Advantages and disadvantages of Bitcoin related to the BRC-20 token standard: Bitfinex report

The latest buzz in the crypto world revolves around the new bitcoin token standard (BRC-20), which has garnered considerable attention and favor due to the recent memecoin craze. Despite the ongoing hype, the token standard is still subject to certain constraints regarding the broader crypto landscape.

A recent report leading crypto exchange Bitfinex highlighted the potential of the token standard and the importance of identifying more use cases to accelerate its widespread adoption.

The BRC-20 token standard

In March, the BRC-20 token standard, known as “Bitcoin Request for Comment”, was established using the Ordinals protocol. Initially designed To facilitate the creation of Bitcoin non-fungible tokens (NFTs) by writing data such as images, videos, codes and text in the witness portion of BTC transactions, the protocol has evolved to allow the distinctive transfer of fungible tokens over the blockchain.

According data as of brc-20.io, the market capitalization of BRC-20 tokens had exceeded $900 million at one point, with over 14,400 tokens issued. However, the market has dropped to around $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 more than four million, according to data from Dune Analytics.

Some of the most demanded BRC-20 tokens include ORDI, NALS, PIZA, PEPE and MEME.

Network limits

Despite showcasing the potential of the Ordinals protocol, the new token standard faces limitations that could hinder its growth and advancement.

A significant downside is the lack of use cases, which could hamper development. Additionally, the BRC-20 network does not support smart contracts and asset prices are mainly driven by market speculation. This, coupled with their 24-hour trading volume of less than 30% of their market capitalization, as evidenced by the case of ORDI, makes it difficult to predict their future.

Another limitation is the lack of Ethereum Virtual Machine (EVM) compatibility, limiting developer access to network resources and building capabilities. This could limit adoption and result in a narrow ecosystem.

Additionally, BRC-20 tokens consume significant block space, which could lead to network congestion and upper transaction fees.

Despite these limitations, Bitcoin’s proof-of-work (PoW) consensus mechanism makes it difficult for hackers to break into the network, making blockchain security robust.