Source: Bankless
Compilation: BitpushNews Mary Liu
The Memecoin craze is spreading!
A new token type called BRC-20 is attracting developers and offering an experience on the bitcoin blockchain similar to the shitcoins in the ethereum ecosystem. The BRC-20 is built using the Ordinals protocol, which has recently gained traction for introducing NFTs to Bitcoin.
In this article we'll dive into everything BRC-20 is, from the basic definition to the hyped token, while dissecting the on-chain carnage that the hype has caused (not every user is happy about it...) Then, we discuss Here's our take on the state of the BRC-20 market, and why this frenzy is no different from the ones that came before it.
"The new overlord of the square"
BRC-20 has recently angered those BTC purists because it is named after Ethereum's ERC-20 token standard and is the brainchild of Domo, which calls itself "Dune Wizards on the terminal chain" (Dune Wizards: Blockchain analyst's nickname).
BRC-20s use ordinal inscriptions of JSON data to create collections of NFTs that are essentially fungible. While this experiment created a fungible ERC-20-style token, its use cases are rather limited.
Unlike ERC-20, which can be used as collateral in various Dapp on Ethereum, BRC-20 is limited to minting and transferring functions. In the absence of a Bitcoin-native decentralized exchange solution, asset sales can be done on-chain through escrow or token treasury functions.
At contract deployment, anyone can mint BRC-20 tokens for free (plus transaction fees) in increments specified by the token contract - asset issuance cannot be pre-minted. While there has been much discussion surrounding the token type, the project's Whitepaper notes that the issuance of Bitcoin assets backing Taproot is not a new concept, citing the Taro protocol as offering a "clearly better solution."
BRC-20 "To the moon"
The total market capitalization of the BRC-20 has soared over the past few weeks, surging 3441% from $17.5 million on April 25 to $619.7 million on May 9. Many BRC-20 tokens have experienced similar parabolic gains.
For example, the first and largest BRC-20 ORDI with a market cap of $434 million rose 2357% from $0.75 to $18.43 during this period. Since April 2, ORDI has skyrocketed by 18330%, and has begun to land on centralized exchanges such as Gate.io.
Other BRC-20s have produced similar exponential returns for holders. Tokens such as PEPE , MEME, and MOON have all gained more than 2,000% in the past month.
Bitcoin transaction fees soar
BRC-20 mania has caused chaos in the Bitcoin fee market.
BTC fees have reached their highest level since April 2021, and the average fee per transaction has soared, currently around $31.
In total, more than $49 million in transaction fees have been generated on the Bitcoin blockchain over the past week as the BRC-20 craze intensifies. Between this period and block space rewards, miners generated over $204 million in revenue during this period.
For reference, this weekly earnings is the highest since May 2022.
The surge in demand for block space caused severe congestion on the network. There are currently over 411,000 pending transactions in the mempool.
Congestion has also had an impact on centralized crypto platforms. Binance, which was forced to halt withdrawals twice between May 6 and 7, is now prioritizing lightning withdrawals to provide users with alternative options.
"Sunrise in the east and rain in the west"
Speculators are busy dumping it all at meme casinos, meanwhile individuals using crypto systems in the real world - especially in Latin America, Africa and Asia - must now contend with these Degen(degens) block space.
Providing an alternative store of value to fiat currencies in highly inflationary regions and providing financial services to the unbanked have long been two of Bitcoin’s strongest value propositions. Soaring transaction fees pose a major barrier to adoption among low-income, fee-sensitive segments of the population that have traditionally benefited the most from alternative currencies and financial systems.
Some users have blamed the BRC-20 craze as the root cause of congestion, with some observers even claiming that BRC-20 adoption is akin to a DDoS attack on the Bitcoin network.
While this phenomenon should be criticized, it is also the reality of the commoditization of publicly available block space. These transactions, which may seem silly and pointless to some, are a perfectly valid use of Bitcoin block space.
Blockchain has not yet been widely adopted, and the idea that the future of consumer finance is layer-1 based is ludicrous. Layer 1 networks alone, neither Bitcoin nor Ethereum, can provide enough block space to achieve the scale required for next-generation financial primitives.
Rather than fighting current fee increases by attacking specific use cases (which is a relatively minor problem when considering the exponential growth in future adoption), we must focus our attention on building reliable decentralized scaling solutions.
familiar fate
Like their Ethereum-based memecoin cousins, demand for BRC-20 will be short-lived in the long run. Their prices will not rise, but a series of plummets: these instruments are not suitable for investment!
They have no value other than the value generated on the meme layer, and while BRC-20 has been around for two months, these fungible bitcoin ecosystem tokens need Cross-chain meme enthusiasm to attract a lot of attention. While we’ve seen memecoins explode in the past, the mania always subsides and they get back on track.
While you might be tempted to go after some of the more explosive-sounding moves, be warned: you could lose more than your investment is worth. Properly distributed as these tokens have no value and operate under an immature framework!
the bottom line
The BRC-20s may not facilitate any meaningful cryptographic advancements, but represent a powerful thought experiment, Ordinals theory that highlights the role of culture in crypto-financial systems.
High Gas fee(despite the limited use cases of today's encrypted financial systems in developing countries) should serve as a warning that contemporary blockchain systems cannot meet future needs, driving awareness among industry players of the need for decentralized scaling solutions.
Meme crazes come and go, but creating demand for block space is critical to ensuring the continued security of the network. Especially for the Bitcoin network, with successive halvings and reduced block incentives, miners will increasingly rely on transaction fee income to pay for operating costs. The long-term future of Bitcoin is multiple expansion methods, the outbreak of Ordinals and the resulting High fees are the catalyst toward this future.
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