What Are BRC-20 Tokens? A Complete Beginner's Guide

Bitcoin has long been associated with simple peer-to-peer transactions and a store of value. However, the innovation of BRC-20 tokens has shifted Bitcoin's reputation to a multi-functional ecosystem.

These tokens represent a groundbreaking development on the Bitcoin blockchain, introducing new use cases that were once considered exclusive to platforms like Ethereum. But what exactly are BRC-20 tokens, and why are they creating such a buzz in the crypto world? 

BRC-20 tokens are fungible digital assets created as part of an "experimental" token standard on the Bitcoin blockchain. Unlike Ethereum's ERC-20 tokens, which rely on smart contracts, BRC-20 tokens utilize a unique process known as ordinal inscriptions. These inscriptions encode data—including token specifications like name, symbol, and supply—onto Bitcoin's smallest unit, called a satoshi, via JSON (JavaScript Object Notation) files.  

By doing this, the Bitcoin blockchain is transformed into a platform that supports more than simple transactions. BRC-20 tokens can now be minted, transferred, and traded, all while leveraging the inherent security and decentralization of Bitcoin. 

The concept of BRC-20 tokens originated in March 2023, thanks to a blockchain analyst known as "Domo." Inspired by Ethereum's ERC-20 standard, Domo leveraged Bitcoin's Ordinals protocol—enabled by the Taproot upgrade in 2021—to inscribe token specifications onto individual satoshis using JSON files. Initially conceived as an experiment, BRC-20 rapidly gained traction, resulting in the creation of over 14,000 tokens by early 2025. Popular examples like ORDI, PEPE, and VMPX have contributed to a combined market capitalization surpassing $500 million at the time of writing. However, this innovation has also introduced challenges such as network congestion and scalability concerns for the Bitcoin blockchain. 

Peer-to-Peer Transfers
BRC-20 tokens can be transferred between wallets, offering a decentralized medium for digital currency transactions. This functionality is particularly useful for individuals seeking a pseudo-anonymous and efficient way to exchange value.

Decentralized Exchanges (DEXs)
BRC-20 tokens can interact with decentralized exchanges and trade assets directly on the Bitcoin layer. Users can trade native BRC-20 on on-chain protocols and easily withdraw their holdings to their wallets.

Tokenization of Assets
BRC-20 tokens can be used to tokenize real-world assets on-chain through the Ordinals protocols.

Supporting Continuous Experimentation
BRC-20 tokens have opened the doors to innovation on the Bitcoin network. Developers continue to push boundaries, making these tokens a key part of Bitcoin's evolutionary trajectory.

DeFi on Bitcoin
BRC-20 tokens enable lending, borrowing, yield farming, and other DeFi applications directly on the Bitcoin network.

Governance and Community Tokens
BRC-20 tokens can be used for community membership and governance, allowing token holders to participate in decision-making processes. 

Compatibility with Bitcoin: BRC-20 tokens operate directly on Bitcoin's blockchain, allowing them to exploit Bitcoin's robust and well-established infrastructure fully. This includes the network's outstanding security features, which are recognized as among the most reliable in cryptocurrency.  

Simplicity: Unlike Ethereum's ERC-20 tokens, which require smart contracts, BRC-20 tokens simplify the process using JSON inscriptions. This streamlined approach makes creating and deploying tokens more accessible, even for those with limited technical expertise.  

Decentralization: The minting and distributing of BRC-20 tokens are designed to be more inclusive. They often involve multiple wallets rather than relying on centralized parties, which helps to prevent issues of centralization and ensures a fairer token distribution process. 

Lack of Smart Contract Functionality: BRC-20 tokens do not support smart contracts, which significantly limits their versatility and restricts the range of applications they can support compared to Ethereum-based tokens. This means they cannot facilitate complex decentralized applications or automated processes.  

Bitcoin's Limitations: Since BRC-20 tokens rely on the Bitcoin network, they inherit limitations, including a low scalability rate of around 7 transactions per second (TPS) and higher transaction fees. These factors make them less efficient for high-volume or low-cost transactions than other more advanced blockchain networks.  

