What is BRC-20 and how can we invest in it?
As usual, the world of Web3 is constantly evolving and offering new opportunities.
One such development is the BRC-20 token standard on the Bitcoin network.
This might sound complex so let’s break it down into simpler terms.
What is BRC-20 and why it matters?
BRC-20 represents a new token standard on the Bitcoin blockchain, inspired by Ethereum’s ERC-20.
Created in March 2023 by a developer known as Domo, BRC-20 makes it possible to create and transfer digital tokens on the Bitcoin blockchain.
It started a huge meme mania, but enabling tokens on BTC can do more:
- Utility on Bitcoin: These tokens introduce a new layer of functionality to the Bitcoin network, showing that Bitcoin can support more than just sending and receiving BTC. We already see rising BTC “NFTs” and upcoming DeFi solutions.
- Security: BRC-20 tokens can be safely created and transferred using the same robust infrastructure that Bitcoin itself uses.
- Mining and fees: creating and transferring BRC-20 tokens is complex and requires more space on the blockchain resulting in higher fees and rewards for miners.
How Does BRC-20 Work?
The BRC-20 operates on a feature of the Bitcoin network called “ordinal inscriptions.” introduced by Bitcoin’s Taproot upgrade.
This feature allows for small bits of data, like a unique serial number, to be attached to the smallest unit of Bitcoin, known as a satoshi.
These inscriptions can include simple code, images, or text, making each token unique and enabling the creation of BRC-20 tokens.
BRC-20 vs. ERC-20 Comparison
ERC-20 tokens are built on Ethereum, which natively supports smart contracts. This allows for a wide range of functionalities, including automatic execution of agreements and complex decentralized applications.
BRC-20 tokens have limited capabilities compared to their Ethereum counterparts, but they are simpler to create, and leverage the same robust infrastructure Bitcoin is using.
BRC-20 and NFTs
Although primarily designed for fungible tokens, creators already started exploring BRC-20’s technology in the NFT sector.
Through creative applications and cross-chain bridges, BRC-20 tokens are finding a place in NFT marketplaces and collections.
Platforms like Magic Eden have begun supporting BRC-20 tokens, facilitating trade and minting of these Bitcoin-based assets, showcasing their versatility beyond simple currencies or meme tokens.
Some of the popular NFT projects: RSIC METAPROTOCOL, Quantum Cats, NodeMonkes, Bitcoin Puppets, bitmap, Ordinal Punks, Ordinal Maxi Biz.
Investing in BRC-20
Investors can join the hype the same way they would with classical Ethereum-based tokens:
- Speculate on the token price — this is driving the BRC-20 meme mania
- Trade high volatile tokens
- Participate in the ecosystem to get free mint or airdrop
Less obvious ways:
- DeFi: Once DeFi is enabled, we can leverage the capabilities it unlocks, especially yield farming for BRC-20 tokens, but even more the DeFi for our BTC holdings.
- Launchpads: Getting early positions in promising launchpads, or using the launchpads to get in early on the ground floor of BRC-20 token launches.
- Mining shift: The increased demand for transaction space due to BRC-20 activity is raising Bitcoin network fees, boosting mining profitability. This can be played two ways, either by directly mining BTC or by doing research of mining companies on the stock market.
- DIY (Deploy It Yourself): Instead of buying other tokens early, go and mint yours. It’s simple.
Final Thoughts
There is a lot of heated discussion around the risks, security, and higher fees due to inscriptions and BRC-20.
While I like the idea that BTC is getting some utility, finally, I’m also in favor of keeping Bitcoin away from meme coins and other speculation.
I’m exploring launchpads in the BRC-20 space, but what I’m more interested and already invested in are the platforms that could benefit from this hype, such as Stacks or Rootstock.
Next time we can explore the infrastructure and these platforms.
