[WARNING] Stay away from BRC-20 tokens - they are doomed in the long term

[d5000]

There is a new hype in Bitcoinland - so called BRC-20 tokens. They are advertised by some of their holders as "the equivalent in Bitcoin for the Ethereum-based ERC-20 tokens". They were created in March 2023, are fungible (so they are no NFTs) and based on the so-called "Ordinals" technology introduced in late 2022.

You may be interested to invest in this tech, maybe even create a token yourself. But I think this is a bad idea - these tokens have a lot of disadvantages. It is possible, and in my opinion likely, that they will not have a very long life.

First of all: BRC-20 is, by far(!), not the only way to create tokens on the Bitcoin blockchain. There are more than a dozen token standards for Bitcoin since at least 2013/14. Some are quite popular and have a long history, with years of improvements, like Counterparty and Omni, and some offer advanced features like compatibility with Lightning Network (RGB, Taproot Assets [1]).

Now to the disadvantages:

1) BRC-20 tokens are extremely limited in their functionality. Not only don't they support smart contracts (like ERC-20 tokens do), nor DeFi [2], nor even Lightning Network. Due to their technical conception it is very difficult that they will support these things in the future.

2) The creator itself, @Domodata, has described them as an "experiment", and has warned that they may not be worth anything.

3) They may have undiscovered flaws. They're only 2 months old. Software often has bugs, and so may have Ordinals and BRC-20.

4) They are extremely inefficient. This is, in my opinion, the most important disadvantage. Not only BRC-20 token creations, but also all transfers of tokens cost two transactions, because they need to be "inscribed" as an Ordinal in the blockchain. All other token protocols I mentioned above need only one. That's not something only of importance for some maxis or nerds. It will cost holders money, because the more space a token transfer needs, the more fees you will have to pay in each transfer. For a simple BRC-20 transfer you will have to pay about two times the fee of that to transfer any other Bitcoin-based token. And additionally, the way the parameters of the coin are stored is very inefficient.[3]

5) (new and important!): They very likely will not be stored permanently on the blockchain, so eventually they will be unavailable or only kept by "archival nodes" which will charge access for it. See this post from gmaxwell for more details. So BRC-20 tokens will eventually "disappear". They are doomed in the long term.

The only advantage they have is actually: They are "new and hot". There's currently a "fad" around them, so very, very fast early adopters could still earn money with them, e.g. with a meme coin. But don't wait too long. You may be holding a very annoying (due to the fees to transfer them) and costly, but potentially worthless bag.

Still like the idea of tokens and meme coins on Bitcoin?

There are a lots of alternatives, but for new users I recommend two, and there is one more for advanced users:

- Counterparty - developed since 2014, has lots of features, supports also NFTs, even meme tokens have already been created there, some long times ago ("Rare Pepes", one of the first NFT collections ever). Lightning and smart contract features are in development.
- Omni - developed since 2013 (originally as Mastercoin), best known because the stablecoin TetherUSD (USDT) is based originally on this technology. Lightning support is in development.
- RGB - one of the most modern and efficient token protocols, developed since 2017 (whitepaper was published in 2016). It is not only compatible with the Lightning network, it was specifically designed for off-chain transfers. This may be a very interesting technology once fees become higher in the long term. It is however still in its initial stages.
- Taproot Assets (formerly known as Taro). Another modern standard which support Lightning, now being tested on mainnet. They have some similarities with RGB in that the tokens rules can be set off-chain, but there are also some differences in the way the tokens are stored and transferred.

And there are also altcoin platforms with much less congested blockchains you can use.

PS: This is no investment advice. Do your own research. But my personal opinion about BRC-20 tokens is that their future looks very, very bleak. It is also not against the technology itself - it may be an interesting tech test. But IMO it has come way too far, and I fear many will lose lots of money with it.

[1] There was a trademark lawsuit regarding the name of this protocol, called initially "Taro". The name was now officially changed to Taproot Assets.
[2] Contrary to popular belief some DeFi applications can be implemented in Bitcoin, but not with the BRC-20 standard and in a different way than with ETH. Counterparty for example has an experimental implementation, but it is not usable still for production. RGB may be eventually a better alternative.
[3] BRC-20 inscriptions are JSON texts. This means that not only the metadata itself is inscribed, but also the names of the parameters to store, even the special characters. Other token protocols don't do that, so the metadata only occupies half to two thirds of the space required by BRC-20.

