Decoding BRC-20s: Your Ultimate Guide to Bitcoin's New Token Standard

Demystifying the Technological Shifts Reshaping Bitcoin's Ecosystem

GM,

While my focus has shifted away from the intricacies of Bitcoin development, the significance of Bitcoin as a prominent asset in my portfolio ensures my continued interest in its trajectory. My optimistic stance on Bitcoin remains undeterred, anchored by my belief in the principles that have made it so resilient - simplicity, resistance to censorship, and a robust proof of work consensus algorithm.

However, recent developments with 'Ordinals' have piqued my curiosity, prompting me to delve back into the rabbit hole of Bitcoin forums. The consensus among Bitcoin core developers seems to be largely negative, dismissing 'Ordinals' as little more than spam.

I find myself in agreement with this sentiment. I maintain that the integrity of Bitcoin is contingent on the preservation of small block sizes, a block time of 10 minutes, and a block size of 1MB. These parameters facilitate efficient network syncing and simplified node operation, crucial elements in maintaining the network's accessibility and functionality.

That being said, the intention of this discussion is not to rekindle the contentious SegWit debate or to incite block-size warfare. Rather, I aim to encourage thoughtful discourse and exploration of recent developments. Your input and perspectives are always appreciated and I look forward to our ongoing dialogue.

The BRC-20 Token Standard: Unpacking the Basics

In the ever-evolving landscape of cryptocurrency, a new token standard has emerged on the Bitcoin blockchain: BRC-20. This token standard can be thought of as a blueprint for tokens, instructing them how to behave within the Bitcoin ecosystem.

Drawing parallels with the concept of Ordinals NFTs, the BRC-20 tokens are intrinsically linked to Satoshis - the smallest unit of Bitcoin. This essentially means each BRC-20 token is 'backed' by a Satoshi, providing a tangible value base.

However, it's important to note that BRC-20 tokens don't function identically to their counterparts on Ethereum, like ERC-20 tokens. Firstly, BRC-20s are not compatible with the Ethereum Virtual Machine (EVM), which means they can't be traded on Ethereum-centric or Layer 2 decentralized exchanges (DEXs) like Uniswap.

Furthermore, BRC-20s do not operate on the smart contract principle that Ethereum tokens do. They aren't created or 'deployed' in the same way. Instead of being deployed as a smart contract on the network, BRC-20 tokens are essentially Satoshis with additional metadata attached, giving them their unique properties and behavior.

In essence, the BRC-20 token standard represents a new kind of token, one that is native to the Bitcoin network and fundamentally tied to its base currency unit, the Satoshi. This opens up new possibilities for tokenization and value transfer on the Bitcoin blockchain. 

The BRC-20 token standard certainly brings an interesting dimension to the Bitcoin ecosystem, particularly benefiting miners. But when it comes to the broader network, I personally believe Bitcoin wasn't designed to accommodate such a change.

The core attributes that make Bitcoin appealing to me are its security, immutability, predictability, and resistance to censorship. These features were built into Bitcoin from the start and have been instrumental in its success.

The push to bring Bitcoin into the realm of decentralized applications (dApps) and speculation feels like a departure from these foundations. My conviction is that Bitcoin should preserve its simplicity, perhaps with a touch more privacy added into the mix (We need conjoin to Ledger enabled by default).

While the introduction of features like Taproot can potentially pave the way for more complex applications and the Xpub key and coin controls are impressive advancements, the essential nature of Bitcoin, in my view, should remain unaltered.

By focusing on its core principles and strengths, Bitcoin can continue to serve as a reliable, secure digital asset that doesn't sway with the winds of speculation and fleeting trends. As always, your insights and perspectives on this topic are highly valued, and I look forward to hearing your thoughts.

The surge of the Bitcoin fees following Ordinals.

In recent days, keen observers of the Bitcoin network might have noticed a dramatic surge in transaction fees. This sharp increase is primarily a consequence of heightened block space demand fueled by Ordinals on the Bitcoin blockchain.

Datas from ycharts.com

This situation bears an uncanny resemblance to the Bitcoin fee spike of 2018, where a simple transaction could cost upwards of $15. While such a fee might be a common occurrence on Layer 1 networks like Ethereum, it's a stark departure from the norm for Bitcoin. According to Bitcoin core developers, Bitcoin is primarily designed to be a 'store of value', and I wholeheartedly agree with this perspective. For me, Bitcoin has served as an exceptional saving tool, as I refrain from spending my Satoshis, except when using Lightning.

