manage tokens on Bitcoin.
How BRC-20 Works
Deploy: A user deploys a new BRC-20 token by inscribing data that defines the token's supply, name, and mintable amount onto the blockchain using Ordinals.
Mint: Other users can mint new tokens according to the rules defined in the initial deployment.
Transfer: Once tokens are minted, users can transfer them to others by inscribing transfer instructions onto satoshis.
Example of a BRC-20 Token:
A simple example of a BRC-20 deployment inscription might look like this (in JSON format):
This example defines a BRC-20 token called "EXAMPLE" with a maximum supply of 21,000,000 tokens and a mint limit of 1,000 tokens per transaction.
Features of BRC20
1. Experimental Nature:
BRC-20 is still in an experimental phase. Its use cases are being explored primarily by Bitcoin developers and enthusiasts interested in adding additional layers of utility to Bitcoin.
2. Limited Functionality
Due to Bitcoin’s limited scripting capabilities, BRC-20 tokens do not support advanced functionality such as automated smart contracts. Functions such as decentralized exchanges (DEXs), staking, and complex logic are more challenging to implement directly on Bitcoin with only the BRC-20 protocol.
3. Storage and Network Impact
The introduction of BRC20 and Ordinals has raised concerns about the increased data storage and network congestion on Bitcoin, as more arbitrary data is inscribed onto the blockchain, potentially increasing fees and block space usage. While some see this as a way to support miners as block rewards decline, others worry about its impact on cost-sensitive users.
Current Use Cases and Outlook
BRC-20 is primarily used to experiment with fungible tokens on Bitcoin.
BRC-20 applications are nascent with their utility and traction.
Scalability and network impact are key considerations when implementing.
Innovate with These Token Standards on Fractal
BRC-20 is an innovative experiment that brings fungible token functionality to the Bitcoin network.
Fractal Bitcoin encourages such innovations, pushing the limits of what Bitcoin can accomplish. As an innovation playground for developers, Fractal is dedicated to fostering a continuously evolving ecosystem of standards and applications.
Building Runes on Fractal? Refer to our resources here.
Building BRC-20 on Fractal? Refer to our resources here.
Disclaimer: BRC-20, and Ordinals are not affiliated with Fractal. This blog post is for informational purposes only, and intended to help users understand the technology. Readers and community members are advised to do their own research before engaging with any projects or technologies mentioned. Fractal assumes no responsibility for any decisions made based on this information.
