What Are BRC-20 Tokens? A Complete Beginner's Guide

This guide provides an introduction to BRC-20 tokens, which have gained recent popularity due to the increasing speculation on Bitcoin meme coins. Read on to learn about what these tokens are, how they work, and whether investing in them aligns with your investment goals. 

What Are BRC-20 Tokens?

BRC-20 tokens are fungible digital currencies created using what has been dubbed an  experimental Bitcoin token standard called BRC-20. A pseudonymous developer by the name “Domo” created the token standard as an experiment. Domo announced its implementation on March 9, 2023. 

He was inspired to develop the BRC-20 token standard after observing the Sats Names standard, which involves creating Web3 identities on Bitcoin using Ordinals, and a tweet alluding to the potential for an Ordinals-based BRC-20 standard.

The BRC-20 token standard, short for Bitcoin Request for Comment, was made possible by the Ordinals protocol released in January 2023. 

As of now, BRC-20 is an experimental, fun, and simple standard that the creator admits is by no means “the standard for fungibility on Bitcoin with Ordinals.” 

Fungibility is a term used to describe tokens that are equivalent and indistinguishable from each other. For instance, Alice’s $1 is equal in value to Bob’s $1, so they can easily trade these dollars with each other. Similarly, 1 BTC is generally equivalent to another 1 BTC. The opposite of fungible is non-fungible. Non-fungible tokens (NFTs) are unique and thus distinguishable. Therefore, one Taproot Wizard is not interchangeable with any other Taproot Wizard since each has its own unique attributes and characteristics and, thus, most likely, its own different price. 

How Ordinal Theory Birthed the BRC-20 Token Standard

Created by software engineer Casey Rodarmor, Ordinal Theory is a methodology for identifying and tracking individual satoshis within the current Bitcoin supply and associating them with specific data. 

This process, called “inscribing,” involves using the Ordinals software to attach videos, texts, or images to sats, thereby creating Bitcoin-native NFTs known as “inscriptions.” In Ordinal Theory, each sat is assigned an ordinal number beginning from 0. 

In addition to enabling the creation of NFTs on the Bitcoin blockchain, Ordinal theory can also be used to facilitate the development of fungible tokes through the BRC-20 token standard. 

BRC-20 tokens are created and transferred using inscriptions of JSON data in a sat. This means that programmers can store a script file within a sat, allowing them to generate and transfer fungible tokens on the Bitcoin base layer.

When a BRC-20 token is deployed, only the 'deploy' function inscription exists, which sets the parameter of that very token. For instance, this can be the token’s supply. However, these tokens do not exist yet, once the function is live. An interested buyer first has to mint them by inscribing the mint function into an ordinal that creates the actual tokens. Once the supply limit of a specific BRC-20 token is hit, all the ordinals can be indexed. This way, only the tokens falling into a given inscription range will be considered valid for this very token. 

Meme Coins Are Coming to Bitcoin!

Thus far, meme coins are the main use case of the BRC-20 token standard. Meme coins are digital currencies and tokens inspired by popular internet memes. 

For instance, the Pepe BRC token draws inspiration from Pepe the Frog meme, which had been widely used on platforms like Myspace in 2008. Pepe is the second-largest BRC-20 token by market cap at the time of writing. 

Furthermore, some popular meme coins, such as Dogecoin and Shiba Inu, now have their own BRC-20 token versions: Doge and SHIB. Doge draws inspiration from a viral internet meme of Kabosu, a Japanese Shiba Inu dog. This meme, which emerged in 2013, also contained silly captions of the dog’s thoughts. 

While the BRC-20 Doge token has not yet been minted, the BRC-20 SHIB token has already been created and has a maximum supply of 100 trillion tokens. Like Doge, SHIB draws inspiration from the same Shiba Inu dog.

The first BRC-20 token, called Ordi, was minted on March 8 by Domo. Ordi currently has the largest market cap among BRC-20 tokens, benefiting from its first-mover advantage. 

Top 5 Most Popular BRC-20 Tokens by Market Capitalization

According to brc-20.io, there are already over 14,000 BRC-20 tokens at the time of writing. 3,902,698 out of the 5,344,090 Ordinals inscriptions that currently exist are BRC-20 inscriptions. Moreover, the total market capitalization for all BRC-20 tokens is over $500,000,000. 

Now, let’s take a look at the top five coins by market cap.

Ordi

Ordi was created by Domo and was the first implementation of the BRC-20 token standard. The token has a maximum supply of 21,000,000 tokens. Additionally, it has a limit of 1,000 tokens per mint. Ordi is inscription number 348,020. It was created on March 8, 2023.

As of May 10, 2023, Ordi’s price is $17.86, and the market cap is $393,120,000.

Pepe

Pepe is inscription number 356,777, minted on March 9, 2023. It has a maximum supply of 42,069,000 tokens and a limit of 1,000 tokens per mint. Pepe is a BRC-20 token and shouldn’t be confused with the Ordinals project, Inscribed Pepes.

As of May 10, 2023, Pepe was worth $0.45, and its market cap was $18,991,671.

