What Is BRC-20 ,Its Advantages and Disadvantages.

Hi all, After a long time again I start giving my regular articles here. I hope all of you enjoyed it.

In my post today, I try to explain the present trend regarding BRC-20. At present, the BRC-20 trend is going on. It's our responsibility to learn about it. Otherwise, we will not earn good returns on our investments. Because IN THE CRYPTO INDUSTRY, TREND IS OUR BEST FRIEND.

That's why I try to explain what BRC-20 is and its advantages and disadvantages. Along with that, try to compare it with the ERC-20 too. I hope this article gives new knowledge to all.

Let's start my article today.

What is BRC-20?

BRC 20 is a new type of token developed on the Bitcoin network. Similar to ERC-20 on the Ethereum Network. BRC-20 tokens are known as ordinals and inscriptions. Ordinal means tokens; it may be anything. While inscription means NFTs, text, domains, and many more

At the start of 2023, we may see a BRC-20 trend. OnChain Monkey and Bitcoin Punk's NFT collection get huge popularity. But within a short period, they disappeared from the market due to the complexity of trading them, scalability, not being user-friendly, and many more reasons. But it attracts users due to its strong security, being easy to mint and deploy our own ordinal or inscription in a few minutes, and many other reasons that again attract users, developers, and traders too. That's why, again, the BRC-20 trend is going on in the market now.

However, some users argue about it. It's similar to ERC-20, so why BRC-20? All we know about deploying any contract on Ethereum is how much time and money it consumes. Also here, the contract developer may hold some portion of the coins with it, remaining by providing liquidity he deploys on the market for trading needs.

But with BRC-20, it builds on the Bitcoin network. Here, no smart contract option is available. Once he deploys them, users will only use them by minting. Here the developer shows how many coins he deploys in his project ticker and all tokens available for purchase. No fear of further dumps from the developer, because he cannot hold any coin from him. Also, the developer does not get any revenue from his work. Here, users pay a transaction fee, which we may mint based on developer conditions. This feature attracts users.

At first, this technology was developed by Domodata, a Twitter user, on March 8th, 2023.Like traditional token standards, ERC-20 is managed by SmartContract on the EVM chains, but BRC-20 standards are essentially a script file store on the Bitcoin network. Here, we don't interact with smart contracts.

_{BRC-20 Developer}
source

What it means here is that tokens are stored in the form of metadata. It attaches to bitcoin transactions through ordinary protocal. That's why it allows users to create fungible tokens on top of Bitcoin. That's why it easily separates from Bitcoin and BRC-20 tokens. Here, BRC-20 tokens are stored in a JSON script file on the Bitcoin blockchain. That's why this token exists in the secondary market; it is completely separate from Bitcoin. But here we need specific software to be sourced, categorised, and displayed for the blockchain's needs.

_{BRC-20 Tokens store in our Wallet Like This}

At present, BRC-20 tokens do not have any value, but some influencers are pushing this market. At present, the BRC market is nearing $1 trillion, which shows its upcoming strength, but interacting with it needs some knowledge and experience.

How Does BRC-20 Work?

BRC-20 tokens offer an easier process for deploying a token on the Bitcoin network compared to ERC-20. Because deploying ERC-20 tokens is not an easy task, we need to develop smart contracts and raise huge funds to provide the needed liquidity.

But BRC-20 has only three functions. They are Deploy, Mint, and Transfer.

The Deploy Function allows anyone to create a token as per his wish by setting the Ticker, Max Supply, and Mint Amount.

Once a token is deployed on top of the Bitcoin network, it can be minted by anyone; we don't have any restrictions. As long as the transactions are ordered inside a mined block, we may mint it and stay within the threshold maximum supply

This procedure is based on the First is First principle. This process, adopted from the Sats Name Protocol and deployed on BTC's blockchain, establishes the validity of the token.

For example, the first BRC-20 token is ORDI. It has only 21,000 supplies, and each mint user gets 1000 ORDI tokens. Like that, only the first 21 users who mint these coins are valid, and after any user mints them, it executes the transaction, but we don't receive any tokens of ORDI. So here, users waste their satoshis. So before minting, we should check their minting status and only go for mint.

