Exploring Bitcoin NFTs, Ordinals, & BRC-20: Hype Beyond Memecoin Mania
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Over the past week, Bitcoin transaction fees soar amid memecoin mania on BRC-20. In this blog post, let’s unwrap Bitcoin NFTS, Ordinals, and BRC-20 and get into the roots beyond memecoin hype.
Bitcoin’s transaction fees reached new heights last week, with the average fee for the past seven days touching $20. The reason behind this surge is the high demand for block-space due to the increasing popularity of memecoins on the newly introduced BRC-20 token-type on Bitcoin.
How do Bitcoin transaction fees work?
Transaction fees on Bitcoin operate on the principle of supply and demand. As there is a limited number of transactions that can be included in a Bitcoin block, the demand for inclusion can vary. If there is a high demand, users need to pay extra fees to get their transaction included, which is paid to miners as transaction fees.
This sudden overwhelmed minting of BRC-20 tokens on the Ordinals protocol, creating a backlog of transactions and sending transaction fees soaring. The Bitcoin NFTs dynamic has brought a windfall to bitcoin miners, as fees shot up eightfold to about $20 per transaction. Devotees of the blockchain, who have long cringed at the idea of using any token besides its native cryptocurrency, bitcoin, claimed the network was under attack. Everyday users in Africa have had to scout for new options, including using stablecoins and resorting to using the Lightning Network. Binance, the world’s biggest crypto exchange, temporarily halted withdrawals on Sunday and said it would move to integrate Lightning. As of Monday, more than 11,000 tokens – led by ORDI, the first – had been issued, with a cumulative market capitalization of $1.6 billion. Wu Blockchain, a crypto content provider, noted that BRC-20 tokens “currently lack practical application value,” though the blockchain analytics firm Coin Metrics pointed out that high transaction fees “help the market clear” when demand for blockspace outstrips supply.
The Emergence of Bitcoin NFTs and BRC-20s with Ordinals Protocol
Earlier this year, the introduction of the Ordinals protocol sparked the rise of a new form of Bitcoin NFTs. This protocol enabled the conversion of individual satoshis (the smallest denomination of Bitcoin) into Bitcoin-based NFTs.
Shortly after, an experimenter utilized the Ordinals protocol to develop BRC-20s as a new way to create semi-fungible tokens on Bitcoin.
With the recent surge of memecoins such as $PEPE on Ethereum, a similar memecoin craze has emerged on Bitcoin through BRC-20s.
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Understanding ERC-20 and BRC-20 Token Standards
ERC-20 is Ethereum’s official token standard for fungible tokens proposed in 2015. Fungible tokens are tokens that are identical and currency-centric, just like the dollars in your pocket or UNI in your wallet.
On the other hand, BRC-20 is a much newer token standard that is not based on smart contracts like ERC-20. BRC-20 tokens are not completely fungible either but rather like a cross between a semi-fungible ERC-1155 NFT and a fungible token such as MATIC or UNI.
To create a BRC-20 token, a snippet of JSON text is inscribed into a Bitcoin NFT using the Ordinals protocol. This JSON contains the token’s basic information, including its max supply, token ticker, and other details. For transfers or buy/sell actions, additional NFTs are inscribed to track balance adjustments off-chain.
While ERC-20 tokens are completely fungible, BRC-20 tokens are semi-fungible and created by inscribing JSON text into a Bitcoin NFT using the Ordinals protocol.
BRC-20 is a token-type introduced on Bitcoin in March, which has been used to create memecoins that have exploded in popularity. Over 14,000 tokens have already been issued, with a total market cap crossing $600M and a volume of over $200M in the last 24 hours. The reactions to BRC-20 and memecoin mania are polarized, with some viewing it as an opportunity to unlock new use cases for Bitcoin’s core transaction types and contribute to its security budget, while others believe it could prevent adoption among price-sensitive individuals and that BRC-20 is a technically inferior standard that cannot be properly integrated into the wider DeFi ecosystem.
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Accordingly, the BRC-20 model is an unofficial, experimental standard that outlines an NFT-based currency system built atop Bitcoin. As the creator domo has explained on GitBook.
