Since the beginning of cryptocurrencies, Bitcoin (BTC) has been the innovator and market leader. It has become a household name in the financial sector and has experienced tremendous growth. As the landscape of the digital asset market changed over time, BTC changed as well. The idea of cross-chain compatibility is one of the most recent breakthroughs that has attracted the attention of the crypto world, and BRC20 is playing a significant role in determining the future of Bitcoin.
Understanding Cross-Chain Compatibility
The ability of several blockchain networks to connect and communicate with one another is referred to as cross-chain interoperability. Users can take advantage of the distinctive features and functions of various networks by facilitating the smooth transfer of assets and data between several blockchains. For users and developers, this interoperability opens up a world of possibilities and makes it simpler to construct cutting-edge applications and services.
Introducing Bitcoin BRC20
The BRC20 token standard, also known as Bitcoin Request for Comment 20, was released in March 2023 by an unidentified developer going by the name Domo and is based on Ethereum’s ERC20 token standard. The fungible BRC20 tokens are built into the Bitcoin ecosystem. They are ERC20 tokens in the BTC universe, albeit there are some significant distinctions, such as the lack of smart contract functionality.
Ordinal inscriptions are a feature of BRC20 tokens that was made feasible by Bitcoin’s Taproot upgrade in November 2021. The smallest unit of Bitcoin, the satoshi, is stamped with a serial number by ordinals. The witness signature field of a BTC transaction stores this serial number and the ordinal’s information, guaranteeing the rightful possession of the ordinal.
The Components of Bitcoin BRC20 Standard
For the purposes of starting token contracts, producing new tokens, and enabling token transfers, BRC20 tokens rely on JSON (JavaScript Object Notation) ordinal inscriptions. It’s crucial to keep in mind nevertheless that not all ordinals are BRC20 tokens. There are millions of ordinals, but only slightly more than 14,000 BRC20 tokens as of writing.
In comparison to ERC20 tokens, BRC20 tokens currently have less functionality. Only BRC20 tokens can be created, used, and transferred by users. In contrast to ERC20, BRC20 is still in the proposal stage and is not a recognised standard. This limits the liquidity and adoption of BRC20 coins by making it difficult for them to be traded on exchanges.
Bitcoin’s Push for Cross-Chain Compatibility
Bitcoin’s journey towards cross-chain compatibility has been driven by the need for scalability, interoperability, and enhanced functionality. The Bitcoin community recognizes the potential of cross-chain compatibility in expanding the use cases and utility of the cryptocurrency.
To further its compatibility with other blockchains and enhance its market dominance, BTC has been actively exploring new developments and partnerships.
