The latest hype in the crypto industry is been channeled towards the newly introduced Bitcoin token standard (BRC-20), which has gained considerable favor and attention aided by the recent meme-coin craze. Regardless of the current hype, the token standard is still subject to some form of constraint concerning the broader crypto landscape.
According to a recent report by Bitfinex one of the leading crypto exchanges, emphasis was placed standard potential of the token and the importance of identifying more use cases to enhance its widespread adoption.
In March, the BRC-20 token standard, also known as “Bitcoin Request for Comment,” was created by making use of the Ordinals protocol. It was originally designed to improve the creation of Bitcoin non-fungible tokens (NFTs) by inscribing data such as text, images, codes, and videos into the witness portion of BTC transactions, the protocol has evolved and now allows for the distinct transfer of fungible tokens on the blockchain.
At one point, the market capitalization of BRC-20 tokens had exceeded $900 million according to data from brc-20.io, issuing over 14,400 tokens. However, as of the time of writing, the market has declined to approximately $542 million.
From the introduction of Bitcoin-based fungible assets, transactions on the network have increased by a reasonable mile, and according to data from Dune Analytics, the BRC-20 Ordinals transactions have surpassed non-BRC-20 transactions by over four million.
ORDI, PIZA, NALS, MEME, and PEPE are some of the most in-demand BRC-20 tokens.
LIMITATIONS OF THE NETWORK
Despite revealing the potential of the Ordinals protocol, the new token standard is faced with certain limitations that could stunt its growth and advancement.
The lack of use cases is one significant limitation, which can cause its development to lag. In addition to that, the BRC-20 network does not support smart contracts, and the prices of assets are majorly dependent on market speculation. All of this, coupled with their 24-hour trading volume which is less than 30% of their market cap, makes the prediction of their future challenging.
Another drawback is the absence of compatibility with the Ethereum Virtual Machine (EVM), which restricts developers from gaining access to the network resources and building capabilities. This could limit mass adoption and can narrow down the ecosystem.
Furthermore, the BRC-20 tokens consume a large block space, which could lead to congestion of the network and result in higher transaction fees.
In spite of these limitations, the proof-of-work (PoW) consensus mechanism of Bitcoin makes it difficult for the network to be breached by hackers, making the blockchain’s security robust.
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