The BRC-20 tokens, which are widely regarded as spamming the Bitcoin network, have certainly stirred up debate. Some even view this influx as an indirect attack on Bitcoin, suggesting that a government could potentially destabilize the network by launching and promoting a wave of low-value tokens. While this scenario is speculative, it does underscore the potential impact of excessive token creation on the Bitcoin network.

This recent issue, though troublesome, could have been leveraged as an opportunity to advocate for the Lightning Network, Bitcoin's scalable solution that I personally love using. It offers an excellent level of privacy, especially when purchasing goods on platforms like Bitrefill. However, the technical complexities involved in setting up a Lightning channel might be daunting for novices.

Moreover, it's important to acknowledge that developer tools on the Bitcoin blockchain are not as user-friendly as those available on Ethereum. Ethereum's EVM compatibility, the use of Solidity, and a plethora of easy-to-use front-end and back-end tools make it a more approachable platform for developers.

In summary, while the recent surge in Bitcoin fees and the advent of BRC-20 tokens present challenges, they also offer opportunities for discussion, learning, and potentially, improvement. As always, your thoughts and perspectives on these topics are greatly appreciated.

the Potential Removal of Ordinals: Bitcoin-Dev Mailing List Insights

Recently, an intriguing conversation has emerged on the Bitcoin-dev mailing list. The topic at hand is the potential removal of Ordinals from the Bitcoin network, a discussion sparked by recent developments affecting transaction congestion.

Ali, a contributor to the list, shared his concerns about the Bitcoin mempool's condition over the past 96 hours. He attributed the severe congestion, not seen since December 2017, to side projects like BRC-20. According to him, the high volume of these tokens is pricing out genuine Bitcoin transactions, disturbing the network's regular operations.

Ali, and many others, see these tokens as virtually worthless, thus posing a threat to Bitcoin's primary function as a peer-to-peer digital currency. If the token volume continues unabated, he suggests that some action might be necessary. He even points a finger at miners for allowing the system to be manipulated this way.

Ali suggests two possible courses of action: introducing Bitcoin Improvement Proposals (BIPs) or making changes directly to the Bitcoin Core codebase to fix the loophole in BIP 342, which defines the validation rules for Taproot scripts. These changes would curtail the unforeseen consequences that have led to the current situation.

An alternative suggestion involves the enforcement of a type of "censorship" at the node level, introducing a run-time option to instantly prune all non-standard Taproot transactions. While this would be easier to implement, it wouldn't be functional until at least the next release.

Ali acknowledges that this proposal might face criticism, especially from those advocating for absolute freedom in the Bitcoin network. However, he stresses the need for a solution that can find common ground among all participants. Given that the current situation was inadvertently enabled by the existing rules, he believes there is a responsibility to prevent such congestion from happening again.

As always, I welcome your thoughts and perspectives on this evolving discussion. Do you think removing Ordinals is the right move, or do you see other potential solutions? Let's continue this conversation together.

You can read the Ali mailing post here: https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2023-May/021620.html

Ordinals: My Take and Where to Find Them

While I've been discussing the impact of Ordinals extensively, I want to clarify that I personally haven't purchased any, nor do I intend to. Given my long-term perspective on Bitcoin (spanning at least a decade), I view Ordinals as more of a short-lived trend. Therefore, I won't be the one to recommend purchasing them.

However, if your curiosity is piqued, I've discovered a marketplace where you can explore these tokens. You can visit OrdinalsWallet, where you can inscribe on the Bitcoin blockchain and purchase both NFTs and BRC-20 tokens. The website even provides information about the market capitalization of the tokens.

Please remember, this isn't investment advice. It's crucial to proceed with caution as this platform isn't battle-tested, and I haven't found any means to review the underlying code.

Thank you for taking the time to read this article. The events unfolding during this bear market on the Bitcoin blockchain are undeniably intriguing. I'd love to hear your thoughts on the whole situation. To continue staying informed and engaged, please consider subscribing to this newsletter and following me on Twitter @yanneth_eth and please give a follow to Bonsai, my personal project. Your support is greatly appreciated!