Tokens on Bitcoin are becoming popular with the rise of new token standards. These new standards aim to simplify asset creation and bring efficiency to Bitcoin.
In this guide, we will learn more about Bitcoin token standards, and the best standards you should know about.
What Are Bitcoin Token Standards?
Bitcoin token standards are a set of functions that govern how a token on the Bitcoin blockchain is designed and operates. Token standards guide how tokens are minted, issued, and deployed on crypto blockchains.
Initially, token standards were synonymous with blockchain protocols that supported complex smart contracts. The first token standards were on Ethereum.
Circling back to Bitcoin, the blockchain did not support token standards from its inception due to its architecture. However, in the years that followed, updates to the core protocol increased on-chain storage and enhanced transaction efficiency.
5 New Token Standards Transforming Bitcoin
Here is a list of the five most popular token standards on Bitcoin at the time of writing.
BRC-20
BRC-20 is the first token standard under the Ordinal protocol for the creation of Bitcoin fungible tokens. The token standard was proposed by a pseudonymous programmer known as Domo in March 2023. The standard allows developers to inscribe JSON code within a sat to generate fungible tokens on the Bitcoin network. Tokens under this standard inherit Bitcoin’s security and durability.
Runes
The Runes protocol is an Unspent Transaction Output-based model for generating fungible Bitcoin tokens. Runes was launched in April 2024 as a less complex and resource-intensive alternative to BRC-20. Runes come into existence by storing runestones in Bitcoin transaction outputs. A runestone can etch a new rune, mint an existing one, and transfer runes from a transaction’s inputs to outputs.
ARC-20
The Atomicals protocol is a token standard for creating arbitrary fungible tokens on Bitcoin. Introduced in December 2023, it uses individual sats to back every unit of a deployed token. In other words, each ARC-20 token is forever backed by one satoshi and inherits Bitcoin’s fungible properties. These tokens can be minted, transferred to any Bitcoin address, and stored in UTXO-compatible Bitcoin wallets.
CBRC-20
CBRC-20 is a meta-protocol standard for creating ordinal-based fungible tokens on Bitcoin. The standard was launched in December 2023 by a group of programmers called THEMOTO. CBRC-20 is meant as an upgrade to BRC-20 in areas such as reducing inscription costs and optimizing the indexing of fungible tokens on Bitcoin. These tokens are created by storing metadata in Ordinal envelopes using a CBOR format.
BRC-420
The BRC-420 standard infuses BRC-20 tokens with metadata capabilities, creating a new and diverse set of tokens. Proposed in 2023 as a universal standard for metaverse assets, it aims to power a future metaverse economy. Using this standard, developers can create inscriptions ranging from 2D to 3D animations, game items, multimedia, art, and more. The standard has a royalty system that allows creators to earn inscription payments.
What Do Bitcoin-Native Tokens Bring to the Bitcoin Ecosystem?
Bitcoin native tokens offer several new use cases for the Bitcoin economy.
For instance, the BRC-20 token standard has become popular for the creation of meme coins, which have gained traction in the Bitcoin community by offering comical relief and opportunities for speculation,
Here are some of the more practical applications of Bitcoin token standards:
- Ordinal gaming—The BRC-20 standard is used to power Bitcoin Ordinal games like Ordz Games, which rewards players with its Bitcoin native token known as $ORDG.
- Asset tokenization—Bitcoin token standards can be used to create diverse tokenized assets on the Bitcoin blockchain.
- Access to decentralized finance—Tokens are being used to seamlessly integrate into decentralized exchanges, yield farms, and other DeFi protocols due to their Web3 properties.
Wrapping Up
With new token standards now in the picture, the issuance of Bitcoin fungible tokens becomes more efficient. Now more than ever, developers can experiment with more potential applications of Bitcoin using these standards.
