The BRC-20 Token Invasion: Is Bitcoin Network Feeling the Heat?
BRC-20 tokens have reached a market capitalization of over $1 billion just two months after the creation of the Bitcoin token fungibility protocol. The total trading volume of BRC-20 tokens reached $208.4 million in the past 24 hours.
BRC-20 is an experimental new token standard designed by a pseudo-anonymous developer known as Domo on Twitter.
The token standard is built on the Bitcoin blockchain network and is a Bitcoin-based solution for the creation and transfer of new digital assets. BRC-20 is modeled after Ethereum's ERC-20 standard, but its architecture is different and uses a concept known as "ordinals," which is built into Satoshis, the smallest units of Bitcoin.
However, BRC-20’s creator Domo has openly stated that the standard is worthless and that users should not waste money mass minting. “To emphasize again, this is simply a fun experiment. People much smarter than I have been working on similar ideas for much longer”, Domo explains.
Despite its experimental nature, BRC-20 has spread rapidly with hundreds of new tokens minted in the past couple of months.
However, the rising popularity of BRC-20 tokens has led to increased transaction fees and a backlog of transactions, pushing Bitcoin transaction fees to the highest level since May 2021. According to Dune Analytics, more than 3.5 million BRC-20 transactions have already occurred, generating an additional 493 BTC (approximately $14 million) in miners' fees. BRC-20 token swaps accounted for over 50% of all network transactions between April 29 and May 2.
According to CryptoQuant analytical firm, BRC-20 memecoin minting on the BTC blockchain is causing the surge in block space demand, with the average fee per transaction skyrocketing to over $16 and peaking at $29 on May 9.
Bitinfocharts also reported a spike in the average transaction fees, recording a jump to $31 on May 8 compared to around $19 the day prior.
The situation has become so concerning that Bitcoin core developers are even considering taking action against BRC-20 tokens and Ordinals, which they view as network spam.
It also led Binance, the world's largest crypto exchange, to temporarily halt withdrawals via Bitcoin early on May 10. As a result, transactions on the Litecoin blockchain have also surged to all-time highs as high fees on the Bitcoin network made crypto users search for alternatives.
