What Are BRC-20 Tokens? Bitcoin NFTs And Ordinals Explained

July 11, 2023 by Mimi Phan

Let’s talk about the new kid on the block: BRC-20 tokens, the latest buzz in the world of crypto fans. As you probably know, Bitcoin pretty much paved the way for Web3‘s grand entrance – but it was kind of a one-trick pony, mostly used for payments (unlike its buddy Ethereum, which could pop out apps and shiny new NFT tokens). Now, though, here comes BRC-20, flipping the script and giving Bitcoin a brand-new image!

What Are BRC-20 Tokens?

BRC-20 tokens are built on the BRC-20 standard. This standard forms the foundation of all the innovative tokens that run on Bitcoin, such as Bitcoin NFTs. Some popular examples of BRC-20 tokens include Ordi, Pepe, Moon, BSV, and Geke. While these tokens have seen some success, they wouldn’t be here without something called the ordinals protocol.

What Are Bitcoin Ordinals And How Do They Work?

Like a cent to a dollar, a Satoshi is the smallest piece of a Bitcoin. Each Bitcoin can be broken down into a whopping 100,000,000 Satoshis. Bitcoin ordinals are like a magic tool that turns Bitcoins into unique, trackable tokens. How? The ordinals protocol gives each Satoshi (those teeny-tiny Bitcoin building blocks) its own special tag or serial number and monitors it as it moves around.

The neat thing about the ordinals system is that it numbers each Satoshi based on when and how it was created and transferred. It’s all about the order – that’s why they’re called “ordinals.” The best part is that you can jazz up your Satoshis by attaching extra bits of info to them. It’s like putting a unique sticker on each one. This is called “inscription.”

Let’s Talk About Bitcoin NFTs AKA Bitcoin Ordinals

Bitcoin NFTs are non-fungible tokens built on (or associated with) the Bitcoin blockchain. Let’s take a look at a scenario that explains the concept a little better.

Two separate one-dollar bills are interchangeable; you can swap one $1 bill directly for another and you’ll have the same amount of value. In web3, this is known as fungibility. However, if one of these bills, say, gets signed by someone famous, its value changes. It’s still a one-dollar bill, but it has become sort of rare.

That’s essentially the way Bitcoin NFTs work, and this unique trait is supplied by ordinals.

Where Did BRC-20 Tokens Come From?

In November 2021, the Taproot upgrade went live, allowing anyone to inscribe data onto a Satoshi and store it on the Bitcoin blockchain, creating a fixed record of information. This sparked an interest in creating fungible tokens that run on the Bitcoin network.

On March 9, 2023, the first BRC-20 tokens, known as “Ordi,” were created by an anonymous developer named Domo (@domodata on Twitter). And the rest is history!

How Are BRC-20 Tokens Different From ERC-20 Tokens?

BRC-20 is sort of inspired by ERC-20, but has some differences you should know about.

1. Let’s start with the most obvious difference: BRC-20 runs on the Bitcoin blockchain, while ERC-20 runs on the Ethereum blockchain.

2. BRC-20 tokens work in “parallel” to the Bitcoin blockchain. This means that activities on the BRC-20 token won’t affect Bitcoin. The opposite is true for ERC-20 tokens, which work in “resonance” with the Ethereum blockchain.

3. Unlike their ERC-20 cousins on the Ethereum network, BRC-20 tokens don’t use smart contracts. This makes them easier to create.

What Are BRC-20 Tokens Used For?

Unlike Ethereum, which could be used to build applications and mint tokens such as NFTs, Bitcoin was primarily a cash system and was limited to making financial transactions – a flaw that had long existed on the Bitcoin blockchain since its creation. But with BRC-20 tokens came the potential for new possibilities.

Let’s dive into some of the exciting things these tokens can do!

1. P2P Transfers

Much like their big brother Bitcoin, BRC-20 tokens can be passed around from one person’s wallet to another person’s wallet on the network. And because they’re on the Bitcoin blockchain, fees are paid in Bitcoin.

2. Tokenization

BRC-20 tokens can become digital stand-ins for tons of goodies – real-world money, gold, you name it! It can be configured into the token’s code through ordinal inscriptions.

3. DeFi

Let’s face it: Bitcoin’s been reliable, but not much fun. Its simple design has capped how many decentralized apps and protocols could party on its network. But BRC-20 tokens bring the fun. With a few extra features, these tokens can hop into DeFi exchanges, yield farming, and even GameFi (Gaming Finance).

How To Buy Bitcoin Ordinals And Get Started With BRC-20

To get started with BRC-20 tokens, you will need a Unisat or Ordswap wallet.

1. Go to Unisat and add the Unisat wallet extension to your Chrome browser by clicking “Download from Chrome Store.”

2. Create a new wallet by clicking “Create New Wallet.”

3. Create a strong password.

4. Write down your 12-word secret recovery phrase and keep it safe somewhere you will always remember. You’ll need this for wallet recovery.

5. Finally, you’ll need to choose an address type. Choose Taproot and click “Continue” to proceed.

How to Buy Bitcoin Ordinals

1. Visit Ordinals Wallet.
2. Click “Create Wallet.”
3. Write down your recovery phrase and set a unique password.
4. Buy Some Satoshis (Sats) and send them to your Ordinals Wallet address. (Pro tip: Search for Satoshi on CoinMarketCap to see a list of where to buy it.)
5. Click on “Collections” at the top.
6. Pick your favorite ordinal and inscription.
7. Use your Sats to buy your chosen ordinal. Enjoy!

What Does The Future Look Like For BRC-20 Tokens?

BRC-20 tokens are still in their early stages, so it’s difficult to say what direction they’re headed in. But looking at how mind-blowing PEPE has been, it’s safe to say that this might be one of Web3’s biggest hits so far.

Anyone considering investing in BRC-20 tokens should proceed with caution, of course, as these tokens are still in their experimental stages and it’s possible to encounter bugs. But on the whole, things are looking exciting for the new world of Bitcoin!

Featured image by Dmitry Demidko on Unsplash