Limited Interoperability: BRC-20 tokens face challenges integrating with other blockchain ecosystems or supporting more advanced tokenization needs. This lack of interoperability reduces their ability to interact with decentralized finance (DeFi) platforms or other blockchain-based applications, limiting their functionality and appeal. 

BRC-20 tokens, despite their experimental nature, have made a notable impact on the blockchain space. With over $500 million in market capitalization at the time of writing, they have driven increased adoption of Bitcoin for tokenization. However, in the past, the surge in transaction volumes has overwhelmed Bitcoin's network, exposing significant scalability challenges.

Critics argue that this added strain could impair Bitcoin's ability to handle traditional transactions efficiently. On the other hand, users see BRC-20 as a catalyst for innovation, potentially transforming Bitcoin into a versatile, multi-functional blockchain and breathing new life into its ecosystem. 

Purchasing BRC-20 tokens requires a Taproot-enabled Bitcoin wallet. Here's how you can get started:

1. Create an Ordinals Wallet on specialized platforms and make sure to follow security best practices, making sure to secure your passphrase carefully.
2. Browse Available Tokens and select from listed BRC-20 tokens.  
3. Make Your Purchase by clicking "Buy Now" and ensuring sufficient Bitcoin in your wallet for transactions and fees.   

Blockchain Platform:  

• BRC-20 tokens operate on the Bitcoin blockchain, utilizing its existing infrastructure but extending its functionality through tokenization.  
• ERC-20 tokens are built on the Ethereum blockchain and other EVM-compatible networks, leveraging Ethereum's flexibility and smart contract ecosystem.  

Creation Method:  

• BRC-20 tokens are created using JSON inscriptions, a relatively new method designed for the Bitcoin network that involves embedding data into transactions.  
• ERC-20 tokens are created through smart contract coding, offering a more programmable and feature-rich approach to token design.  

Functional Scope:  

• BRC-20 tokens are more limited in functionality as they cannot execute smart contracts, focusing mainly on basic token operations like minting and transferring.  
• ERC-20 tokens are highly versatile, supporting a variety of use cases, including complex dApps and DeFi applications.

Transaction Processing:  

• BRC-20 tokens operate parallel to Bitcoin transactions, meaning they utilize Bitcoin's base layer for validation but do not integrate as deeply into Bitcoin's architecture.  
• ERC-20 tokens are fully integrated into Ethereum's network architecture, allowing seamless interaction with smart contracts and other decentralized features within the ecosystem.

Use Cases:

• BRC-20 tokens are currently more focused on speculative assets, meme coins, and basic tokenization, with limited integration into complex decentralized applications.
• ERC-20 tokens support a wide array of use cases, including stablecoins, governance tokens, utility tokens, and are integral to numerous DeFi platforms and blockchain-based projects.

Network Performance:

• BRC-20 tokens are subject to Bitcoin's lower transaction throughput, typically around 7 transactions per second, which can lead to slower processing times and higher fees during network congestion.
• ERC-20 tokens benefit from Ethereum's higher transaction capacity and ongoing scalability improvements, allowing for faster and potentially cheaper transactions, especially with Layer 2 solutions.

Decentralization and Immutability:

• BRC-20 tokens are often considered more decentralized and immutable due to their attachment to Bitcoin's robust and widely distributed network, with limited ability for centralized modifications.
• ERC-20 tokens, while benefiting from Ethereum's decentralized nature, may be subject to more centralized control in some cases, as project teams can potentially modify or upgrade token contracts. 

What Is a BRC-20 Token Contract?
A BRC-20 token contract is a set of rules coded onto Bitcoin's blockchain via JSON inscriptions, defining a token's name, supply, and other essential properties.

What Is an Example of a BRC-20 Token?
ORDI was the first BRC-20 token created and remains one of the most popular, boasting a market cap of over $185 million as of March 14th 2025. 

While experimental, BRC-20 tokens have reshaped conversations around Bitcoin's potential use cases by unlocking capabilities like tokenization and decentralized finance, they demonstrate Bitcoin's adaptability. However, users and developers alike must exercise caution as the technology matures.

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