BRC-20 tokens have created a frenzy over the last few days. Users are pouring BTC to mint the token that is settled on the Bitcoin Blockchain via Ordinals inscription.
Bitcoin sidechain Mintlayer CEO Enrico Rubboli however feel that the technology to mint the BRC tokens is “heavily flawed and isn’t in line with the axioms of the core Bitcoin community.”
Notable issues with BRC-20 tokens
According to Enrico Rubboli, some of the major issues plaguing BRC-20 and the offshoot dApps that are attempting to connect them to smart contracts are:
- Low speeds since transactions have to wait for Bitcoin block confirmation, which combined with the frenzy created by the BRC-20 token could mean one could wait for hours for a transaction to be completed.
- The nature of the user interfaces being built for the BRC-20 tokens require gas tokens for the exchange and BTC to pay network fees. This means transaction costs double the normal fees to transact BTC.
- Exchanges are using token bridges and wrapped Bitcoin to bridge Bitcoin to their platform. These token bridges have recently become targets for hackers with $1.4 billion being lost through token bridge attacks in 2022.
- BRC-20 tokens are linked to the Bitcoin blockchain using Ordinals which inscribe token information into the witness data of statistics. This mixing of user-generated tokens with Bitcoin is worrisome from a regulatory standpoint
Leaching off the popularity of ERC-20 tokens
Interestingly, the BRC-20 token standard was chosen not because it was the 20th proposed standard, but to leech off the popularity of the Ethereum ERC-20 token standard.
According to the Bitcoin sidechain Mintlayer CEO;
“Developers of the BRC-20 token standard and the tools used for developing the tokens are not affiliated with Bitcoin, they are anonymous, and their software has not been thoroughly tested in this application. The liquidity token being used is called WBTC, but is not the popular Ethereum token WBTC. Besides the hundreds of totally worthless tokens that have been minted to rug pull money from later investors, the actual software could be hiding malicious attacks. The most popular DEX warns of “100% slippage”, which is basically a warning that you could lose all of your assets by simply executing a trade. “
The creator of the BRC-20 token Domo recently warned in a tweet that the tokens are worthless warning users that some inscription tools are built to mint the tokens to the intermediaries’ wallet, taking control from the users from the time they are minted.
However, not everyone shares the idea of BRC-20 tokens are a bad idea. The AngelBlock founder and CEO, Alex Strzesniewski recently came out and said that he thinks what happening within Bitcoin is amazing.
Strzesniewski while disagreeing with some prominent BTC figures like Adam Back who is calling for BRC20 token transactions to be censored “as a form of discouragement,” said:
“As a recovering Bitcoin maximalist, I think that what’s happening within Bitcoin is amazing. It feels like Bitcoin is going back to its roots of actually being “magic internet money”, and evolution for any technology is a natural phenomenon. I see the backlash from many BTC “purists”, but I don’t think that anyone should use their platform to attempt to censor transactions and attempt to discern between what is a “valid” and “invalid” transaction on any network.”
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