But for minting, loading the needed BTC into our wallets and again listing those on the market is not an easy task. Sometimes, it takes up to 24 hours to execute transactions. Also, It don't have good user interface,need knowledge and skills to interact here. That's why it's not getting that much support from retail investors. But some influencers and developers are trying to push it. But getting real use cases was not an easy task, and it took too much time. Because it just started a few months ago, it took time to give maximum benefits to users.

Advantages of BRC 20

BRC-20 is a new technology, so we have potential growth in the upcoming future. Here, we have a lot of advantages along with disadvantages too.

Let's discuss BRC-20's advantages.

• Fungibility: In BRC-20, fungibility is a key feature, in my opinion. Why? Because due to this, we can easily transfer and exchange on various crypto exchanges that support BRC-20 standards. One more is that BTC traders don't wish to trade other currencies. So they get a chance to trade BTC indirectly through BRC-20 tokens.

• Security: In my opinion, security is another major advantage of BRC-20 tokens. Because it's built on the Bitcoin network. All we know is how secure the Bitcoin network is. Because it works on a proof-of-work consensus mechanism that thwarts most hacking attempts. This is why this feature enhances the security of BRC-20 tokens. It shows how secure BRC-20 is and how tamper-resistant it is, too.

• Simplicity of Bitcoin Protocal: It's another major advantage we may consider. Due to the simplicity of Bitcoin Protocal, anyone can deploy a token; there are no restrictions here. Along with that, we easily integrated our project into Bitcoin Protocal. That's why it gives developers the freedom to develop innovative and real-world use-case projects on top of the Bitcoin Network.

All those above features are major advantages for the BRC-20. But here we have some disadvantages too. Let's discuss it.

Drawbacks of BRC-20 Tokens

The BRC-20 has good features compared to others, but it too has its own limitations. Let's discuss those.

• Gas Fee: To execute transactions, we need to pay a gas fee. Inform Sathoshies here too. If a lot of users try to interact at the same time, then the Bitcoin network fee also increases. Sometimes it costs up to 30 to 50 pounds. In real life, it costs around £2 to £3. But as users increase, fees also increase. It's a big drawback, we might say.

• Inherent Complexity: BRC-20 tokens add another layer of complexity while processing. Because it needs separate wallet software for managing tokens. It also needs additional steps for storing and transaction needs.

Normal users will not be able to understand it. It requires skills and knowledge for interaction. That's why a lot of users are not showing interest in interacting here.

• difficulty in validating transactions :
  In BRC-20, we don't have any safeguards to avoid double spending or limit or control the transactions. That's why validation becomes more complex on BRC-20.

On the Bitcoin network, executing each transaction takes a huge amount of time, which is why users face a lot of issues while executing each transaction. Sometimes they spend double the money for faster execution needs.

For interacting with BRC-20, we need patience; without it, we may lose some hard-earned money unnecessarily.

Like those limitations we have in BRC-20. But finding solutions regarding those was not an easy task; it took time. Let's hope for the best.

The Future of BRC-20

The BRC-20 developer openly states that BRC-20 was created as a fun game. It doesn't have any use cases; also warn Don't waste your money while investing in BRC-20.

_{Statement from BRC-20 Developer}
source

But BRC-20, the marketplace platform of Unisat, states that the upcoming future is BRC-20 and that it has strength to prove in the coming days.

Recently, Bitget Exchange allow users to trade BRC-20 tokens on their exchange. Other exchanges, like Binance and Kucoin, are also arranging the needed liquidity for trading BRC-20 tokens. Here, we have two types of opinions. But no one knows what will happen next; let's wait and watch.

Conclusion

BRC-20 tokens are fungible and an experimental standard on top of the Bitcoin network. But it's in an early stage and needs a lot of development to bring real-world use cases. But interacting with BRC-20 is not easy compared to other networks. It has a lot of advances, along with limitations.

---

Note : All screen shots taken by my wallet

Thanks a lot for reading my article