Bitcoin Pros and Cons Related to the BRC-20 Token Standard: Bitfinex Report
The latest buzz in the crypto world revolves around the recently introduced Bitcoin token standard (BRC-20), which has gained significant attention and favor due to the recent memecoin craze. Despite the ongoing hype, the token standard is still subject to certain limitations regarding the broader crypto landscape.
A recent report from leading crypto exchange Bitfinex has emphasized the token standard’s potential and the importance of identifying more use cases to accelerate its widespread adoption.
BRC-20 Token Standard
In March, the BRC-20 token standard, known as “Bitcoin Request for Comment”, was established using the Ordinals protocol. Originally designed to facilitate the creation of Bitcoin non-fungible tokens (NFTs) by entering data such as images, videos, codes and text into the witness part of BTC transactions, the protocol has evolved to allow the characteristic transfer of fungible tokens on the blockchain.
According to data from brc-20.io, the market capitalization of BRC-20 tokens had exceeded $900 million at one point, with more than 14,400 tokens issued. However, the market has fallen to approximately $542 million at the time of writing.
Since the introduction of Bitcoin-based fungible assets, transactions on the network have increased, with BRC-20 Ordinals transactions outpacing non-BRC-20 transactions by over four million, according to data from Dune Analytics.
Some of the most in-demand BRC-20 tokens include ORDI, NALS, PIZA, PEPE, and MEME.
Network limitations
Despite showing the potential of the Ordinals protocol, the new token standard faces limitations that could hinder its growth and progress.
A significant disadvantage is the lack of use cases, which can hinder development. In addition, the BRC-20 network does not support smart contracts, and asset prices mainly depend on market speculation. This, combined with their 24-hour trading volume being less than 30% of their market cap, as evident in the case of ORDI, makes it difficult to predict the future.
Another limitation is the absence of Ethereum Virtual Machine (EVM) compatibility, which limits developers’ access to network resources and build capabilities. This can limit adoption and result in a narrow ecosystem.
Furthermore, BRC-20 tokens use significant block space, which can lead to network congestion and higher transaction fees.
Despite these limitations, Bitcoin’s proof-of-work (PoW) consensus mechanism makes it difficult for hackers to breach the network, making the blockchain’s security robust.
