Mad Maxis: The Mematic Rise of BRC-20 tokens

@lunarcrush

Social Intelligence for Crypto, NFTs, and Stocks - there's more to markets than tr...

An exciting new phenomenon is breathing life into crypto markets — memecoins provisioned on the Bitcoin network. What started 2 months ago as an experimental token standard built on top of ordinal inscriptions has quickly become the next fad with over $200 million in daily trading volume and a total market cap exceeding $500m.

What are BRC20 tokens?

In short, the BRC-20 token standard uses Bitcoin ordinal inscriptions to enable the minting and transfer of fungible tokens on the Bitcoin blockchain. It is modeled after the ERC-20 token standard, the prevailing standard for provisioning fungible tokens on the Ethereum blockchain. It began as an experiment by a pseudonymous Dune analyst and programmer named Domo, and quickly paved the way for thousands of meme coins to exist within the metadata of individual satoshis.

To provide a bit of mental scaffolding, the Bitcoin Ordinals protocol is a system for numbering satoshis (each bitcoin is composed of 100 million satoshis) by giving each satoshi a serial number and tracking them across transactions. Inscriptions are blobs of arbitrary data and associated metadata, of which the latter tells a Bitcoin node how to render said data (i.e. images, text). They run parallel to the Bitcoin network - much like smart contract tokens on the Ethereum blockchain. The two are used in conjunction to provision the BRC-20 token standard, which are JSON object inscriptions that define every characteristic of the token including the minting, balances, and distribution. The bitcoin network decodes this information once they are deployed — and for those concerned, because it is simply an arbitrary piece of data running parallel to the network, Bitcoin remains unaffected if BRC-20 tokens or the protocol itself malfunctions.

What does the market currently look like?

At the time of this writing, there are 14,450 different BRC-20 tokens minted, with $206 million in 24-hour trading volume, and a market cap of half a billion dollars - which is amazing given that any wallet or trading infrastructure is less than 2 months old, with much of the coins are still being traded on a peer-to-peer basis. Here are some of the recent tokens that have been driving this extraordinary rise, and some tokens that may continue to fuel the flames:

$ORDI - Currently being traded on Gate.io and BitGet amongst other CEXs, ORDI is the first BRC-20 token ever minted with a 21 million max supply and a trading volume of $107m. It has the advantage of being the first BRC20 token on Bitcoin.

$PEPE - You may have seen PEPE take over social media lately at one point reaching a market cap of $1.6 billion, making overnight millionaires and attracting a community of like-minded degens. It is based on the popular Pepe the Frog internet meme, created by Matt Furie. PEPE lives on both Ethereum and Bitcoin, widening it’s memetic reach to both communities and witnessing the onset of “memecoin season”.

$MEME - Currently trading at over $90 with +$2m in trading volume, the $MEME token is exactly what it sounds like.

A few others include: $NALS, $PIZA, $BANK, $OSHI, $DRAC ??

How to Buy, Store, and Trade them

There are two major ways that users can buy, store, or trade BRC-20 tokens. BRC-20 tokens can be bought and sold on centralized exchanges like BINANCE or Gate.

However in true crypto ethos/fashion, we recommend transacting with BRC-20 tokens in self custodial wallets. Here we will quickly run through how to create your own wallet, buy BRC-20 tokens, transfer them, and even mint and deploy them. Note that you will need an ordinals compatible wallet (taproot wallet) address to manage BRC-20 tokens - like Hiro, Unisat, or OrdinalsWallet wallets:

Hiro - Hiro wallets were originally developed for managing STX tokens, a smart contract protocol built on top of the Bitcoin blockchain. Navigate to https://wallet.hiro.so/ and click ‘Install Hiro Wallet’ (you can choose from the browser extension or the Desktop app) and follow the instructions to back up your secret key, create a password, and set up your wallet. You can follow this walkthrough here to learn how to deploy, mint, store, and transfer BRC-20 tokens with Hiro’s new wallet upgrade (v4.21.1).

UniSat - UniSat gives users a complete BRC-20/Ordinals experience with both a wallet and a marketplace from which you can trade or buy BRC-20 tokens in a peer-to-peer exchange. Head over to https://unisat.io/ to download the wallet. We recommend downloading the chrome browser extension unless you feel savvy enough to download from Github. You can use the UniSat UI to inscribe satoshis, search for tokens, and buy/sell BRC-20 tokens.

OrdinalsWallet - OrdinalsWallet was one of the first wallets created for supporting ordinal inscriptions, and allows users to store, send and receive Bitcoin Ordinal NFTs. It now allows you to transact BRC-20 tokens on their marketplace as well. Head over to https://ordinalswallet.com/brc20 to create a wallet and buy or sell BRC-20 tokens.

Final Thoughts

BRC-20 tokens give the Bitcoin network the potential to create more utility and bring more users into the space. It’s important to note, however, that BRC-20 tokens are still experimental and in the early stages of its development.

Besides the obvious novelty, the BRC20 token narrative has a few tailwinds. For one, some proponents are now increasingly viewing the Bitcoin network as a settlement platform— rather than simply a (financial) transactional network — where eventually all economic activity will end up inheriting the security properties of the bitcoin network. Some also argue that creating tokens on the Bitcoin network also allows the onboarding of a new cohort of users and degens, and by doing so giving miners another source of fee revenue, which can be used to offset decreasing network security budgets due to halving periods (i.e. after the Bitcoin halving in 2024, miner revenue can be sustained with fees from BRC20 transactions).

On the other hand, BRC-20 tokens have made the Bitcoin network into a victim of its own success, and debates have been raging as to the net effects ordinals and BRC20 tokens have on the Bitcoin network. Some essentially view BRC-20 memecoins as spam, clogging up a network meant for sound money and peer-to-peer payments as per Satoshi Nakamoto’s original white paper. In 2010, Satoshi themself wrote that “Piling every proof-of-work quorum system in the world into one dataset doesn’t scale” in regards to filling blocks with arbitrary data (this was in reference to BitDNS). Some also argue that putting BRC-20 tokens and ordinals on chain diminishes the overall fungibility of bitcoins as satoshis are essentially “marked” for NFTs and tokens, cannabilizing the BTC supply and it’s value proposition as interchangeable units of money. This has created a bit of a culture war between ordinals/BRC-20 token holders and Bitcoin purists who believe that the Bitcoin network should stick to its core ethos of providing peer-to-peer money without a centralized issuer.

On the other side of the argument, ordinals and BRC-20 holders argue that Bitcoin can morph into a settlement network and that worries over fungibility and network congestion are overblown. Some have pointed to the fact that there is still unused blockspace, which represents economic inefficiency and that BRC-20 tokens actually ensure that value density is maximized on each block. Holders also argue that bringing tokens onto the Bitcoin network helps grow the overall crypto user base and is another means to onboard new users and pique interest. Other holders simply argue that bitcoin maximalists are a bunch of buzzkills who are raining on the parade with their sad violin music of maximalist rhetoric.

Whether you view them as a creative expansion of utility or a potential threat to the Bitcoin network's core principles, it is hard to deny that BRC-20 tokens have been making massive inroads into the cryptoverse. Money talks and in the case of bitcoin memecoins, money has been talking to the tune of half a billion dollars and counting — so be sure to keep your ears to the ground for more developments in the world of BRC-20 tokens!

Author:

• Toby Fan, Web3 Strategist @ LunarCrush
• Twitter | LinkedIn