Are you interested in knowing the differences between BRC-20 and ERC-20 tokens ? With the world of cryptocurrency constantly evolving, it can be difficult to keep up with the introduction of new standards.
However, we are here to help you understand the basics of these two types of tokens.
For newcomers to cryptocurrencies, understanding the differences between BRC-20 and ERC-20 tokens may seem daunting. For this reason, we’ve put together this guide to give you a basic grasp of their parallels and divergences.
Whether you are an avid cryptocurrency fan or simply curious about blockchain technology , this guide will provide you with a clear insight into the world of BRC-20 and ERC-20 tokens. Together, let’s investigate these two categories of tokens.
BRIEF HISTORY OF BRC-20 AND ERC-20 TOKENS
HISTORY OF ERC-20 TOKENS
A set of rules for developing new tokens on the Ethereum blockchain is known as the create erc20 token standard. makes certain that these tokens work with other tokens from smart contracts. This has helped promote interoperability and ease of use within the Ethereum ecosystem.
In 2015, Ethereum developers, representing the broader community, created the ERC-20 token standard, which was officially recognized in September 2017 . Developer Fabian Vogelsteller suggested a standard to create a consistent method for managing smart contracts on the Ethereum blockchain.
The proposal was approved and implemented in 2017 as Ethereum Improvement Proposal 20 (EIP-20), but is still called ERC-20 because that is what it was known until its approval. Since its implementation, the majority of tokens in the Ethereum ecosystem have been created using the ERC-20 standard.
The creation of the ERC-20 standard has enabled the development of a wide range of digital assets that can seamlessly interact with each other on the Ethereum blockchain. It has become the most popular token specification and has played an important role in the growth of the ecosystem.
History Of BRC-20 Tokens
On the Bitcoin blockchain, BRC-20 tokens are an innovative and experimental token standard that have made it easier to create, issue, and transfer fungible tokens. An anonymous programmer by the name of Domo created this standard in March 2023 to make it possible to create fungible tokens on the Bitcoin network.
The first BRC-20 token to be created was called “ ordi ”, and support for BRC-20 tokens was quickly added to Bitcoin wallets .
The BRC-20 standard uses ordinal inscription and was introduced by Domo in March 2023. The Bitcoin network now has more options thanks to this experimental standard, such as using it in DeFi protocols and other blockchain-based applications.
The Taproot upgrade and subsequent development of the Bitcoin Ordinals protocol have created a host of new opportunities on the Bitcoin network .
However, the rapid growth of mining activity led to congestion of the Bitcoin mempool and an increase in transaction fees. While some have welcomed the increase in fees as a way to supplement miners’ income as block rewards decline over time, others have expressed concern about the impact on users in more sensitive regions. to the prices .
In this initial phase, BRC-20 tokens carry significant risks and require further development of supporting infrastructure. As its founder noted, this is an experimental technology and potential risks must be carefully evaluated.
The use of ordinals, inscriptions and BRC-20 tokens has shown that there is strong demand for the Bitcoin blockspace beyond its traditional use as a store of value.
BRC-20 VS ERC-20 TOKENS: MAIN DIFFERENCES
Technology/Blockchain
BRC-20 and ERC-20 are two different token standards that exist on different blockchains . BRC-20 is based on the Bitcoin blockchain , while ERC-20 is based on the Ethereum blockchain.
erc20 token development is the main token standard for the Ethereum blockchain and its main goal is to allow tokens to use smart contracts, which are a fundamental feature of this blockchain.
Smart contracts are self-executing contracts that automatically perform actions when certain conditions are met, eliminating the need for intermediaries or third parties. However, BRC-20 tokens do not use smart contracts , which limits their functionality compared to tokens that do use them.
Minteo
The BRC-20 token standard allows the creation and transfer of fungible tokens on the Bitcoin blockchain using the Ordinals protocol . Before 2023, the only asset that existed on the Bitcoin blockchain was Bitcoin itself.
