Something interesting happened on Bitcoin last year—tokens showed up without smart contracts. It felt almost naughty at first. People started minting fungible tokens using a lightweight inscription pattern on Ordinals, and suddenly there were new ways to issue and trade assets that live on Bitcoin’s base layer. I’m going to walk through what BRC-20 is, why it matters (and why it sometimes doesn’t), and how wallets fit into the picture—practical stuff, not hype.
Quick orientation: BRC-20 is an experiment. It’s not a formal Bitcoin upgrade. It piggybacks on Ordinals—the ordinal inscriptions system that maps data to satoshis—so tokens are effectively represented by inscribed metadata rather than by on-chain smart contracts. That design choice has trade-offs. It’s elegant in its simplicity, but it’s also limited by Bitcoin’s transaction model and fee dynamics.
What BRC-20 actually is (and isn’t)
BRC-20 is a convention. It uses JSON files inscribed via Ordinals to define minting and transfers. There’s no virtual machine, no contract code running on-chain, and no built-in enforcement of token rules beyond the inscription history itself. In practice, token state is reconstructed by indexers and tooling that read the inscriptions and interpret the intended mint/transfer semantics.
On one hand, that makes BRC-20 simple: you can create a token by inscribing the right JSON. On the other hand, it means there’s room for ambiguity and for off-chain dependencies: wallets and explorers must agree on how to interpret inscriptions to present balances and histories to users. That’s both a feature—because the protocol stays minimal—and a limitation—because user experience depends on third-party software.
How Ordinals enable BRC-20
Ordinals assign a serial number to each satoshi and allow arbitrary data to be inscribed on that satoshi. Ordinal inscriptions are stored in witness data, which became more flexible after Taproot and SegWit. BRC-20 takes advantage of that by using inscriptions as immutable records: you inscribe a JSON that says “mint” or “transfer” and indexers read those inscriptions to compute token balances. No contract execution is required.
That immutability is powerful: once inscribed, the record is permanent. But permanent also means permanent bloat: inscriptions increase data stored on Bitcoin nodes. That leads to real tensions about block space usage, and it’ll shape how communities and wallets treat inscriptions going forward.
Key limitations and risks
First: no smart contract guarantees. If a token’s rules are only interpreted by an indexer, clever or malicious actors can game things or create conflicting records. Consensus about token state comes from the tooling ecosystem, not from on-chain enforcement like Ethereum smart contracts.
Second: fees and congestion. Minting many inscriptions costs satoshis-per-byte in transaction fees, and big mints can push up mempool fees. That’s not hypothetical—large BRC-20 activity has caused noticeable fee spikes in the past.
Third: UX and custody complexity. Since balances are reconstructed from inscriptions, moving a token often means managing specific UTXOs with inscriptions. That’s different from account-based tokens and can confuse users. Wallets need to expose advanced UTXO management features; otherwise users may accidentally spend a token-carrying satoshi without realizing it.
Fourth: permanence and privacy. Inscriptions are forever and public; any data you write is immortal on-chain. Don’t inscribe private keys, secrets, or anything you wouldn’t want forever visible.
Wallets and tooling: what to look for
Not all Bitcoin wallets support Ordinals or BRC-20. You need a wallet that recognizes inscriptions, tracks the related UTXOs, and can construct the specific transactions used for transfers or mints. Some wallets focus on NFT-style ordinals (images, text), while others add BRC-20 support for token minting and transfers.
If you’re getting started, pick a wallet with a good track record for inscription handling, clear UI for UTXO selection, and transparent fee estimation. One practical option I use and often recommend for inscription and BRC-20 interactions is the unisat wallet, which integrates ordinals tooling and makes inscription-based workflows accessible in a browser extension. It’s not the only choice, but it’s familiar to many users in the Ordinals ecosystem.
How a typical BRC-20 flow works (high level)
Here’s the gist: you create a JSON “deploy” inscription that defines a token name, supply, and minting logic. Then you issue one or more “mint” inscriptions that create token units under that convention. Transfers are represented by additional inscriptions that indicate movement of token allocations between addresses.
Indexers and wallets read these inscriptions in chronological order to build a history and compute balances. Because the state is reconstructed externally, you’ll sometimes see slight differences between wallets until they’ve both indexed the same set of inscriptions.
Practical tips before you mint or trade
– Start small. Test with tiny amounts first, so you learn the UTXO and fee behavior without risking much.
– Watch fees. Use fee estimation that’s aware of witness size—inscriptions occupy witness data differently than normal transfers.
– Backup seeds and UTXO info. A mnemonic alone isn’t always enough: understanding which UTXOs hold inscriptions matters for recovery scenarios.
– Read the token’s inspectable JSON. Because tokens are defined in inscriptions, you can inspect them and decide if you trust the convention and the supply math.
– Avoid embedding personal data. It’s permanent and public.
When BRC-20 is useful (and when it’s not)
BRC-20 shines for experiments, collectibles, and simple token-like constructs that benefit from Bitcoin’s security model and immutability. It’s attractive to folks who want to keep things as close to Bitcoin as possible without moving to a separate L2 or a different chain.
But it’s not a replacement for smart-contract platforms. If you need programmability, composability, complex escrow logic, or gas-efficient batch operations, Ethereum or dedicated smart-contract-capable chains remain better suited.
Community and governance aspects
The BRC-20 scene is community-driven. Standards emerge by convention, and ecosystem tooling decides which conventions gain traction. That’s organic, but it means you should follow people and projects with transparency and track records. Token scams, spoofed projects, and ambiguous supply claims have already shown up—vigilance is needed.
Frequently asked questions
How do Ordinals differ from typical Bitcoin transactions?
Ordinals allow arbitrary data to be inscribed on individual satoshis, stored in witness data. Typical Bitcoin transactions move value between addresses; Ordinals add persistent metadata tied to satoshis. That metadata can represent images, text, or token instructions (like BRC-20). The core difference is data permanence and the need for indexers to interpret inscriptions.
Can BRC-20 tokens be stolen like ERC-20 tokens?
Yes—if an attacker gains access to a wallet’s private keys they can spend UTXOs carrying inscriptions and thus control the tokens represented by those inscriptions. Additionally, careless UTXO management can lead to accidental loss (e.g., consolidating UTXOs that carry inscriptions without understanding the token mapping). Standard wallet security practices apply.
Should I use BRC-20 for launching a new token?
It depends. If you value Bitcoin-native permanence and want to reach an audience already engaged with Ordinals, BRC-20 might fit. But be honest about limitations: higher costs per unit, dependence on indexers for state, and less programmability. For complex tokenomics or on-chain logic, consider platforms built for smart contracts.
Here’s the bottom line: BRC-20 and Ordinals opened a door to creative uses of Bitcoin’s base layer. They’re not a panacea, and they introduce trade-offs around fees, UX, and tooling reliance. If you’re curious—play in the sandbox, use wallets that make inscriptions explicit (like the unisat wallet I mentioned), and treat any minting or trading as experimental until practices and standards mature. Bitcoin does one thing very well—secure, decentralized settlement—and these experiments are testing how much extra we can build on top without losing that core virtue.
