What are BRC-20 tokens?
BRC-20 tokens are a new standard on the Bitcoin blockchain, BRC-20 tokens are inspired by Ethereum’s ERC-20. Like Ethereum’s ERC-20 strands for Ethereum Request for Comment, BRC-20 also fails for Bitcoin Request for Comment.
BRC-20 tokens enable the creation, minting, trading and transferring of fungible tokens or assets on the Bitcoin blockchain via the Ordinals protocol. The Bitcoin Ordinals protocol is a numbering system that allows users to associate additional data with satoshis, the smallest unit of Bitcoin.
The process of adding additional data to satoshis is called inscription. BRC-20 tokens do not require smart contracts to perform transactions as ERC-20 tokens do. Their transactions are done via JSON inscriptions on satoshis via Bitcoin Ordinals.
Differences and comparison between BRC-20 and ERC-20
Ethereum’s ERC-20 may have inspired the creation of BRC-20 on the Bitcoin blockchain, but make no mistake, they are not the same, and we are going to explore that in this section of this article.
Operation: One of the key differences between BRC-20 and ERC-20 is that BRC-20 tokens make their home on the Bitcoin blockchain, while ERC-20 runs on the Ethereum blockchain.
Implementation: BRC-20 and ERC-20 are both implemented differently; However, BRC-20 is experimental, meaning it has not undergone the BIP process. It only implements changes to the Bitcoin protocol, while ERC-20 has undergone the EIP process, which was approved by the Ethereum community after research before implementation.
Security: They are both secure because they are both secure by the top two blockchains in the crypto space, but BRC-20 is secured by the Bitcoin blockchain and ERC-20 is secured by the Ethereum blockchain.
High gas costs or transaction costs: They both have high gas fees if you trade on decentralized exchanges (DEXs).
Wallets: Their wallets are different, you can store your BRC-20 token in wallets that support the Bitcoin Taproot upgrade such as Unisat, Xverse, CoinW and Alex. While ERC-20 tokens are stored on Ethereum supported wallets such as Metamask, Exodus, Trust wallet, Atomic, MyEtherWallet and all EVM compactible wallets
Smart Contract functionality: BRC-20 tokens do not rely on smart contracts to execute transactions, but ERC-20 tokens do.
Token value drive: BRC-20 tokens are token values driven by inscriptions, and ERC-20 token values are driven by utilities and speculations.
Fungibility: BRC-20 tokens are semi-fungible as they are only exchanged in fixed increments. For example, BRC-20 tokens are sold in sets, so you can’t buy 1003 xBRC-20 tokens (x is the token) if the only people selling decide to sell in sets of 250, 500, 750, and 1000, depending about how many tokens they want to sell. Meanwhile, ERC-20 tokens are fully fungible as they can be redeemed in any quantity.
Functions: The BRC-20 token standard is currently primarily for creating meme tokens, while the ERC-20 token standard is used for a wide range of fungible tokens on Ethereum, including stablecoins, governance tokens, wrapped tokens, and utility tokens.
Benefits of the BRC-20 Token Standard
The fact that BRC-20 tokens are built on the most secure blockchain in the Bitcoin crypto space should help you understand that these tokens will benefit from the security that the Bitcoin Blockchain provides.
The interoperability with the Bitcoin network is one of the key advantages of the BRC-20 tokens, as they benefit from the widespread adoption of Bitcoin as the most successful crypto, which has contributed to the overall success of the BRC-20 token . Furthermore, this compatibility with Bitcoin gives the BRC-20 standard access to use the existing infrastructure that the Bitcoin network already has, including its wallets and exchanges.
The BRC-20 standard is still in its early stages, so there is huge potential for growth in the future, and as more people continue to adopt and invest in BRC-20 tokens
Disadvantages of the BRC-20 Token Standard
Likewise, the BRC-20 token standard will benefit from the benefits of the Bitcoin network, but these will still be affected in the areas where Bitcoin is lagging behind. This is because Bitcoin is not as scalable as some other blockchains such as Ethereum. As BRC-20 tokens continue to gain popularity and awareness, there are concerns about congestion, which could lead to potentially higher gas or transaction fees.
Another consideration is that BRC-20 tokens run on the Ordinals protocol, a protocol that is still in its early stages of development, meaning there is the possibility that it will be vulnerable or experience glitches as technology evolves.
The Bitcoin Request for Comment (BRC-20) token standard is still in the early stages of development, so it’s safe to say that it is still semi-fungible compared to the ERC-20 token standard. It has some limitations, such as that it is sold and bought in sets, you are limited to what is available on the DEX marketplace, and you cannot buy any amount you want, either in large or small quantities.
