BRC-20: A New Chapter in the Bitcoin Ecosystem with a $3.4 Billion Market Capitalization Breakthrough

Ordinal works as an important innovation in the Bitcoin ecosystem. It allows for the assignment of a unique serial number to each Satoshi (one hundred millionth of a Bitcoin), enabling the tracking and trading of individual Satoshis. This technology makes it possible to engrave various data, such as images, text, or videos, onto a single Satoshi.

Once a transaction is confirmed, the burned data will be permanently stored on the Bitcoin blockchain. This process makes each Satoshi unique, thus becoming a non-fungible digital asset. The main advantage of Ordinals NFTs is that they can be created directly on the Bitcoin blockchain without relying on other platforms. Since its launch in January 2023, the Ordinals activity has shown significant growth, driving the prosperity of the Bitcoin NFT market.

In March 2023, a new token standard BRC-20 was born. This is an experimental standard for creating fungible tokens (FT) on the Bitcoin blockchain. Unlike Ethereum's ERC-20 standard, BRC-20 does not rely on smart contracts but instead utilizes ordinal inscription technology. The deployment, minting, and transfer of BRC-20 tokens are all achieved by directly writing JSON data into Satoshi.

It is important to note that while BRC-20 is a form of ordinal inscription, not all ordinals are BRC-20 tokens. Standard Bitcoin ordinals can inscribe any information, whereas BRC-20 tokens specifically inscribe JSON data. This feature gives BRC-20 tokens fungibility, which is the main difference from standard ordinals.

According to market data, the market capitalization of BRC-20 has reached approximately $3.4 billion, growing 3.4 times in 7 months. Notable tokens in the market include ORDI (the first minted BRC-20 token) and SATS.

The advantages of BRC-20 include:

• Provides Bitcoin with tokenization capabilities beyond "digital gold"
• Inherits the high security of the Bitcoin proof-of-work system
• Fully based on on-chain operations, no additional file system required.
• Able to attract the large user base of the Bitcoin network
• Good compatibility with existing Bitcoin infrastructure (such as wallets and exchanges)

However, BRC-20 also faces some challenges:

• Due to the limitations of the Bitcoin network, scalability issues may arise, leading to increased fees and transaction delays.
• Compared to ERC-20, the smart contract functionality is limited, making it difficult to implement complex features.
• There are challenges in the interoperability with other blockchain networks.
• As an emerging technology, it is still in the experimental stage, with limited support tools and certain risks.

BRC-20 introduces fungibility, bringing new possibilities to the Bitcoin ecosystem. With the development of the Bitcoin Layer 2 network, more decentralized finance projects based on BRC-20 may emerge in 2024. Although BRC-20 is still in its early stages, its development trajectory is somewhat reminiscent of Ethereum's early development. The growing interest from users, project parties, developers, and investors in BRC-20 highlights the potential of this technology.