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Bitcoin BRC-20 Status Update: On-chain Transactions Hit New High, Why is BRC-20 So Hot?

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Bitcoin BRC-20 Status Update: On-chain Transactions Hit New High, Why is BRC-20 So Hot?

Under the efforts of the community, the Bitcoin ecosystem has developed mechanisms for the minting, issuance, and transfer of homogeneous tokens. However, driven by speculative behavior, this has also led to congestion on the main network and high on-chain transaction fees. The ability to "issue coins" means that Bitcoin is no longer just a means of transfer, but will this fundamentally change the Bitcoin narrative, or will it be just a passing fad like the CryptoKitties that paralyzed the Ethereum network in 2017?

What is BRC-20?

BRC-20 was proposed by developer @domodata on March 8th this year as an experimental "homogeneous token standard" on Bitcoin.

In the past two years, the hyped NFTs are "Non-Fungible Tokens, NFTs," where each token can represent unique digital data.

In contrast, homogeneous tokens are like hundred-dollar bills, where each token is of the same value and substitutable, such as Tether's USDT on Ethereum or Uniswap's UNI with a total supply of one billion tokens.

ERC-20 is currently the most widely adopted homogeneous token standard, and the name "BRC-20" for Bitcoin is inspired by ERC-20.

How is BRC-20 implemented?

The block size of Bitcoin is no longer limited to the previously known 1MB after the scalability solutions SegWit and Taproot upgrades, with the block limit now reaching 4MB.

The NFT protocol "Ordinals," which emerged in early February, writes images, texts, SVG, or HTML files into the smallest unit of Bitcoin, sats. These sats with embedded data numbers and the data embedded by the protocol are named "Inscriptions."

With a significant increase in data written into blocks, the Bitcoin block size has exceeded the initial 1MB limit.

Through the "Ordinals" protocol, BRC-20 enables "writing in JSON data format and defining token minting rules." With this logic, anyone can deploy, mint, or transfer tokens on the Bitcoin chain.

As an example, the first experimental token "ordi" deployed by BRC-20 developers:

  • Protocol Type: brc-20

  • Operation Category: Token Deployment

  • Token Label: ordi

  • Maximum Supply: 21 million tokens

  • Minting Limit: 1,000

Current Situation and Chaos of BRC-20

The first BRC-20 token "ordi" was minted within less than 18 hours of its code release, followed by the emergence of various meme tokens.

Websites related to BRC-20 tools include:

According to BRC-20.io, there are as many as 14,079 tokens, with the majority being low-liquidity meme coins, with ordi alone accounting for two-thirds of the total market value.

Renowned analyst Ignas expressed confusion about the popularity of BRC-20 and pointed out that to use the mainstream trading market unisat.io, users need to first mint, deploy tokens or engage in image, text, or other inscriptions to earn 20 points before entering to buy coins.

He believes this forces users to create or promote a meme coin so that users can buy other meme coins, ultimately leading to congestion on the Bitcoin mainnet.

Note: UniSat announced the removal of the points requirement on May 11th.

BRC-20 Miner Earnings: Far Below 2017, 2021

Data from Dune shows that miners seem to be the biggest winners apart from early entrants to BRC-20, but not as sensational as reported by Chinese media:

"On May 7th, there were 396,763 transactions on the Bitcoin chain, with minting fees of 236 BTC and transaction fees of 7.87 BTC, both hitting a record high."

However, this refers to BRC-20, not all on-chain transactions.

There have also been instances where, for the second time since 2017, the transaction fee of 6.7 BTC in a block exceeded the block reward of 6.25 BTC.

Comparing Blockchair with Dune BRC-20:

  • Average transaction fee on 5/8: $28.88, much lower than the $64.2 in the 2021 bull market and $63.85 in 2017.

  • Total confirmed transactions on 5/1: 682,281, significantly higher than the previous high of 490,644 in 2017.

These data may indicate that even with significantly higher transaction numbers than in 2017, after the Taproot upgrade, transaction fees have decreased significantly, and miner earnings are not as high as in 2017 and 2021.

Overall, the ability to issue tokens makes Bitcoin more than just a means of transmission, but will this completely change the Bitcoin narrative, or will it be just a flash in the pan like CryptoKitties in 2017 that paralyzed the Ethereum network?