The Bitcoin network is experiencing a meme coin frenzy following the explosion in ERC-20 meme coins, with BRC-20 tokens now taking the crypto markets by storm.
The market cap of these tokens is nearing $1 billion, following the listing of ORDI, the first BRC-20 token, on major exchanges.
The BRC-20 tokens’ market cap currently stands at around $991 million, and the number of tokens in circulation has been increasing rapidly over the past few days.
Ordinals unlocked two new primitives on Bitcoin:
1. NFTs (Inscriptions)
2. Coins (BRC-20)Starting tomorrow https://t.co/6rwUJyZ73Y will support the exploring and tracking of both! https://t.co/Qj2IPAU7ca
— Leonidas (@LeonidasNFT) May 9, 2023
Fungible Tokens Built on Ordinals Protocol: Latest Moonshot?
Launched two months ago by the pseudonymous on-chain data enthusiast Domo, BRC-20 tokens are experimental fungible tokens built on Bitcoin using the Ordinals protocol.
Inspired by the ERC-20 token standard on Ethereum, Domo created ORDI on March 8th. Since then, the token’s market cap has reached approximately $400 million.
Other BRC-20 tokens, such as PEPE (not to be confused with ERC-20 Pepe coin), MEME, PIZA, and DOMO, have followed suit, capitalizing on the meme coin mania that has engulfed the crypto community.
On May 1st, ORDI’s value was $3.78, but after being listed on Crypto.com and Gate.io on May 8th, its price skyrocketed to a peak of $29.58 before settling at $18.50.
The popularity of BRC-20 tokens and the subsequent surge in Bitcoin transactions have put the network to the test.
BRC-20 Tokens Overwhelm Bitcoin Network, Binance Suspends Withdrawals
On Sunday, May 7th, 65% of Bitcoin transactions were related to BRC-20 tokens.
The congestion resulted in Binance briefly halting Bitcoin withdrawals due to network issues – sending traders into abject panic.
BRC-20 tokens are created using inscriptions of JavaScript Object Notation (JSON) data, which can be programmed to mint large token supplies.
This ability has led to a rapid increase in the number of tokens in circulation, but it has also driven transaction fees up by 800% from the average $1-2 per transaction fee in 2022 to nearly $20 per transaction.
The soaring fees have impacted users who rely on base layer payments, prompting them to consider alternatives such as the Lightning Network, a layer 2 scaling solution for faster and cheaper Bitcoin transactions.
Lightning Network: Finally Time to Shine?
Binance is currently working on integrating the Lightning Network due to the sudden spike in Bitcoin fees.
If we are in a new regime of higher Bitcoin tx fees due to ordinals/brc-20s, think there’s a very compelling setup for the lightning network over the next few years. pic.twitter.com/tWVLeOpL37
— Will Clemente (@WClementeIII) May 7, 2023
However, the Lightning Network still requires an initial on-chain transaction to establish a payment channel, which is becoming increasingly unaffordable for many users.
As BRC-20 tokens continue to gain traction, questions have arisen regarding the long-term impact on the Bitcoin network and its security model.
For the first time since 2017, miners are earning more from transaction fees than block rewards.
This development raises concerns about the sustainability of miner revenue and the future of Bitcoin.
As BRC-20 tokens reshape the crypto landscape, this experimental token space offers a glimpse into the potential future of Bitcoin technology, highlighting both its strengths and previously unseen limitations.
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