BRC-20 style tokens are spreading to chains beyond Bitcoin. But why?

When the ORDI

-5.48%
token temporarily passed a Reaching a market cap of $1 billion earlier this week, it became the first BRC-20 token to reach this milestone.

Following in its wake are a number of other BRC-20 tokens, all hoping to become the next hyped-up memecoin or coin of the day. But what’s special is that these tokens – which were created on Bitcoin through a workaround because it doesn’t offer native token support – are now expanding to other chains that do support native tokens.

On Bitcoin, an inscription is where an individual satoshi – the smallest bitcoin unit – is associated with a piece of data, such as an image for an NFT or a token. This is done using a small amount of data storage space available when performing transactions. Tokens created on Bitcoin in this way are called BRC-20 tokens, and each token is part of its own collection.

When brought to other chains, these token standards are given their own names, such as PRC-20 on Polygon PoS, but it’s the same core idea. Such tokens include Ethscriptions on Ethereum, Doginals on Dogecoin and Solana Inscriptions on Solana.

Blockchains Celo, Avalanche and Fantom have each seen more than 20 million registrations on their networks, while Polygon PoS has 109 million registrations, according to a Dune Analytics Dashboard created by Hildobby, a pseudonymous researcher at VC firm Dragonfly. In total, there have been more than 200 million entries for thousands of tokens on 11 blockchains other than Bitcoin.

This also causes huge spikes in network activity on these chains. These blockchains see large increases in the number of transactions performed per day as users mint and transfer these tokens. For example, the number of transactions executed per day on the Celo blockchain, as a seven-day rolling average, has increased from 277,000 transactions per day to 3.7 million.

This activity has even caught the attention of Tron founder Justin Sun. He posted on X solicit feedback from the community on providing inscription support to Tron and enabling the creation of BRC-20 tokens on the network.

In addition, NFTs are also being launched on other blockchains – which again have native NFT support – using the same approach. For example, Ethereum Punks recreated the original CryptoPunk collection, but with inscriptions.

Why does this happen?

The development has raised questions about why these tokens are spreading to other chains. These chains have their own native support for token creation, so they don’t need to apply this workaround. Furthermore, these tokens are demonstrably bad for the network, as they aggressively expand the data requirements of the blockchain, making it harder for those running nodes or validators on the networks – one reason why some Bitcoin developers do so. try to get rid of of inscriptions.

Eric Wall, co-founder of Bitcoin NFT collection Taproot Wizards, opined that these types of tokens are proving popular because they allow broader participation in the token mining process. He said this is somewhat similar to proof-of-work mining used for Bitcoin – something that is no longer particularly accessible to the average person.

“If you ensure that the issuance of 100% of the coin supply of a BRC-20, SLP-20 or [Ethereum Virtual Machine]-equivalent derivative requires you to spam entire blocks in one of these chains for not one, not two, but several days (or even months!), which means you can now [an] issuance mechanism that is accessible to everyone. A bit similar to the issuance of Proof-of-Work mining; we can call it ‘Proof-of-Wasted-Blockspace’. he said on X.

HedgedHog, a high-profile crypto trader and co-founder of eGirl Capital, said speculation is likely happening because these tokens are a new vertical with no previous price metrics or reference point. “I actually think it’s just the flavor of the month,” he said. “They’re starting, but it’s all speculation.”

Another element is that transactions with inscription-based tokens can be cheaper than with tokens built natively on blockchains. This is because it is cheaper to, for example, move Ethereum’s native coin ether (ETH) – and the inscription-based token with it – than using a token built natively on Ethereum using smart contracts.

“Inscription-based tokens are expanding to chains that have native token support because the inscription approach is 10x+ cheaper than using smart contracts and just as decentralized,” says Tom Lehman, creator of Ethscriptions, claiming smart contracts are unnecessary and waste of money. .