📚 Background

BRC-20, or Bitcoin Request for Comment 20, is modeled after the Ethereum protocol called ERC-20 (Ethereum Request for Comment 20) and was introduced in March 2023 by an anonymous developer known as Domo. BRC-20s are basically (with some major caveats like a lack of smart contracts) Bitcoin’s version of ERC-20s.

That said, there haven't been other “BRC” numbers as Bitcoin changes actually go through a process called BIP, or Bitcoin Improvement Proposals. So there hasn’t been a BRC-1 or BRC-2 and so on.

ERC-20 is an Ethereum token standard that enables developers to create tokens that are compatible with the broader Ethereum network and have built-in smart contracts. These tokens can embody a broad spectrum of transferable assets or rights, such as ownership interests, access rights or even different cryptocurrencies – many cryptocurrencies such as Tether and Shibu Inu coin are ERC-20 tokens under the hood.

BRC-20 takes a page out of this book, made possible because of Bitcoin’s November 2021 Taproot upgrade, which enabled ordinal inscriptions, the behind-the-scenes tech plumbing that make BRC-20 tokens work.

Ordinals inscribe a serial number onto a satoshi, the smallest currency unit of bitcoin. This serial number, along with the ordinal’s data, are inserted into a part of the bitcoin transaction called the witness signature field. This data verifies the legitimate ownership of the funds being utilized and ensures they are not double spent.

BRC-20 tokens use ordinals, but not all ordinals are BRC-20 tokens. This is why there are millions of ordinals but just over 14,000 BRC-20 tokens.

BRC-20 tokens employ JSON (JavaScript Object Notation) ordinals inscriptions to initiate token contracts (which are still simplistic as smart contract functionality has yet to be developed), create new tokens and move tokens around.

Currently, the BRC-20 protocol has very limited functionality compared to ERC-20. Right now users are limited to only minting, deploying and transferring tokens.

It’s also important to note some other differences from ERC-20. Unlike ERC-20, BRC-20 is not an approved standard but still in the proposal phase, and unlike ERC-20 tokens, BRC-20 tokens are not easily traded on exchanges at this time.