What is BRC-20? A Guide to Issuing, Minting, and Trading

The rise of BRC-20 tokens has drawn many investors into the Bitcoin ecosystem. But what is the underlying technology behind them, and what are their key characteristics? Beyond the tokens that have already seen astronomical gains, are there opportunities to replicate their success?

BRC-20 is an experimental token standard for issuing fungible tokens on the Bitcoin network. It was created by Twitter user @domodata on March 8, 2023, based on the Ordinals protocol. Similar to Ethereum's ERC-20 standard, it defines how tokens are named, issued, and transferred. However, a key difference is that the Bitcoin network does not natively support smart contracts. Instead, BRC-20 utilizes the Ordinals protocol to inscribe JSON data formats to deploy, mint, and transfer tokens.

Understanding the Ordinals Protocol

To understand BRC-20, one must first understand Ordinals. Proposed in January 2023, Ordinals is a numbering system for satoshis (sats), the smallest unit of Bitcoin (1 BTC = 100,000,000 sats).

Ordinarily, every satoshi is identical. The Ordinals protocol assigns a unique serial number to each satoshi, making it distinct and traceable on the blockchain. When information—such as text, code, or an image—is attached to a specific satoshi, it becomes a unique digital artifact, often referred to as a Bitcoin NFT. This process is called inscribing, and the attached information is the inscription.

@domodata realized that the Ordinals protocol could be used for more than just NFTs. By inscribing a standardized JSON data format instead of images, these inscriptions could function as fungible tokens—thus, the BRC-20 standard was born. In essence, a BRC-20 token is a specific type of Ordinals inscription where the content is text-based JSON data that acts as a token ledger.

How the BRC-20 Standard Works

The BRC-20 standard provides a framework for three primary functions:

• Deploy: To create and initialize a new token.
• Mint: To generate new units of a deployed token.
• Transfer: To send tokens from one user to another.

These operations are executed by inscribing specific JSON data. For example, the deployment of the ORDI token used the following format:

{
  "p": "brc-20",
  "op": "deploy",
  "tick": "ordi",
  "max": "21000000",
  "lim": "1000"
}

This JSON string defines the protocol (p), the operation (op), the ticker symbol (tick), the maximum supply (max), and the mint limit per transaction (lim).

Anyone can deploy a BRC-20 token, but the ticker name is limited to four characters (letters or numbers, case-insensitive) and operates on a first-come, first-served basis.

A Step-by-Step Guide to Participating in BRC-20

For most users, interacting with BRC-20 tokens requires a compatible wallet like UniSat Wallet.

How to Mint a BRC-20 Token

Minting is the process of acquiring new tokens directly from the protocol before they are all claimed.

1. Set Up a Wallet: Install the UniSat Wallet browser extension. During setup, ensure you select the derivation path m/86'/0'/0'/0/0 to ensure compatibility with Ordinals and BRC-20.
2. Fund Your Wallet: Deposit BTC (to cover network fees) into your UniSat Wallet address (which starts with bc1p).
3. Inscribe a Mint Transaction: In the wallet, navigate to the "Inscribe" tab. Select the "BRC-20" option and then choose the "Mint" operation.
4. Enter Token Details: Type the ticker symbol of the token you wish to mint (e.g., "ordi") and specify the amount you want to mint, ensuring it doesn't exceed the per-transaction limit set by the token's deployer.
5. Pay the Gas Fee: Submit the transaction and pay the Bitcoin network fee (gas). During times of high congestion, you may need to pay a higher fee to ensure your transaction is processed by miners.

👉 Explore more strategies for efficient minting

How to Buy a BRC-20 Token on the Secondary Market

Once a token's supply is fully minted, you can only acquire it through peer-to-peer (P2P) trading.

1. Marketplaces: Platforms like the UniSat Marketplace allow users to list BRC-20 tokens for sale. These marketplaces operate similarly to NFT platforms, where sellers list a full "lot" of tokens at a set price.
2. Access Requirements: Note that accessing some marketplaces may require holding a specific wallet or earning platform points, which can involve minting other inscriptions and incurring additional fees.
3. OTC Transactions: Users can also arrange trades directly (over-the-counter), but this carries a high risk of fraud unless a trusted escrow service is used.

The BRC-20 Ecosystem and Key Tokens

The BRC-20 landscape is dominated by meme coins, which are highly speculative and often lack fundamental utility. Some of the most notable tokens include:

• ORDI: The first BRC-20 token, with a fixed supply of 21 million.
• PEPE: A popular meme token that migrated from Ethereum.
• PIZA & MEME: Other early tokens that gained significant community attention.

Data from platforms like brc-20.io shows thousands of tokens have been deployed, with a total market capitalization in the hundreds of millions of dollars. However, the number of active holders for even the largest tokens remains in the thousands, indicating a niche but growing market with relatively low liquidity.

Essential BRC-20 Tools and Platforms

• Wallets & Minting: UniSat Wallet, OKX Wallet
• Marketplaces: UniSat Marketplace
• Data & Analytics: BRC-20.io (for prices and market cap), Ordiscan (an Ordinals block explorer), Ordspace (for data and statistics)

Risks and Considerations

While the promise of high returns is alluring, the BRC-20 space carries significant risks:

• Speculative Nature: Most tokens are meme coins with no inherent value or utility. Their prices are driven entirely by speculation.
• Low Liquidity: With a small user base, buying or selling large amounts of a token can be difficult without drastically affecting its price.
• Technical Risk: The standard is experimental. There could be undiscovered flaws in the protocol or supporting tools.
• Network Congestion and High Fees: Minting and trading BRC-20 tokens require on-chain Bitcoin transactions. During bull markets or periods of high demand, network fees can become prohibitively expensive.
• Scams and Fraud: The pseudo-anonymous and experimental nature of the ecosystem makes it a target for scams, including fake tokens and rug pulls.

Frequently Asked Questions

What is the main difference between BRC-20 and ERC-20?
BRC-20 tokens exist on the Bitcoin blockchain and rely on the Ordinals protocol for inscription-based creation and tracking, without smart contracts. ERC-20 tokens are native to the Ethereum network and are powered by smart contracts that govern their functionality.

Do I need a special wallet to hold BRC-20 tokens?
Yes, you need a wallet that supports the Ordinals protocol and can parse BRC-20 inscriptions, such as UniSat Wallet or OKX Wallet. Standard Bitcoin wallets (like those from exchanges) may not recognize these tokens, potentially leading to loss of funds if sent to an incompatible address.

Can anyone create a BRC-20 token?
Yes, the process is permissionless. Anyone can inscribe the JSON data to deploy a new token, provided the chosen 4-character ticker name is not already taken.

Are there alternatives to BRC-20?
Yes, other experimental standards have emerged. ORC-20 aims to be an upgrade to BRC-20 with more flexibility and features. Other chains, like Litecoin, have also seen the creation of similar standards like LTC-20.

Why are Bitcoin purists concerned about BRC-20?
Critics argue that BRC-20 transactions clog the Bitcoin network, driving up transaction fees for everyone and diverting Bitcoin's primary use case away from its intended purpose as peer-to-peer electronic cash. However, proponents believe it brings new innovation and users to Bitcoin.

Is the BRC-20 standard finalized?
No, it is explicitly an experimental standard. The creator, @domodata, has emphasized that it has no inherent investment value and is subject to change.