- Bitcoin BRC-20 tokens have skyrocketed over the past few days, with their combined market capitalization exceeding $923 million as of May 8, 2023.
- Mintlayer CEO Enrico Ruboli highlights some of the flaws and issues with the BRC-20 token standard.
- In addition to not aligning with “core bitcoin community axioms,” the loopholes and issues mean users may be pulled hard.
crypto news There’s a reason the BRC-20 token actually skyrocketed this week Bitcoin The network experienced heavy congestion amid rising fees.
as CoinJournal Thrown light on On Monday morning, the crypto market was down as Binance halted BTC withdrawals amid network congestion. Some trending BRC-20 tokens include Ordi, Pepe, Mayhem, Pizza, and Domo.
Enrico Ruboli, CEO of Bitcoin Sidechain mintlayersays that while BRC-20 tokens continue to generate a frenzy, there are flaws and other issues that plague the token and offshoot decentralized applications that try to connect to smart contracts.
What are BRC-20 tokens?
BRC-20, or “Bitcoin Request for Comment”, is a tokenized standard for Ordinals. The tokens allow the issuance and transfer of alternative tokens on bitcoin and come to market shortly after the mainnet launch of the Ordinals protocol.
With the BRC-20 token, digital art references can be mined in small bitcoin transactions. The token is the creation of a pseudonymous crypto developer known as Domo.
According to market data For the token category, the combined value of all 11,705 BRC-20 tokens as of Monday, May 8, 2023 was $923 million.
BRC-20 tokens suffer from speed and transaction cost issues
Ruboli’s insight, shared with CoinJournal on Monday, is that when people put BTC into creating BRC-20 tokens, they need to realize that the technology behind these assets is “heavily flawed.” He also noted that BRC-20 tokens “are not”In line with the principles of the core bitcoin community,
Ruboli said some of the issues currently affecting tokens and offshoot dApps within the ecosystem include speed, transaction costs, and security.
On the issue of speed, he points out that transactions have to wait for a bitcoin block to be confirmed before settlement, which when combined with network congestion can result in users waiting hours for transactions. have to do.
Mintlayer CEO Says BRC-20 Tokens Are Pulling The Potential Rug
Using token bridges and wrapped BTC could expose users to exploits, according to Ruboli, which sees more from DeFi bridges $1.4 billion Lost to hackers targeting crypto bridges in 2022. Ruboli believes that the entire concept for BRC-20 was designed to confuse and mislead potential investors, with the creators abandoning the popular ERC-20 token standard.
Noting that this could be an opportunity for scams, he said:
,The entire ecosystem was set up to be confusing and misleading. BRC-20 was not chosen because it was the 20th proposed standard, but rather to reduce the popularity of Ethereum’s ERC-20 tokens. The developers of the standard and tool are not affiliated with bitcoin, are anonymous, and their software has not been thoroughly tested in this application.,
Furthermore, hundreds of BRC-20 tokens may not only be completely worthless, but have been created specifically to attract investors to the latter. BRC-20 token standard creator Domo previously warning Regarding the shortcomings of the software, which involves mining of balances in intermediate wallets.
Regulatory issues also arise, with the mining of BRC-20 tokens likely to lead to regulatory concerns around the amalgamation of user-generated tokens with BTC.
,This could expose the bitcoin blockchain to further regulatory scrutiny if users mined unregulated securities, which in turn exposed each BRC-20 to regulation due to 1 bad actor. A layer 2 solution fixes this problem as tokens are not mixed with bitcoin.,” They said.
A layer 2 solution is a protocol that runs on top of a layer 1 blockchain, for example bitcoin or ethereum. The key features that these protocols bring to L1 include better scalability and privacy among others.
In blockchain, common Layer 2 solutions include state channels, sidechains, and zero knowledge roll-up.