Although many people appreciate the value of Bitcoin, the fact that it was the only asset on the blockchain was often seen as a limitation, especially compared to other blockchains that were constantly introducing new tokens and projects. The BRC-20 standard offers a way to expand the capabilities of the Bitcoin blockchain and allow for greater diversity in its use.
In terms of mining, both BRC-20 and ERC-20 allow the creation of new tokens . On each blockchain, there might be variations in the particular procedures and prerequisites for token minting. It’s crucial to remember that BRC-20 is still an experimental token standard and could evolve in the future.
In general, BRC-20 and ERC-20 provide distinctive features and functionalities for token creation and management on their respective blockchains. It will be fascinating to watch how these two token standards develop and contend going forward.
Transaction Fees
The transaction fees for BRC-20 and ERC-20 tokens are different because they exist on two separate blockchains. Whereas ERC-20 is based on Ethereum, BRC-20 is based on Bitcoin.In the case of ERC-20 tokens, the transaction cost is calculated using the formula Transaction cost = gas used * Gas Price.
The cost of sending ERC-20 tokens is determined by the amount of gas used in the transaction . This amount does not vary depending on the number of tokens sent, so sending 1 token costs the same as sending 100 tokens.
The gas used is determined by the ERC-20 contract, while the gas price is determined by the load on the Ethereum network. On the other hand , for BRC-20 tokens, users are charged a commission equivalent to 1% of the transaction amount in tokens of that same standard.
Transaction Speed
Transaction speed is determined by how quickly transactions are processed. On the Ethereum blockchain, this is typically done using a concept called MEV . On the other hand, transactions are handled differently on the Bitcoin blockchain.Data is written into blocks and then validated by miners. This means that there is no specific preference for which transactions are processed faster on the Bitcoin blockchain.
In contrast, on the Ethereum blockchain, those who can pay higher gas fees can receive priority for their transactions . This makes the BRC-20 standard more egalitarian and decentralized than the ERC-20 standard.
Security
From a security point of view, BRC-20 tokens are considered more secure than ERC-20 . This is because the Bitcoin network, on which BRC-20 tokens exist, uses a highly decentralized consensus model based on Proof of Work (PoW). Anyone can join the network and validate blocks using this model.
In contrast, the Ethereum network, on which ERC-20 tokens exist, uses a Proof-of-Stake (PoS) model with a high barrier to entry for validators . This means that the number of validators is limited and that token holders who delegate their tokens have less control over the validation process. As a result, there is a risk of validators acting maliciously.
There have been cases of security breaches in the Ethereum network, such as the DAO hack in 2016. The Bitcoin network hasn’t been hacked, though, as of yet.
BRC-20 VS ERC-20: WHICH IS BETTER?
The BRC-20 token standard is based on the ERC-20 standard, indicating a connection between the two. Currently, ERC-20 tokens are considered a more versatile option for crypto traders because it has been established for several years, while BRC-20 has only been in use for a short time.
While BRC-20 may have the same potential as ERC-20, it is always prudent to approach new products in the cryptocurrency industry with caution. Trends in this industry can change quickly, so it is important to be cautious when considering new developments. A greater number of crypto wallets accept erc20 token development service . BRC-20 does not use smart contracts, but instead uses ordinal inscriptions to function.
Many supporters of BRC-20 have expressed interest in following its development as the market grows. Consequently, there are a lot of fake BRC-20 tokens, and rug pulls are a regular issue.
Furthermore, because the Bitcoin blockchain uses the proof-of-work consensus mechanism, it frequently faces scalability problems and high transaction fees. This is the case with BRC-20 tokens as well.
CONCLUSION
Popular blockchains support both BRC-20 and ERC-20 tokens, which is advantageous for both standards. The Ethereum blockchain is already a popular choice for cryptocurrency developers, but the Bitcoin blockchain may also gain traction due to its support for token creation and mining via the BRC20 standard. In the future, Bitcoin could become the best option for token development , but for now, ERC20 tokens remain the preferred option.