A new Bitcoin “token standard” called BRC-20 is the hottest thing right now in the crypto space. It was introduced in March 2023 by a pseudonymous person called Domo. Bitcoin Request for Comment 20 (BRC-20) is an experiment that brings fungible tokens to the Bitcoin blockchain using the Ordinals protocol.
Ordinals rely on ordinal theory, enabling the identification and tracking of individual satoshis within Bitcoin's existing supply, while also allowing them to be inscribed (associated) with data. Through this technique, satoshis (sats) are given ordinal numbers starting with zero. Anyone can add a script file to a sat to create and transfer a BRC-20 token on the Bitcoin blockchain. BRC-20 tokens are created using three functions: deploy, mint, and transfer.
As of now, the great majority of BRC-20 tokens in existence are meme coins. So, the main factor driving the rise of BRC-20 tokens is pure investor speculation. Still, the total market cap of these fungible tokens surpassed $1 billion earlier this month. While the market capitalisation has since dropped below the $1 billion mark, investors are rushing to cash in on this trend.
While some people are having fun with BRC-20 tokens, a section of the Bitcoin community is watching with unease as the Bitcoin blockchain clogs up and transaction fees rise. The demand for block space is higher than it’s ever been now that more people are using the Bitcoin chain thanks to BRC-20 transactions, which have exceeded normal Bitcoin transactions. As a result, users are forced to pay higher fees if they want miners to prioritise their transactions. The alternative is waiting for long periods for miners to confirm their transactions. Earlier this month, the number of unconfirmed transactions was so high that Binance temporarily paused BTC withdrawals.