# BRC 20/ ERC 20 Explained

### **Demystifying BRC 20 Tokens**

*<mark style="color:orange;">**The New Frontier of Bitcoin Tokenization**</mark>*

Bitcoin's flashy new friends: BRC-20 tokens open DeFi doors with a twist. Before describing how BRC-20 tokens function, we must first understand the technology behind them: the Ordinals protocol. To explain, Sats are given a "<mark style="color:orange;">**serial number**</mark>" depending on the sequence in which they are mined on the Bitcoin network. This assigns an ordinal number to each Satoshi, which is how the protocol acquired its name.

In brief, the ordinals protocol makes it simpler to add extra data (such as text, photos, or music) to a single Satoshi, a process known as <mark style="color:orange;">**inscription**</mark>. Essentially, they are satoshis imprinted with information. And that is precisely what BRC-20 tokens are: a form of ordinals inscription.

However, not all ordinals include BRC-20 tokens. Standard Bitcoin ordinals may be inscribed with any data such as text, photos, or videos, whereas BRC-20 tokens are always inscribed using JSON (JavaScript Object Notation). This is the code that provides the ordinal with additional functionality. While the BRC-20 standard remains restricted, this short bit of code enables you to install, mint, and transfer tokens on the Bitcoin network.

### **How are BRC 20 and ERC 20 Tokens different?**

*<mark style="color:orange;">**New Defi Summer in BRC20 incoming**</mark>*

To begin with, compared to Ethereum tokens, BRC-20 tokens are far more scarce. To elaborate, the ability to execute smart contracts is possessed by several blockchains under their own virtual machine. That is EVM, the Ethereum virtual machine, for Solana and Ethereum. More complicated assets and conditions are possible since these virtual machines can read and execute code.

Here is where Bitcoin differs significantly: it has some constraints because it does not employ a virtual computer. Take BRC-20 tokens as an example; they aren't compatible with other chains and can't be transferred easily. In contrast to Ethereum's EVM, which can access files held on IPFS and other decentralized storage protocols, Bitcoin is unable to manage complicated tokens or store additional information outside of the blockchain.\
\
Ethereum's proof-of-stake consensus, known for its speed, cost-efficiency, and lower energy consumption, contrasts with Bitcoin's proof-of-work mechanism. While creating BRC-20 coins on the Bitcoin network involves more resources, time, and expense compared to launching ERC-20 tokens, this distinction brings a notable advantage. The <mark style="color:orange;">**proof-of-work**</mark> approach of Bitcoin endows BRC-20 tokens with **enhanced security** and **immutability**, features highly valued in the crypto world. This difference underscores the unique strengths of Bitcoin's method, emphasizing the robust security and inalterability inherent in BRC-20 tokens.


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