Meme

Meme is a BRC-20 token by a project that has also created a few Bitcoin-native NFT collections, namely Meme Degens, Meme Machines, and Memes on Bitcoin (MOB). The total supply of the BRC-20 Meme tokens is 99,999. It has a limit of 1 token per mint.

Meme is inscription number 352,242, created on March 8, 2023. A the time of writing, the price of Meme is $202.75, and its market capitalization is $20,274,997. 

Nals

Nals is a BRC-20 token minted on March 9, 2023. It has inscription number 378,206. Moreover, its maximum supply is 21,000,000 tokens with a limit of 1,000 tokens per mint. However, there is currently limited information available about this token, as it does not appear to have an official Twitter or Discord account.  

At the time of writing, Nals was worth $0.82, and the market cap was $17,236,737.

Piza

Piza is a BRC-20 meme token that draws inspiration from the first real-world Bitcoin transaction, where Laszlo Hanyecz bought two pizzas for 10,000 BTC. It was minted on March 15, 2023, as inscription number 482,449.

Piza has a supply of 21 million tokens, and it was worth $0.42 a piece at the time of writing. Its market capitalization was $8,769,600.

Are BRC-20 Tokens Good or Bad for Bitcoin?  

While the BRC-20 token standard is an experiment, it has attracted a lot of speculators, leading to a rise in BRC-20 transactions. Interestingly, these transactions have surpassed regular Bitcoin transactions and non-BRC-20 token inscriptions.

For example, on May 10, 2023, non-Ordinals transactions were 76,450 compared to 83,431 BRC-20 transactions. Non-BRC-20 Ordinals transactions were only 12,502. 

BRC-20 tokens are beneficial to Bitcoin miners, as they increase transaction volume and can lead to higher earnings from transaction fees. Additionally, these tokens are helping to attract new users to the Bitcoin blockchain, which is contributing to increased adoption rates.

Furthermore, the standard could encourage more developers to tinker with token standard designs and optimizations for Bitcoin-native fungible tokens. Domo also thinks it might motivate the Bitcoin community to reach a consensus on defining best practices for Bitcoin token standards.

That said, some Bitcoin maximalists are worried about the rising demand for block space on the Bitcoin network, which seems to be primarily driven by speculation. The high demand for BRC-20 tokens is clogging up the network, creating a long queue of unconfirmed transactions. Transaction costs have also shot up significantly, rising as high as $30 per transaction. In the view of some, this is not conducive to Bitcoin’s goal of becoming an open, global monetary network.

Should You Invest in BRC-20 Tokens?

BRC-20 tokens aren’t designed to have any financial value. At least not yet. Currently, they are fun and experimental; hence no one should expect a financial return from them. 

Even BRC-20 creator Domo discourages “any financial decisions to be made on the basis of [the BRC-20 token standard] design.” That means if you invest in BRC-20 tokens, you should do so at your own risk and really only for fun. 

Not heeding the BRC-20 token standard founder’s advice, speculators have turned BRC-20 tokens into a multi-million-dollar market, with tokens trading on a few centralized platforms and a decentralized exchange already. 

So, if you’re bent on taking advantage of this highly speculative market, it may be prudent for you to only allocate a small portion of your disposable income to these investments. It's important to avoid investing money that you cannot afford to lose and to conduct thorough research before purchasing any coins. 

Securely Store and Manage BRC-20 Tokens Using Xverse 

Whether you are acquiring BRC-20 tokens to test the technology or as a speculative trade, you need a secure Bitcoin wallet with BRC-20 token support, such as Xverse, to store your assets.

Xverse is a user-friendly, non-custodial wallet built for the Bitcoin Web3 ecosystem, allowing you to securely store and manage Bitcoin, Bitcoin NFTs, and BRC-20 tokens. Available for Chrome, iOS, and Android, Xverse is your gateway into the world of Bitcoin-native L1 assets.

Download Xverse now to buy and store BRC-20 tokens securely.  

FAQs 

How Can You Buy BRC-20 Tokens?

You can easily buy BRC-20 tokens using Xverse. Simply connect your wallet to ALEX’s dedicated decentralized exchange (DEX) for BRC-20 tokens, either directly in the Xverse mobile wallet’s dApp browser or using the Xverse Chrome extension on your desktop. 

Where Can You Buy BRC-20 Tokens?

BRC-20 tokens can already be traded on a handful of centralized exchanges, including Binance and Gate.io. 

Additionally, you can buy and sell BRC-20 in a completely permissionless manner on the ALEX’ protocol’s newly launched decentralized exchange (DEX) directly within the Xverse wallet mobile app or by connecting your Xverse Chrome extension. 

Are BRC-20 Tokens a Good Investment? 

BRC-20 tokens are experimental in nature and are not created with any real monetary value as their primary purpose. As such, they represent an extremely speculative and, thus, risky investment opportunity. Despite this, many crypto investors continue to speculate on these tokens, although this does not necessarily indicate that they are a wise investment choice.

Ultimately, whether an investment is considered “good” will depend on a variety of factors, including your risk tolerance, belief in the potential success of a given crypto asset, and overall portfolio composition. Therefore, only you can determine whether BRC-20 tokens are a suitable investment option for your particular circumstances.