BRC-20: a new era for Bitcoin or an experimental standard?

Why BRC-20 Has Caused Such Interest in the Crypto Community

The emergence of BRC-20 tokens marked a turning point in the development of the Bitcoin ecosystem. This innovative standard allowed for the creation of interchangeable assets directly on the Bitcoin blockchain, something previously considered impossible. BRC-20 not only expanded the network’s functionality — it redefined what the Bitcoin base layer can do.

It is important to understand that BRC-20 is still an experimental standard. However, its rapid development and the growing number of projects relying on this technology indicate serious potential for long-term growth.

Technological Foundation: From Taproot to Ordinals and BRC-20 Tokens

To understand BRC-20, it’s essential to know its predecessors. The Taproot upgrade increased the amount of data that can be stored in each Bitcoin block. This created the conditions for the Ordinals protocol.

Kaspar Rudarmor introduced the Ordinals protocol in January 2023, a revolutionary tool that allows attaching records to individual satoshis (the smallest units of Bitcoin). Based on this mechanism, in March 2023, analyst pseudonym Domo developed the BRC-20 standard.

How does it work? While traditional tokens like ERC-20 on Ethereum are created via smart contract code, BRC-20 tokens are generated by writing JSON files directly onto satoshis through the Ordinals protocol. This means that deploying BRC-20 does not require complex smart contract logic — simple text data is sufficient.

Comparison with Other Standards: What Makes BRC-20 Unique

BRC-20 differs fundamentally from familiar standards. The main distinction:

ERC-20 (Ethereum): requires full smart contracts, supports complex logic and conditional actions, offering high flexibility.

BRC-20 (Bitcoin): uses simple Ordinals records, does not support smart contracts, but inherits the security of Bitcoin directly.

This simplicity is both an advantage and a limitation of the standard.

Why BRC-20 Attracts Developers and Investors’ Attention

Main Advantages

Security and Reliability. BRC-20 tokens are protected by the Proof of Work consensus algorithm and Bitcoin cryptography. They inherit the power of the oldest and most proven blockchain network.

Accessibility. The absence of smart contracts simplifies the process of creating and managing tokens. Developers do not need deep high-level programming knowledge — understanding basic data formats is enough.

Ecosystem Expansion. The huge Bitcoin user base creates growth potential. New projects using BRC-20 are emerging daily, indicating active interest in the standard.

Critical Disadvantages

Lack of Smart Contracts. This is a serious limitation. It’s impossible to implement complex financial instruments, automated processes, or conditional transactions. Unlike ERC-20, BRC-20 functionality remains basic.

Bitcoin Scalability Issues. BRC-20 directly depends on Bitcoin network throughput. Low transaction processing speed and high fees become obstacles to mass adoption. When thousands of BRC-20 transactions hit the network simultaneously, it causes congestion and further fee increases.

Compatibility. Integrating BRC-20 with alternative blockchain systems and various crypto wallets is challenging. This creates ecosystem fragmentation.

Narrow Use Cases. The standard is optimal for interchangeable assets but not suitable for NFTs (they still require Ordinals), and it is completely unsuitable for implementing complex functions like borrowing or derivatives.

Current State and Future of BRC-20

Currently, the community is at a crossroads. On one hand, innovation is growing — developers are experimenting with BRC-20, and new projects and applications are emerging. On the other hand, network congestion caused by BRC-20 and Bitcoin NFTs has revealed vulnerabilities in the underlying infrastructure.

To overcome these obstacles, major players and researchers are actively exploring second-layer solutions for Bitcoin and other scalable approaches. How effective they will be remains to be seen.

Final Assessment

BRC-20 is an important step in Bitcoin’s evolution but not a panacea. The standard demonstrates that Bitcoin’s blockchain can evolve and adapt to new demands. At the same time, its current limitations indicate the need for further technological improvements.

For those who see potential in BRC-20, it’s a great opportunity to participate in developing a new part of the crypto ecosystem. For skeptics, it’s a reminder that experimental standards require caution and thorough analysis before investing.