[cryptoaddictchie]

Ive seen it on Twitter and even major platform like icodrops show the topic about BRC-20. This will be another hype. Of course for degen users this is a possible money printing but for bitcoin maxi this is bullshit project. I think this will be hyped but not will sustain its long term plan like they wanted. Experimental could be good but also dangerous.

Bitcoin has its reputation of being decentralized and this idea will not boost it more. Its still like an altcoin which being related to bitcoin. Even Saylor wouldnt mind this.

[Helena Yu]

Nice write up.

I think when the BRC-20 hype trend is over, this happen when the token price isn't increase higher than the fees they've spend, so the project will consider to use the other alternative chain like counter party, OMNI and RGB you mentioned above. But AFAIK those chain is really underrated, not many people use it, so it's not liquid.

Even there's a vulnerability with the ordinals and BRC-20 token, people will not care, just like how many DEFI and NFT scam out there. They only care with the hype and liquidity.

BRC-20 wouldn't destroy Bitcoin, but it make the true usage of Bitcoin e.g. as a currency, will be harder because it's not convenient to use it for daily transaction.

[cryptoaddictchie]

I think when the BRC-20 hype trend is over, this happen when the token price isn't increase higher than the fees they've spend, so the project will consider to use the other alternative chain like counter party, OMNI and RGB you mentioned above. But AFAIK those chain is really underrated, not many people use it, so it's not liquid.

Can you explain whats happening out there. Ive seen a lot of social influ posting about it and its like people are grabbing some attention with this. Ive seen some nft with prices skyrocketed. So this domo on twitter the creator created a very contorversial tech?

[noorman0]

I just don't think the hype will last as long as nft tokens on other networks like ERC20 or BSC20. However bitcoin is not oriented towards this technology, nft and token enthusiasts will not find a better efficiency solution (if they saw this sooner) despite migrating to the bitcoin network.
In conclusion, the hype isn't going to absorb more fans of past nft hype just by looking at the current average transaction fees.

[Helena Yu]

Can you explain whats happening out there. Ive seen a lot of social influ posting about it and its like people are grabbing some attention with this. Ive seen some nft with prices skyrocketed. So this domo on twitter the creator created a very contorversial tech?

BRC-20 tokens aren't NFT because there's no uniqueness of one to another, so it's just like altcoins created in Bitcoin network. It seems all the BRC-20 tokens has a limit supply, since it's already minted 100% and many people join this hype, this make the price of the token skyrocketed.

As you can see there are few tokens has 300%+ price increase in just 24 hours, people are looking for flipping their money.


https://brc-20.io/

[cryptoaddictchie]

BRC-20 tokens aren't NFT because there's no uniqueness of one to another, so it's just like altcoins created in Bitcoin network. It seems all the BRC-20 tokens has a limit supply, since it's already minted 100% and many people join this hype, this make the price of the token skyrocketed.

Oh alright, Ive been able to understand more so indeed its happening on bitcoin network.

Ive been able to understand more upon reading this article from coingecko.

https://www.coingecko.com/learn/bitcoin-ordinals-nft

It seems that domo created a way to fully launch nft or called ordinals in btc network. This could really affect regular btc users as transaction fees are too high, it seems this hype is for web3 peeps and people who are into nft collections and of course money grabbers, and flip takers.

[Dunamisx]

I know that alot of crypto freaks would have been so enthusiastic in going for this same brc20 token that has caused controversial outcome to the bitcoin network raising the transaction fee, i know that it would have resulted to the hype experienced on this same token which i may termed it as garbage in and garbage out, anything that has to do with tokens is not a very good idea to run an investment on because they way they run fast to grow will also be thesame way it may comes down, this is one of the simplest truth about tokens, using the bitcoin network doesn't make any difference from being what they are, bitcoin is bitcoin while tokens are tokens but at this time, we are having this kind of token o the bitcoin blockchain network instead of smart contracts, don't invest if you're not having that kind of thicker skin for taking a risk on NFTs.

