What is BRC-20?

BRC-20 is a new standard, representing tokens backed by the Bitcoin blockchain. As we shall see later, they can be dangerous if used in the wrong way.

Introduction and overview

As previously mentioned, BRC-20 tokens are issued on the Bitcoin blockchain. This can be considered innovative in that the ERC-20 standard (like many others) is one of the standards that best represents the issuance of tokens.

In January 2023, Casy Rodarmor, former developer of the Bitcoin core unit, implemented the Ordinals (ORDI) protocol on Bitcoin, which was the very first BRC-20 token to see the light of day.

Thanks to the use of satoshis (Bitcoin's smallest unit of measurement, 1 satoshi = 0.00000001 BTC), the Ordinals protocol makes it possible to register data on the Bitcoin blockchain via satoshis. The data in question is of JSON type and its inscription is called an Inscription transaction.

As mentioned in the heading of this document, following the creation of the ORDI token, tens of thousands of other tokens have been created and followed with a particular hype on the part of investors, despite the fluctuating nature of prices. It has to be said that knowing when to sell to make a profit is no mean feat. It is therefore a speculative market.

Quelques chiffres et une particularité

At the time of writing, just under 35,000 tokens have already been created using the BRC-20 standard, with a market capitalisation of over $170,000,000 and a daily trading volume of around $34,000,000.

With a global market capitalisation of over $228,000,000,000 according to CoinMarketCap, it's clear that the BRC-20 ecosystem still has a long way to go.

Since we are tending towards a gradual decline in mining, given its enormous consumption of electricity, the article by Elise ALFIERI and Yann FERRAT entitled "Une meilleure rémunération des mineurs: un effet positif sur la performance financière des cryptomonnaies" (Better remuneration for miners: a positive effect on the financial performance of crypto-currencies) supports the above. I quote them: 'Crypto-currencies are intangible assets by nature that neither generate cash flows nor pay dividends'. Indeed, they really have no intrinsic value (at least not yet) and so people invest in them on the basis of trust. This applies all the more to the newly created BRC-20 standard tokens.

How the BRC-20 ecosystem works

BRC-20 tokens

A large number of fungible (FT) and non-fungible (NFT) tokens have already been created on the Bitcoin blockchain.

Let's take a closer look at the first fungible token created on BRC-20, ORDI. It is important to have a good understanding of how the ORDI token works, in order to better understand the overall operation of tokens issued using the same standard.

Ordinals is the foundation of BRC-20. Strictly speaking, it is a protocol that uses certain Bitcoin updates to write information to a block. The aim of this information is to become an NFT, which will be directly attached to a satoshi.

This information stored in blocks can be removed at any time by validation nodes. This could happen when, during the validation phase of a transaction, a node is faced with a block containing too much information.

If information is regularly added to blocks of the Bitcoin blockchain, then the blockchain will continually grow over time. However, one of the fundamental principles of the Bitcoin blockchain is to be able to fit any validation node into a Raspberry Pie (a small computer in which Bitcoin blockchain data is stored

Ordinals is therefore a small plus in the short and medium term, but it can turn into a disadvantage over time if the miners, via the nodes, don't get rid of the overflow of recorded information.

For the moment, apart from Ordinals, all the other fungible and non-fungible tokens in BRC-20 are empty in terms of content interest.

The BRC-20 marketplace

On Ordinalswallet.com, you can see that the total number (21,000,000) of ORDI tokens has already been minted (a decentralised operation aimed at generating a new token).

To be able to interact with Ordinalswallet.com and therefore with BRC-20 tokens, all you need to do is create a wallet such as Ordinals Wallet, Xverse or Unisat. Once this is done, simply connect your wallet to Ordinalswallet.com by clicking on the "Connect Wallet" button.

Tokens are generally purchased in packs, as buying them individually is generally more expensive due to the peer-to-peer exchange system used. This is illustrated by the following 2 proposals. One is for the sale of an ORDI token at $107, while the other is for a pack of 10 ORDI tokens at $8 each.

There are also a number of tokens issued on BRC-20 that would like to break away from the conventional route and create their own experience. One example is the Oshi token, whose creator would like to see this project (albeit still in its embryonic stage) become the first liquidity pool on the Bitcoin blockchain. Wait and see!

