We Need to Talk about BRC-20 Tokens
MIM # 14: Paypal reveals huge crypto holdings, $LTC transactions reach all-time high, Ethereum validators take home record-breaking profits
The rise of BRC-20 tokens has swept over the cryptocurrency market like a shitcoin tidal wave, disrupting the balance of the Bitcoin network and creating a polarizing new application on the blockchain. Some see BRC-20 tokens as a wave of innovation, boosting activity and creating new use cases for the industry’s leading blockchain.
Others see it as a plague disrupting the finely balanced Bitcoin ecosystem, sending gas fees skyrocketing and congesting the network. I see it as an armada of useless driftwood, cluttering the sandy beaches of the financial utopia Satoshi Nakamoto created with Bitcoin.
In fact, driftwood at least can serve a purpose. If you burn it, it provides something of value. No amount of token burning can save the long-term market cap of most of these tokens! Before I start ranting and can’t stop, let’s take a step back and dive into what BRC-20 tokens are.
The BRC-20 token standard is a fungible token standard designed for the Bitcoin blockchain using the Ordinals Protocol. Put simply, Ordinals allows users to inscribe any file on-chain on Bitcoin, creating digital collectibles, cryptocurrencies, or NFTs.
BRC-20 tokens are transferable on the Bitcoin blockchain and can be traded like other digital assets. The standard has over 14,000 issued tokens, with ORDI, PIZA, MEME, and MOON becoming the most popular.
Although similar to Ethereum’s ERC-20, BRC-20 tokens differ in their use of the Proof of Work mechanism and lack of smart contract support. Developers cannot access or build certain resources on the network, potentially leading to a smaller ecosystem and limited adoption and innovation.
BRC-20 tokens surpassed a $1 billion market cap on the 10th of May, 2022, just two months after the Bitcoin token fungibility protocol was created. Around the same time, BitKeep announced that it would soon support the Ordinals protocol and BRC-20 protocol on its mobile and plugin-extension platforms.
However, the BRC-20 market quickly shed nearly half its market capitalization in just 24 hours after the BitKeep news was published. Despite the momentum BRC-20 tokens have gained, Magic’s thoughts are less than favorable on the industry’s latest hot commodity.
Read to the end to hear my take. For now, here are the top stories in the crypto sphere last week.
Last week’s crypto news
- PayPal disclosed that it holds nearly $1 billion worth of customer assets in cryptocurrencies on its balance sheet. The company reported an increase of $339 million in customer crypto assets from the end of last year. PayPal has introduced several crypto features to its customers, including customer transfers to third-party wallets and exchanges and crypto transfers on Venmo.
- Blockworks, a crypto-based media firm, raised $12 million at a $135 million post-money valuation. The funds will accelerate Blockworks Research, a subscription-based platform that provides access to research, data and analytics, governance, and real-time news. The money will also expand the company globally, particularly in Asia.
- Transactions on the Litecoin blockchain have reached an all-time high, with over 525,000 transactions executed in a day. Users are seeking alternatives to the high fees on the congested Bitcoin blockchain due to the popularity of BRC-20 tokens. This surge in Litecoin activity has also led to a record number of active wallet addresses and new address creations.
4. Validators on the Ethereum network earned a record $46 million in staking rewards in the first week of May. The staking rewards rate has reached 8.6% post-Merge, representing a 40% increase in income from the previous week.
The increase is attributed to the trading craze of the meme coin $PEPE, which led to higher gas fees on the network and increased transaction processing income for validators. Since moving to a proof-of-stake consensus mechanism, ETH staking has attracted significant institutional interest.
5. According to data from Glassnode, the number of individual Bitcoin wallets holding at least one whole $BTC has surpassed one million. This indicates sustained long-term sentiment, representing a 20% increase since February 2022. The growth in these wallets was notable between November and January, coinciding with the collapse of the FTX crypto exchange and a decline in Bitcoin prices.
6. A viral video shows how easy it is to create a new cryptocurrency in less than 30 seconds using a program called Contracts Wizard and an application called Remix. The video gained over 3 million views and was reposted by several large accounts on Crypto Twitter.
The post’s popularity comes as “shitcoins” have gained more traction in the broader crypto ecosystem, led by meme coins like $PEPE. Another video emerged, showing the same process completed in just 22.45 seconds, setting a new unofficial record for the meme-coin speedrun. Love it or hate it, that is the definition of Magic Speed.
Magic’s parting thoughts
I’m never one to rain on the parade of a trend that boosts activity in the cryptocurrency market. However, I am making an exception in the case of BRC-20. In my opinion, BRC-20 is an experimental breed of crypto assets that pose an acute danger to Satoshi Nakamoto’s vision of Bitcoin.
The frenzy around BRC-20 has caused network congestion on the Bitcoin blockchain, with some users reporting multi-hour waiting times for regular $BTC transaction processing. Furthermore, the inscription tools of some BRC-20 tokens are built to mint new assets in an intermediary’s wallet, meaning that users lose control of coins when they are minted.
Additionally, most BRC-20 coins will turn out to be shitcoins, cryptocurrencies with no real-world value. In fact, DOMO, BRC-20’s creator, has openly stated that the standard is worthless and that users should not waste money mass-minting this fun experiment. So why are we congesting the network for assets with zero real value?
BRC-20 tokens have nothing to do with Bitcoin other than the fact that they use the same network. They are nothing more than a script file that allows almost anyone to add metadata to Bitcoin’s blockchain and create a new token. We have just seen that it only takes 30 seconds to mint a coin.
Most BRC-20 tokens are taking advantage of Bitcoin’s legitimacy as the world’s best-known and most trusted cryptocurrency. They are simply masquerading as something associated with a blockchain that provides real value to its users.
The real value in Web3 comes not from the coins desperately clinging to Bitcoin’s brand power. The real value comes from coins providing groundbreaking features and innovative infrastructure to the burgeoning market.
Web3 gaming platforms like Nakamoto Games, which offer the largest catalog of blockchain games on the market, or DeFi directory UpOnly, which consistently launches cutting-edge X-to-Earn services. These are the cryptos that will 10x, 50x, and 100x in the long run!
Do you want to know why? Because they are backed by teams building real value in a flourishing market. They won’t fall off the face of the earth when the mob has moved on to the next trendy coin. They will remain, rapidly building the next generation of the internet.
Phew! I needed to get that one off my chest. Rant over, Speedsters. I will see you all next week.