The BRC-20 is part of an increasing trend of activity on Bitcoin, including the rise of Ordinal inscriptions to $4.8M and the deployment of Trustless Market, a Uniswap-like DEX, on Bitcoin. Binance is also integrating Lightning Network.
It is crucial to stress that BRC-20s should not be considered as investments, but rather as gambling at best. The market will ultimately decide if they will survive or not.
Importance of BRC-20s
The Ordinals protocol brought a new type of Bitcoin NFTs earlier this year, which allows individual satoshis (the smallest BTC denomination) to be converted into Bitcoin-based NFTs. Shortly after its arrival, an experimenter created the BRC-20s system, which provides a new way to make semi-fungible tokens on Bitcoin.
In recent days, the memecoin boom on Ethereum has inspired a similar trend on Bitcoin via BRC-20s. BRC-20s are not smart contract-based tokens like Ethereum’s ERC-20s and are not completely fungible either. A BRC-20 token is like a cross between a fungible token and a semi-fungible ERC-1155 NFT. It is created by inscribing a snippet of JSON text into a Bitcoin NFT via the Ordinals protocol, which contains basic information such as max supply and token ticker. Additional NFTs are inscribed for transfers or buy/sell orders.
BRC-20s are an experimental standard that outlines an NFT-based currency system built atop Bitcoin. Its recent surge in minting and trading activity has caused controversy in the Bitcoin community, with some hardliner Bitcoin maxis viewing it as an outright attack against the OG blockchain.
Despite the controversy, tokenization experiments on Bitcoin are here to stay.
Getting started with BRC-20s
BRC-20s is still in its early stages, but there is a popular option that has emerged as a top choice for using Ordinals and BRC-20 tokens: UniSat.
UniSat is both a platform and a Chrome extension that makes it easy to mint, store, and transfer BRC-20 tokens. On the UniSat website, there is also a BRC-20 marketplace where you can review and purchase BRC-20 assets or create your own listings.
However, it is important to proceed with caution as the BRC-20 scene is experimental and volatile. If you are new to BRC-20, UniSat is a great place to start. It’s worth noting that to use the UniSat marketplace, you need to have made at least 20 inscriptions on the platform, which is contributing to network congestion on the Bitcoin network. Due to this congestion, Bitcoin transactions are currently expensive, and many people are racing to get their 20 transactions in to start using the UniSat marketplace.
Explore BRC-20s: consider a UniSat wallet 🪙
Refer to Dune dashboard by Crypto Koryo is one place you can explore early BRC-20 activity for yourself.
To sum up on BRC-20 boom and Bitcoin NFTs…
NFT-based BRC-20 tokens are gaining popularity and challenging Bitcoin’s dominance. Ordinals protocol was introduced earlier this year and used to “inscribe” or convert individual satoshis (the smallest BTC denomination) into Bitcoin-based NFTs. Later, a BRC-20 system was created, which allows for semi-fungible tokens on Bitcoin. In recent days, the memecoin craze, such as $PEPE on Ethereum, has inspired a similar boom on Bitcoin via BRC-20s.
BRC-20s are not completely fungible, unlike ERC-20 tokens, and are created by inscribing a JSON snippet into a Bitcoin NFT via the Ordinals protocol. The BRC-20 model is an unofficial experimental standard that demonstrates an NFT-based currency system built on top of Bitcoin.
The rise of BRC-20s in recent days has caused network congestion, with some Bitcoin maximalists portraying the surge in activity as an attack against the original blockchain. The UniSat wallet is a popular Ordinals and BRC-20 wallet that allows minting, storing, and transferring BRC-20 tokens. UniSat also offers a BRC-20 marketplace where buyers and sellers can trade. However, the marketplace has a limitation where users must make at least 20 inscriptions through the platform to use it, leading to congestion on the Bitcoin network.
Overall, tokenization experiments on Bitcoin are likely here to stay, and the rise of BRC-20 tokens has sparked activity and controversy within the Bitcoin community.
Also read this, Crypto Next-Wave: Get Ready For Bitcoin DeFi
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