Some advantages and disadvantages

Advantages

BRC-20 offers a number of advantages.

• An ultra-liquid marketplace, which will have a major impact on the liquidity of a large number of centralised exchanges (CEX)

• A peer-to-peer system with no intermediaries → reduces the risk of fraud and attacks

• An initial listing of the first token created on BRC-20, in particular ORDI, on CEXs belonging to the world's top 25 according to CoinMarketCap, such as Gate.io, OKX, Kucoin, Huobi, Bitget and Crypto.com Exchange. This will give a much larger number of investors access to the said token.

• Despite the Halving phenomenon, which reduces miners' rewards by about half every 4 years, miners have seen their rewards increase since the launch of the BRC-20 marketplace.

Disadvantages

The disadvantages associated with the birth of BRC-20 include the following:

• A significant reduction in CEX liquidity, relative to Bitcoin tokens → This has prompted the CEOs of several of them (such as Binance) to temporarily suspend the transfer of Bitcoin tokens.

• No possibility of creating decentralised applications (DApps), because there is no smart contract

• Bitcoin transaction fees have risen sharply due to the growing number of transactions on BRC-20

• Given the change in behaviour observed among several miners since the implementation of BRC-20, the entire Bitcoin cycle (including Halving) may be disrupted.

• There are far too many transactions waiting to be processed. This is due to the fact that most investors choose to pay the minimum gas charges and therefore see their transactions not being processed as a priority.

• BRC-20 tokens cannot currently be indexed (who and what percentages hold the token, how to make transactions more secure, etc.). The most likely solution would be to migrate to ORC-20. Some of these improvements can be seen in the images and here.

Le BRC-20 token représente une avancée significative dans l'écosystème des cryptomonnaies, émergeant comme un standard de jetons adossés à la blockchain Bitcoin. Initialement introduit en janvier 2023 par Casy RODARMOR, ancien développeur de l'unité Bitcoin core, le protocole Ordinals (ORDI) a marqué le début des BRC-20 tokens.

Ce standard se distingue par son utilisation novatrice des satoshis, la plus petite unité de mesure du Bitcoin, pour inscrire des données JSON sur la blockchain Bitcoin, créant ainsi des transactions de type Inscription. Depuis la naissance du premier jeton ORDI, des milliers d'autres ont émergé, suscitant l'intérêt des investisseurs malgré la volatilité des prix.

Avec près de 35 000 BRC-20 tokens en circulation et une capitalisation boursière de plus de 170 millions de dollars, l'écosystème BRC-20 est en constante expansion. Toutefois, il est essentiel de comprendre le fonctionnement spécifique de ces tokens. Ordinals, en tant que protocole fondamental, permet la création de NFT directement liés aux satoshis, bien que cette approche puisse entraîner des défis liés à la gestion des informations excessives sur la blockchain.

La marketplace BRC-20, illustrée par Ordinalswallet.com, offre une variété de jetons, notamment ORDI, dont l'achat se fait généralement par pack. Certains projets, comme le jeton Oshi, cherchent même à créer leur propre expérience en dehors des conventions établies.

En termes d'avantages, le BRC-20 présente une marketplace liquide, un système pair-à-pair réduisant les risques de fraude, et une liste sur des échanges majeurs. Cependant, des inconvénients subsistent, tels que la réduction de la liquidité des CEX et l'absence de possibilité de créer des DApps.

À mesure que l'écosystème BRC-20 évolue, la question de son impact sur le cycle complet du Bitcoin et l'émergence éventuelle de l'écosystème ORC-20 reste ouverte, indiquant des perspectives fascinantes pour l'avenir de la cryptomonnaie.

Conclusion and outlook

From the above, while the launch of tokens on the Bitcoin blockchain marks a turning point in the cryptocurrency ecosystem, it must be acknowledged that there is still a fair amount of room for improvement.

The question arises as to whether the ORC-20 ecosystem, about which there is still little talk and which is supposed to improve the quality of the attributes of the BRC-20 ecosystem, will definitively mark a change of direction or a revolution for Bitcoin and its blockchain.