The latest token standard on the Bitcoin network, BRC-20, has been attracting much attention lately. However, the CEO of Mintlayer, a blockchain infrastructure company, Enrico Rubboli, has expressed concerns regarding these new crypto tokens. He stated that BRC-20 tokens could tarnish Bitcoin’s reputation.
BRC-20, crafted by a developer who calls himself Domo, is an experimental token standard that leverages the Bitcoin blockchain. This allows for the creation and transfer of new tokens on the blockchain. However, though, experts are arguing that Bitcoin’s blockchain is not designed to foster such entities. Despite similarities to Ethereum’s ERC-20 standard, BRC-20 introduces a different architecture that employs “ordinals” in Satoshis.
For those who don’t know, Satoshis or Sats are the smallest units of Bitcoin. Consequently, users can design their own cryptocurrencies on the Bitcoin blockchain. This feature – one that was nonexistent until very recently – has led to tens of new tokens. The joint market capitalization of the whole BRC-20 sector reached a staggering $760 million some days ago. Today, it is sitting somewhere between $350-$450 million.
Nevertheless, the CEO of Mintlayer, concerned about BRC-20’s unregulated nature, has voiced concerns about its potential to deviate from Bitcoin’s original concept – a fully peer-to-peer electronic cash system without any trusted intermediaries. He has highlighted multiple issues that the advent of BRC-20 has precipitated.
Firstly, the surge in BRC-20 transactions has caused significant congestion on the Bitcoin network, even eclipsing BTC transactions at times. This escalation has been problematic for Bitcoin users, with reported waiting times of several hours for transaction processing. Consequently, Bitcoin’s transaction fees have spiked, setting new all-time highs where people had to pay over $35 for small, slow transactions.
Secondly, Rubboli has warned of the inherent lack of value in most BRC-20 tokens. Thus, he branded them as “shitcoins.” He asserts that several influencers have capitalized on the hype around BRC-20. As always, influencers began promoting tokens that are likely to leave many investors financially damaged because of their “shitcoin” nature. He also notes that Domo, the creator of BRC-20, also issued warnings about the lack of inherent value in these tokens.
Enrico Rubboli: BRC-20 Tokens Just Add Another Layer Of Complexity To Crypto
An additional layer of complexity with BRC-20 tokens is that they require a separate wallet and a unique protocol for transactions. This makes the process more confusing for experienced users, let alone beginners. As a result, users might resort to leaving their tokens with centralized exchanges. This, as a consequence, increases the risk of potential hacking or mismanagement.
The CEO also predicts regulatory challenges posed by BRC-20’s implied association with Bitcoin. This could result in potentially misleading new investors about the security and established nature of these tokens. The capability of BRC-20 to facilitate unregistered securities trading could invite greater regulatory scrutiny, even for Bitcoin. As you may know, regulators are currently targeting altcoins rather than Bitcoin when it comes to regulatory action because of Bitcoin’s decentralized nature.
Despite Domo’s potentially well-intentioned innovation, Rubboli believes that BRC-20 tokens pose more risks than rewards. In his Op/Ed, Rubboli expressed that, from his perspective, they are a distraction from Bitcoin’s stability and growth. So, BRC-20 serves as “fool’s gold” wrapped in a “deceivingly attractive package.”
For those with a conservative approach to risk and a belief in Bitcoin’s potential, BRC-20 should be avoided. The CEO suggests focusing on Bitcoin to avoid unnecessary risk and contribute to its stability and growth. Holding Bitcoin, he contends, aligns with Satoshi Nakamoto’s vision for a more equitable and fair financial future.
“Avoid the fool’s gold that BRC-20 tokens represent, steer clear of the associated risks, and focus on the long-term value of Bitcoin instead.”
Enrico Rubboli, CEO of Mintlayer