BRC-20 vs ERC-20: what are their differences?

The creation of Ethereum's ERC-20 token standard marked a revolutionary moment in the history of cryptocurrencies. Inspired by this established standard, the BRC-20 standard has since emerged, which has achieved remarkable success within the cryptocurrency world, while building upon the original Bitcoin blockchain. Despite the similarity in names, it is still necessary to recognize the underlying differences that exist between these two standards.

Differences between BRC-20 and ERC-20, currently widely used standards

Understanding the ERC-20 and BRC-20

Before mentioning the difference between the two standards, let's quickly explain what each one is:

ERC-20

ERC-20 was created in 2015 by developers representing the Ethereum community. The abbreviation stands for Ethereum Request for Comments 20, which was the 20th proposal submitted on the Ethereum blockchain, and was officially recognized in September 2017. ERC-20 is the most widely used token standard and also the consistent technical standard for all Ethereum-based assets.

The establishment of ERC-20 has facilitated the creation of a diverse variety of digital assets that can interact with each other effortlessly on the Ethereum blockchain, which in fact plays a key role in driving the growth of the entire crypto ecosystem.

BRC-20

BRC-20 focuses on providing a method to create and exchange alternative tokens on the Bitcoin blockchain. Built on the Ordinals Protocol, BRC-20 introduces a unique approach to token creation and management: directly record JSON data (which can be text, images, audio, etc.) into Satoshis (the smallest unit of Bitcoin), associate them with specific Satoshis, and mint them into tokens.

This method offers a new level of flexibility and programmability, while leveraging Bitcoin's security and immutability. Since its launch in March 2023, BRC-20 quickly attracted the attention of the crypto community, and thousands of BRC-20 tokens have been issued, with ORDI, SATS, PIZA and MEME being the most popular.

Difference between BRC-20 and ERC-20

Now that you know what they are, it will be much easier to understand the differences between BRC-20 and ERC-20:

Token issuance

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. ERC-20 tokens are created and managed using smart contracts on the Ethereum network. These self-executing protocols can automate the issuance, distribution and management of tokens, thus providing flexibility and reliability.

However, BRC-20 tokens do not support the use of smart contracts. Instead, they require a Bitcoin wallet for token issuance and exchange, resulting in a lack of interoperability between different chains.

Cost and speed of transactions

Due to the block space occupied by JSON data enrolled in satoshis, BRC-20 transactions can be relatively more expensive compared to other blockchains. In addition, with the increased popularity of BRC-20 tokens, network congestion has intensified, resulting in longer transaction processing time and increased fees.

Similarly, in the case of ERC-20, Ethereum network scalability issues mean transaction processing times and fees are also higher during peak periods. However, transaction cost and speed can vary significantly depending on network usage, gas rates and the specific blockchain on which the token operates.

Both BRC-20 and ERC-20 are different protocols, but usable within the blockchain.

Security

From a security standpoint, BRC-20 tokens are considered more secure than ERC-20 tokens. This is because the Bitcoin network, where BRC-20 tokens reside, uses a highly decentralized consensus model based on Proof of Work (PoW) and anyone can join the network to validate blocks using this model.

In contrast, the Ethereum network, where ERC-20 tokens exist, employs a Proof-of-Stake (PoS) model. There is a higher barrier to entry for validators, so the number of validators is limited and token holders have less control over the validation process.

Fungibility

Both BRC-20 and ERC-20 tokens are fungible. However, BRC-20 tokens are somewhat fungible, as they are enrolled in Satoshi, and can only be exchanged in set increments. ERC-20 tokens, on the other hand, are fully fungible and can be exchanged in any quantity.

Conclusion

Although the BRC-20 token standard is inspired by ERC-20, there are fundamental differences between the two token standards. BRC-20 is not based on smart contracts, but operates on scripted data in Satoshi. It leverages the functionalities of the Bitcoin blockchain and coexists with Bitcoin, opening up new possibilities beyond NFTs. ERC-20 has a wider variety of tokens and greater support from exchanges and wallets, so overall it is a more mature standard.

However, as BRC-20 tokens continue to evolve, it is possible that they will take on a more important position in the cryptocurrency landscape in the future.

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