- Bitcoin BRC-20 tokens have skyrocketed over the previous few days, with their mixed market worth rising to over $923 million as of 8 May, 2023.
- Mintlayer CEO Enrico Rubboli has highlighted a few of the flaws and points plaguing the BRC-20 token customary.
- Apart from not aligning with the “axioms of the core Bitcoin community,” flaws and points imply customers are prone to be rug pulled.
Crypto news this week certainly has the skyrocketing transactions of BRC-20 tokens as one of many causes the Bitcoin community skilled huge congestion amid rising charges.
As CoinJournal highlighted on Monday morning, the crypto market was down as Binance halted BTC withdrawals amid the community congestion. Some of the trending BRC-20 tokens embrace ordi, pepe, meme, piza and domo.
Enrico Rubboli, the CEO of Bitcoin sidechain Mintlayer, says that whereas BRC-20 tokens proceed to create a frenzy, there are flaws and different points that plague the tokens and offshoot decentralised functions that attempt to join with sensible contracts.
What are BRC-20 tokens?
BRC-20, or “Bitcoin Request for Comment,” is a token customary for Ordinals. The tokens permit for the issuance and switch of fungible tokens on Bitcoin and hit the market quickly after the mainnet launch of the Ordinals Protocol.
With BRC-20 tokens, one can etch digital artwork references into small Bitcoin transactions. The tokens are a creation of a pseudonymous crypto developer referred to as Domo.
According to market data for the token class, the mixed worth of all 11,705 BRC-20 tokens was $923 million as of Monday, 8 May 2023.
BRC-20 tokens affected by velocity and transaction prices points
Among the insights Rubboli shared with CoinJournal on Monday is that whereas folks pour BTC into minting BRC-20 tokens, there’s a necessity to understand that the expertise behind these property is “heavily flawed.” He additionally notes that BRC-20 tokens aren’t “in line with the axioms of the core Bitcoin community.”
Rubboli mentioned that a few of the points at present plaguing the tokens and offshoot dApps throughout the ecosystem embrace velocity, transaction prices and safety.
On the problem of velocity, he explains that transactions have to attend for Bitcoin block affirmation earlier than settlement, which when mixed with community congestion, has resulted in customers ready hours for transactions to clear.
Mintlayer CEO says BRC-20 tokens are potential rug pulls
According to Rubboli, using token bridges and wrapped BTC may expose customers to exploits, with DeFi bridges seeing greater than $1.4 billion misplaced to hackers that focused crypto bridges in 2022. Rubboli believes your entire idea for BRC-20 was designed to confuse and mislead potential traders, with the creators leeching off the favored ERC-20 token customary.
Saying this may very well be a chance for scams, he added:
“The entire ecosystem was set up to be confusing and misleading. BRC-20 was chosen not because it was the 20th proposed standard, but to leech off the popularity of Ethereum’s ERC-20 token. The developers of the standard and the tools are not affiliated with Bitcoin, they are anonymous, and their software has not been thoroughly tested in this application.”
Besides, the lots of of BRC-20 tokens may not simply be completely nugatory, but in addition minted particularly to rug pull later traders. BRC-20 token customary creator Domo has beforehand warned of the shortcomings of the software program, together with minting balances to middleman wallets.
Regulatory points additionally come up, with the minting of BRC-20 tokens prone to result in regulatory considerations round commingling of user-generated tokens with BTC.
“If users mint unregulated securities, it could expose the Bitcoin blockchain to further regulatory scrutiny, which in turn exposes every BRC-20 to regulation due to 1 bad actor. A layer 2 solution fixes this problem as tokens are not commingled with Bitcoin,” he opined.
A layer 2 resolution is a protocol that runs on high of a layer 1 blockchain, as an illustration Bitcoin or Ethereum. The key options that these protocols deliver to the L1 embrace improved scalability and privateness amongst others.
In blockchain, widespread layer 2 options embrace state channels, sidechains, and zero data roll-ups.