[imamusma]

The BRC-20 hype has caused bitcoin transaction fees to increase, in fact I don't know what to do to move some bitcoin from one wallet to another other than just wait for the fees to down. Of course people should be given a good understanding of what BRC-20 is instead of just expecting returns for their greed. This hype will fade soon, but I think it will probably last all of 2023.

Regarding bitcoin, should we wait for transaction fee adjustments or should we look for an alternative solution right now?

[Gladitorcomeback]

Yes you are right that BRC 20 is getting so much hype and Bitcoin price now very high because of these high paying transaction. This is another problem BTC holder now facing. First ordinal NFT ws introduced but it's didn't got big hype and now Brc20 is live and interesting to see that coins launching on this network are pumping well and investing in these coins can give you fast profit but remember high risk also included. i have not participatd in this chain although i minted ordinal nft months ago. i have 100$ which I can afford to lose and i am thinking to check this chain too because of hype.

[d5000]

It seems that there are now even more "standards" being developed on top of Ordinals. Among them are BRC-721 (a standard for NFT collections), BRC-777 and BRC-1155.

These standards are more related to NFTs than the fungible BRC-20 tokens. But AFAIK they share the same problems I described in the OP. They need an inscription per transfer, and thus two Bitcoin transactions when there should be only one.

[Helena Yu]

It seems that there are now even more "standards" being developed on top of Ordinals. Among them are BRC-721 (a standard for NFT collections), BRC-777 and BRC-1155.

These standards are more related to NFTs than the fungible BRC-20 tokens. But AFAIK they share the same problems I described in the OP. They need an inscription per transfer, and thus two Bitcoin transactions when there should be only one.

I think the new developer want to implement anything which previously add on Ethereum network to Bitcoin network. BRC 20, BRC 721, BRC 777, BRC1155, don't forget with BRC 4626, even though one to another standard isn't that different.

I guess we might see there's a wallet can be used directly to connect a project e.g. dApps in Ethereum, I think it's possible if the developer create fork or smart contract, although the drawback we will see many wallets or projects are scam.

[Outhue]

Nice one OP, Twitter is now hyping the hell out of BRC-20 on the platform and many people are still buying those Ordinals, I know that this won't last very long, there will come a time where Ordinals will stop trending.

My concern is the devs on Bitcoin, they are still there I believe, why cant they put an end to this before millions of dollars went into Ordinals? Crypto is getting more complicated, we already have so much bullshit in crypto space and many more unnecessary junk keep showing up.

Lack of regulation? Everyone are on a race of making millions with crypto and people are now into creating stupid things with ease, it takes not less than 10 minutes to create a new token today and everyone is now a developer.

[d5000]

It's nice to see that the BRC-20 developer himself, Domodata is now recommending openly Taproot assets (formerly known as Taro), a much better and more modern protocol, to create fungible tokens on Bitcoin:

Would also like to mention that the taproot enabled concept of issuing assets on the bitcoin blockchain is not novel, and Taro is unequivocally a better solution.

Thanks @Domodata

Nice one OP, Twitter is now hyping the hell out of BRC-20 on the platform and many people are still buying those Ordinals, I know that this won't last very long, there will come a time where Ordinals will stop trending.

Yep, BRC-20 is already a bit downtrending in blockchain space. Albeit the hype isn't over yet, around 200K transactions per day are probably still of this kind. (I dunno if my humble thread here has contributed a bit).

My concern is the devs on Bitcoin, they are still there I believe, why cant they put an end to this before millions of dollars went into Ordinals?

Why should they care? The devs should care about the core protocol, not about an experiment with an experimental "protocol extension". They could issue a statement, but I guess there are diverging opinions on how "good" or "bad" Ordinals/BRC-20 is for Bitcoin. And I think they know: people learn best by losing money.

If things really don't normalize in a couple of weeks (fees are already in an acceptable range again), then I guess a "standardness" policy change via policy.cpp is the best way to go. A softfork crippling Taproot would be an extreme measure.

By the way: they've discussed it, but the only one (among the devs, not the occasional mailing list visitors!) pressuring for action is Luke Dashjr, who's known for his a bit eccentric nature.


BTW: I'm a bit annoyed that this thread was moved into Altcoin Discussion. BRC-20 is a Bitcoin technology, and this post was intended to warn beginners. But whatever ...

