• Bitcoin BRC-20 tokens have skyrocketed in the last few days, with their combined market value reaching over $923 million as of 8 May 2023.
• Mintlayer CEO Enrico Rubboli has highlighted some of the flaws and issues that plague the BRC-20 token standard, such as not aligning with Bitcoin’s core community axioms.
• These flaws mean users are likely to be rug pulled and cause network congestion on the Bitcoin network.
What Are BRC-20 Tokens?
Bitcoin Request for Comment (BRC-20) is a token standard for Ordinals that allows users to issue and transfer fungible tokens on Bitcoin. The tokens hit the market soon after the launch of the Ordinals Protocol, and can be used to etch digital art references into small Bitcoin transactions. As of 8 May 2023, the combined value of all 11,705 BRC-20 tokens was $923 million.
Flaws Plaguing BRC-20 Tokens
Mintlayer CEO Enrico Rubboli has highlighted some of the major issues plaguing BRC-20 tokens and offshoot decentralised applications that try to connect with smart contracts. These include speed, transaction costs, security, and not aligning with “axioms of the core Bitcoin community”. This means users are likely to be rug pulled when investing in these tokens, leading to network congestion on the Bitcoin network as more people pour BTC into minting them.
Impact on Crypto Market
The rising popularity of BRC-20 tokens had an impact on this week’s crypto market – it led to massive congestion on the Bitcoin network amid rising fees which caused a drop in prices across different cryptocurrencies when withdrawals were halted at Binance. This shows how easily these flaws can lead to problems in trading activity throughout crypto markets if they are not addressed properly by developers or protocols governing them.
What Can Be Done?
To address these issues properly developers need to better understand how different protocols interact with each other before creating new ones or relying solely on existing ones such as Ethereum or EOSIO based projects; this way they can anticipate possible security vulnerabilities and create solutions accordingly so that users don’t fall victim to rug pulls or other scams associated with poorly designed projects. Developers should also focus more on building their own infrastructure rather than relying heavily on external ones which could be subject to change without notice due changes in user demand or legislation from governments worldwide regulating cryptocurrencies usage/trading activities within their borders – this would help ensure continuity regardless what happens outside developers control scope.
Conclusion
BRC-20 tokens have raised concerns among investors due to their potential for frauds and scams, but there is still potential for them if developers take proper steps towards mitigating risks associated with them – this includes better understanding how different protocols interact before launching their own projects as well as focusing more heavily on building up their own infrastructures rather than relying heavily external ones which may suddenly become unavailable without warning due changes in user demands or government regulations worldwide regarding cryptocurrency usage/trading activities within a given country’s borders . With proper care taken by developers at each step along development process we should see fewer incidents related frauds/scams occurring related these types assets going forward!
