What is BRC-20?
BRC-20, short for "Blockchain Request for Comment 20," is an experimental standard for creating and managing fungible tokens on the Bitcoin blockchain. Similar to Ethereum's ERC-20 standard, BRC-20 defines a set of rules and functions that developers can use to create tokens on the Bitcoin blockchain.
How Does BRC-20 Work?
BRC-20 uses the Ordinal inscription method to inscribe JSON data, allowing users to mint and transfer fungible tokens on the Bitcoin blockchain. To buy BRC-20 tokens, a user must have a Bitcoin Taproot-enabled wallet.
Key Components of BRC-20 Tokens
Transferability: BRC-20 tokens are fungible, meaning each token is identical and interchangeable with any other token of the same type.
Transfer Approval: Token holders can grant permission to other addresses or contracts to spend tokens on their behalf, a crucial feature for decentralized applications (dApps).
Event Handling: BRC-20 tokens can trigger events when certain actions occur, such as transfers or approvals, allowing dApps to respond to token-related activities
Why is BRC-20 Significant?
The BRC-20 token standard effectively builds upon Ordinals inscription technology to explore token fungibility. Early examples of BRC-20 projects have explored token creation, interoperability, crowdfunding options and additional DeFi options for dApps.
As such, BRC-20 tokens are now compatible with various wallets, exchanges and dApps.
Use Cases for BRC-20 Tokens
A wide range of use cases for BRC-20 tokens has been explored. Some use cases include:
DeFi Platforms: Supporting decentralized finance (DeFi) protocols, such as decentralized exchanges (DEXs), yield farming, and lending platforms.
Gaming: Issuing in-game assets and virtual currencies that can be traded and utilized within blockchain-based games.
Token Sales: Raising capital through token sales, allowing investors to purchase project-specific tokens.
BRC-20 Related Terms
ERC-20: Ethereum's equivalent standard for creating fungible tokens on the Ethereum blockchain.
Fungibility: The property of tokens or assets that makes them interchangeable with one another. Fungible tokens are identical and have equal value.