[Outhue]

All I see is the happiness that BRC20 works on Bitcoin chain, that fact alone is why they are hyping it, like they never expected such on Bitcoin chain, yet they are blind to see how it's so limited and there for, it won't last for long because of the limitations, I've always said that if this is something that can work better Satoshi would have made it public right from the start, and maybe Ethereum developer won't even need to baked Ethereum Chain at all.

Thanks for the write-up OP, I pray we will all be alive to see how long this BRC20 will be here for, even the projects running on BRC20 are all quake works crappy projects, not one solves anything new, they are jam-packed with what's already available on other chains.

[livingfree]

I think those people that are obsessed with BRC20's don't realize that the dev himself said that it's still experimental. But on this market, people who sees some opportunity to make quick profits don't have to look at those sides.

As long as they get money from these trends, they'll stay and when it's about to show its pitfall then everyone will start to loose and untie themselves on it before it collapses.

Thank you OP for this thread!

[Doan9269]

I think those people that are obsessed with BRC20's don't realize that the dev himself said that it's still experimental. But on this market, people who sees some opportunity to make quick profits don't have to look at those sides.

As long as they get money from these trends, they'll stay and when it's about to show its pitfall then everyone will start to loose and untie themselves on it before it collapses.

Thank you OP for this thread!

If you're interested in NFTs and you're putting your money into them calling them your investment then you're wrong, that hype they always see common to this kind of token is what use to deceive many from enjoying the fruit of their investment after they would have been distracted to invest on the wrong token, there's a very high risk in token than in memecoins, we should know that they are just all about a temporary research just like the testnet before the main launch is out which is the coin.

[livingfree]

I think those people that are obsessed with BRC20's don't realize that the dev himself said that it's still experimental. But on this market, people who sees some opportunity to make quick profits don't have to look at those sides.

As long as they get money from these trends, they'll stay and when it's about to show its pitfall then everyone will start to loose and untie themselves on it before it collapses.

Thank you OP for this thread!

If you're interested in NFTs and you're putting your money into them calling them your investment then you're wrong, that hype they always see common to this kind of token is what use to deceive many from enjoying the fruit of their investment after they would have been distracted to invest on the wrong token, there's a very high risk in token than in memecoins, we should know that they are just all about a temporary research just like the testnet before the main launch is out which is the coin.

As said, they should just put money on it as if they're for the collectibles. But with BRC20, it's something new to them so they think that on this market whoever goes first always has the advantage and that's what they're doing.

It's only just a matter of time until we see people are going to be turned off from it and they'll start to have the idea that it's much better if they just leave this chain of Bitcoin alone and focuses to the smart contracts that they usually see in other projects.

[d5000]

If what gmaxwell writes here is true, then BRC-20 and Ordinals are completely doomed in the long-term.

What he wrote is basically that Bitcoin eventually will move to a mechanism where not everything stored in previous blocks will be kept in storage by the nodes. The initial blockchain validation by new nodes would then be achieved by other means (perhaps by something similar like the mini-blockchain scheme). It would then become difficult to find a node providing all Ordinals/BRC-20 inscriptions, which means that data storage on the Bitcoin blockchain would not be permanent anymore.

The post is also interesting because it seems that Ordinals had some financing by persons with very shady intentions with respect to Bitcoin. If some people describe Ordinals as an "attack" there is perhaps a bit of truth in it.

This only reinforces my stance about that: Keep away from BRC-20. And probably from all inscription-related features.

[Bitstar_coin]

I just don't think the hype will last as long as nft tokens on other networks like ERC20 or BSC20. However bitcoin is not oriented towards this technology, nft and token enthusiasts will not find a better efficiency solution (if they saw this sooner) despite migrating to the bitcoin network.
In conclusion, the hype isn't going to absorb more fans of past nft hype just by looking at the current average transaction fees.

NFTs are still hyping incase you don't know, in crypto nothing rarely faded out completely except the project stop existing because the devs stop development completely.

Same thing will apply to brc-20, this imo is just the beginning of many more projects that will sprang up in the btc network with the aim to catch the hype.  What is happening now is the testing phase, most of the projects are nft base, soon more indept projects will beginning to come up. I doubt this is going anywhere, rather, the earliest projects will die and much better advanced ones will come up. There is always a dev to create something.