BRC-20 Tokens DEX Exchanges
This article discusses how to trade Bitcoin Request for Comment (BRC-20) tokens Uniza, the most used decentralized exchange (DEX) to trade BRC-20 tokens. You can also check out other DEX like ones Xverse And Alex.
Install and set up UniSat Wallet
To trade on a decentralized exchange (DEX) you need a wallet. Go to your Chrome browser and search for the UniSat Wallet extension as shown below, click “Add to Chrome” to download the UniSat Wallet extension and add it to your Chrome browser.
Click on the “Create a new wallet” button to create your UniSat Wallet.
Create your password, use a password you can remember as you will need your password to make transfers and click the “Continue” button. The Secret Recovery Phrase page appears. Write down your secret phrase and keep it in a safe place because anyone who has access to your secret phrase has access to your wallet. Then click “Get on”.
Expect to be a crypto genius. I would recommend that you leave the Step 2 page as it is, just click “Get on”. The“Compatibility Tips” appears, check the boxes and click “OK”
You have now successfully created your UniSat wallet, where you can receive, send and buy cryptocurrencies.
When you click “Received” you get a QR code that you can scan on your phone and also an option to manually copy your wallet address.
When you click “To steer”, you will see where you need to enter the recipient address you want to send your Bitcoin to, and below that enter the amount of Bitcoin you want to send. You can choose the transfer speed you want, but keep in mind that the faster the transfer, the higher your gas fees or transaction fees.
I would not recommend you use the “Buy” feature as it is too expensive, and it is better to buy your Bitcoin on a centralized exchange and send it to your UniSat wallet.
How to buy, sell and trade on UniSat
To buy, sell and trade BRC-20 tokens you need Bitcoin in your wallet for gas costs and Bitcoin to buy the BRC-20 token. So go to a centralized exchange of your choice, such as Binance, OKX or ByBit, to buy your Bitcoin, copy your UniSat wallet, paste it into the receiving address on the centralized exchange and send the Bitcoin.
Now that your wallet is funded it’s time to act, head over to the UniSat websiteand click “Connect”.
click on “UniSat wallet”and connect your UniSat Wallet.
Once your UniSat Wallet is connected, click “brc-20”, as shown below, to see the full list of BRC-20 tokens you can trade on Uniza.
Click on one of the BRC-20 tokens you want to buy, for example I clicked on the “meme” sign below. There are buttons in the upper right corner of the screenshot, circled in red “Display” And “Trade”.
If you click Display, it will take you there OKLINK where you can see the meme BRC-20 inscription with all its details, Total offer, Limit per coin, Holders, Struck tokensAnd Price.
When you click Tradeit takes you to the UniSat Marketplacewhere you will see all the items listed meme token inscriptions you can buy.
Click on one of the sellers that has the exact number of meme inscriptions you want to buy or one of the sellers that has close to the number of meme inscriptions you want to buy. After selecting a seller, the purchase page below will appear with the “Buy now” button appears.
click on “Buy now” and the confirmation page to confirm your order will appear, click “To confirm” and you have purchased the BRC-20 token.
After you buy your BRC-20 and you want to sell it, go to the marketplace and click “my BRC-20”click on the inscription you want to sell and then click on the list.
Click on the plus buttonEnter the exact quantity you want to sell and click “Next one”.
Click “Next again”.
“Sign and pay”And “Finished”, your registrations are listed. When your order is picked up, your registration will be sold and the money will be transferred to your wallet.
Use CoinW to track the price of your BRC-20 tokens
MintW is a centralized crypto exchange where you can track your BRC-20 and use its charts to make informed decisions about which token you want to buy.
To search for BRC-20 tokens, click “Market”click on “Is called”, and then click “BRC-20”, as shown below.
For example, I clicked ORDI, as you can see in the diagram below.
Here’s another example using RATS, another BRC-20 token on the list.
Conclusion
In conclusion, BRC-20 tokens provide a new opportunity for tokenization within the Bitcoin blockchain, expanding its usefulness beyond traditional cryptocurrency transactions. They provide seamless integration of additional data on satoshis, enabling a wider range of use cases and applications.
With BRC-20 tokens, the Bitcoin ecosystem gains enhanced functionality and opens up possibilities for innovative decentralized finance (DeFi) solutions. Using the Ordinals protocol, BRC-20 tokens contribute to the growing diversity and maturity of the blockchain industry as a whole.
Featured image from IQ.wiki
Disclaimer: The article is for educational purposes only. It does not represent NewsBTC’s views on buying, selling or holding investments and of course investing involves risks. You are advised to conduct your own research before making any investment decisions. Use the information on this website entirely at your own risk.