What Is BRC-20? Definition and Meaning in Cryptocurrency

The world of cryptocurrency continues to evolve, and one of the most talked-about innovations in 2023 was the emergence of BRC-20 tokens. Built on the Bitcoin blockchain, BRC-20 has sparked interest for enabling fungible tokens on a network traditionally seen as limited to simple value transfers. But what exactly is BRC-20, how does it work, and how does it compare to established standards like ERC-20?

In this comprehensive guide, we’ll explore the definition, functionality, history, and limitations of BRC-20, while also examining its role in the broader Web3 ecosystem.

Understanding BRC-20: A New Token Standard on Bitcoin

BRC-20 (Bitcoin Request for Comment) is an experimental token standard that allows for the creation and transfer of fungible tokens on the Bitcoin blockchain. Inspired by Ethereum’s widely adopted ERC-20 standard, BRC-20 brings programmable token functionality to Bitcoin—albeit in a very different way.

Unlike ERC-20 tokens, which are powered by smart contracts, BRC-20 tokens rely on the Ordinals protocol and use JSON data inscriptions embedded directly into Bitcoin’s blockchain. This innovative approach leverages Bitcoin’s immutability and security while expanding its utility beyond peer-to-peer transactions.

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The Origins of BRC-20: How It All Began

To understand BRC-20, we must first look at the technological advancements that made it possible.

Bitcoin was originally designed as a decentralized digital currency for peer-to-peer (P2P) transactions. For years, it lacked the programmability seen on platforms like Ethereum. That changed in 2021 with the Taproot upgrade, which enhanced Bitcoin’s scripting capabilities and laid the groundwork for more complex data storage.

Then, in January 2023, the Ordinals protocol was introduced. This protocol assigns a unique identifier to each satoshi (the smallest unit of Bitcoin) and allows users to inscribe arbitrary data—like images, text, or code—onto individual satoshis. These inscriptions are stored permanently on the Bitcoin blockchain.

This breakthrough opened the door for Bitcoin-based NFTs, and soon after, developers realized they could use the same mechanism to create fungible tokens. In March 2023, a pseudonymous developer known as domo (@domodata) proposed the BRC-20 standard using JSON-formatted inscriptions to deploy, mint, and transfer tokens.

How BRC-20 Works: The Role of JSON Inscriptions

BRC-20 doesn’t use smart contracts. Instead, it relies on plain-text JSON inscriptions to define token behavior. These inscriptions are sent via Bitcoin transactions and contain instructions for deploying or transferring tokens.

Here’s an example of a BRC-20 deployment inscription for the first BRC-20 token, ORDI:

{
  "p": "brc-20",
  "op": "deploy",
  "tick": "ordi",
  "max": "21000000",
  "lim": "1000"
}

Let’s break this down:

• "p": Specifies the protocol—in this case, brc-20.
• "op": Indicates the operation—in this example, deploy to launch a new token.
• "tick": The ticker symbol of the token (ordi).
• "max": The maximum total supply (21 million tokens).
• "lim": The maximum number of tokens that can be minted per transaction (1,000).

Once deployed, users can mint tokens (within the defined limits) and transfer them using similar JSON inscriptions. However, because these operations are not governed by executable code but rather by community consensus and wallet support, interactions are less automated than with ERC-20 tokens.

BRC-20 vs. ERC-20: Key Differences

While both standards enable fungible tokens, BRC-20 and ERC-20 differ significantly in design and functionality.

ERC-20 tokens benefit from Ethereum’s robust infrastructure, including decentralized applications (DApps), decentralized finance (DeFi), and extensive developer tools. In contrast, BRC-20 is still in its infancy and lacks native smart contract capabilities.

However, BRC-20’s integration with Bitcoin—the most secure and decentralized blockchain—offers unique advantages in terms of security and network effects.

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Popular BRC-20 Tokens and Use Cases

Since ORDI’s launch, thousands of BRC-20 tokens have been created. While many are speculative or meme-driven, some have gained notable traction:

• ORDI: The first BRC-20 token, symbolizing the Ordinals ecosystem.
• PEPE: A meme coin inspired by the popular internet meme, ported to Bitcoin via BRC-20.
• MEME: Another meme-based token aiming to capture cultural trends.
• DFUK and OSHI: Community-driven tokens with active followings.

These tokens have primarily gained popularity through speculative trading and community engagement. However, due to the ease of deployment—anyone can create a BRC-20 token—many projects lack utility and may quickly lose value.

Limitations and Criticisms of BRC-20

Despite its innovation, BRC-20 faces several challenges:

1. Not Fully Fungible

While called "fungible," BRC-20 tokens are more accurately described as semi-fungible. Each token unit is tied to a specific inscription, meaning they aren’t perfectly interchangeable like traditional currencies or ERC-20 tokens.

2. No Smart Contract Logic

Without smart contracts, BRC-20 cannot support advanced features like automated yield farming, staking, or governance—common in ERC-20 ecosystems.

3. Scalability and Cost

Inscribing data on Bitcoin increases transaction size and fees. During periods of high demand, minting or transferring BRC-20 tokens can become expensive.

4. Experimental Nature

The creator of BRC-20 has emphasized that it is a proof-of-concept, not a formal standard. It was designed to explore on-chain state management via inscriptions—not to become Bitcoin’s primary token standard.

Frequently Asked Questions (FAQ)

What is BRC-20?

BRC-20 is an experimental token standard that enables the creation of fungible tokens on the Bitcoin blockchain using JSON data inscriptions via the Ordinals protocol.

How is BRC-20 different from ERC-20?

ERC-20 uses smart contracts on Ethereum and supports complex functionalities, while BRC-20 relies on JSON inscriptions on Bitcoin and offers only basic token operations like deploy, mint, and transfer.

Can I create my own BRC-20 token?

Yes, anyone can create a BRC-20 token by crafting a valid JSON inscription and broadcasting it to the Bitcoin network. However, it requires technical knowledge and incurs blockchain fees.

Are BRC-20 tokens secure?

They inherit Bitcoin’s security since they exist on its blockchain. However, their functionality is limited and not protected by formal smart contract audits or governance mechanisms.

Is BRC-20 a good investment?

Many BRC-20 tokens are highly speculative with little intrinsic value. As with any crypto asset, thorough research is essential before investing.

Will BRC-20 replace ERC-20?

No. BRC-20 serves a different purpose—it brings minimal token functionality to Bitcoin. ERC-20 remains dominant in DeFi, NFTs, and Web3 applications due to its flexibility and ecosystem maturity.

The Future of BRC-20: Innovation or Flash in the Pan?

BRC-20 represents a fascinating experiment in extending Bitcoin’s utility. It demonstrates that even a non-Turing-complete blockchain like Bitcoin can support tokenized assets through creative use of data storage.

However, its long-term viability remains uncertain. Without smart contracts or widespread developer adoption, BRC-20 may remain a niche player compared to more functional ecosystems.

That said, it has already inspired new thinking about what’s possible on Bitcoin—and could pave the way for future upgrades like BitVM or native smart contract support.

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Final Thoughts

BRC-20 is more than just a technical curiosity—it’s a symbol of community-driven innovation on the world’s most secure blockchain. While it may not revolutionize decentralized finance like ERC-20 did, it opens new doors for digital ownership, collectibles, and community tokens on Bitcoin.

As the Web3 landscape evolves, standards like BRC-20 remind us that even the oldest blockchains can still surprise us.

Core Keywords: BRC-20, Bitcoin token standard, fungible tokens, Ordinals protocol, JSON inscriptions, ERC-20 vs BRC-20, cryptocurrency innovation