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Bitcoin BRC-20 and Ethereum ERC-20 are two separate token standards, though the former is said to be inspired by the latter.

But how do these two token standards compare, and are they really that different? What features do BRC-20 and ERC-20 share, and could one be better?

ERC-20 is the Ethereum blockchain's primary token standard. First put forward in 2015 by Fabian Fogelsteller in the 20th comment of a GitHub post, the standard's name aptly became "Ethereum Request for Comment-20", or, as it is usually known, ERC-20.

The core focus of ERC-20 is to give tokens the ability to use smart contracts, a key attribute of the Ethereum blockchain as a whole. Smart contracts can automatically execute agreements when a set of specific conditions are met, eliminating the need for a middleman or third party.

ERC-20 is an incredibly popular token standard, as it is the standard used by all fungible tokens created on the Ethereum blockchain. To be fungible, each token must have the same value. For instance, each Shiba Inu token must be worth the same amount so that one can be directly exchanged for another.

There is a standard on Ethereum for non-fungible tokens (NFTs), ERC-721, but we won't discuss that in detail today. Instead, check out our piece comparing ERC-20 and ERC-721 to learn more.

Some of the biggest tokens in the crypto world use the ERC-20 standard, including:

At the time of writing, almost half a million different ERC-20 tokens are built on the Ethereum blockchain. In fact, ERC-20 is the most popular standard used by token developers across the entire crypto realm. However, other standards have gained a solid foothold among crypto users, such as the BNB Smart Chain's BEP-20.

On top of enabling smart contracts, ERC-20 enables a range of other features, including transferring tokens, using tokens on other platforms, and finding out the token balance of a given account or wallet.

Because of their popularity, many ERC-20 tokens are now available to trade on big exchanges like Binance, Coinbase, and Kraken. You can even pay for products using certain ERC-20 tokens, such as Shiba Inu. Various vendors now accept Shiba Inu payments, which speaks to the wide adoption of ERC-20 tokens.

Until 2023, only one asset existed on the Bitcoin blockchain: Bitcoin. While many people love Bitcoin, the blockchain's hosting of just one asset is often considered limiting, especially with other blockchains constantly diversifying with new tokens and projects.

Ethereum has always stood as Bitcoin's competition. Though Bitcoin is more valuable than Ethereum, the price is not all that matters. Ethereum supports thousands of tokens on its blockchain and supports smart contracts, DeFi projects, and decentralized exchanges like UniSwap.

Because of Ethereum's greater range of capabilities, it is preferred by many over Bitcoin. But now, Bitcoin might be able to meet Ethereum at its own level with the introduction of the BRC-20 token standard.

The BRC-20 token standard was launched in March 2023. The standard, proposed by an anonymous user known as "Domo," essentially allows developers to create tokens on top of the Bitcoin blockchain. The tokens created through this standard are known as BRC-20 tokens.

BRC-20 uses the Ordinals protocol to function. Ordinals is a Bitcoin protocol that launched in January 2023two months before BRC-20. The Ordinals protocol addresses another limitation experienced by the Bitcoin blockchain: its inability to host NFTs. NFTs (non-fungible tokens) are still crypto-assets but, as the name states, are not fungible. One NFT cannot be directly exchanged with another to make an even trade.

NFTs were unavailable on the Bitcoin blockchain until the launch of Ordinals. Using the Ordinals protocol, data can be inscribed onto a tiny fraction of Bitcoin, known as a satoshi, during a transaction, effectively creating an NFT. Though Ordinals created hype around Bitcoin, the limitation of a single-asset blockchain still existed. But with the BRC-20 token standard (which works via Ordinals), fungible assets can be created and minted on the Bitcoin blockchain.

BRC-20 is still very much in its infancy at the time of writing, but there are already some notable BRC-20 tokens, including:

Most of the above assets currently have a very low value of under a dollar. PEPE, for example, had a value of around half a dollar on May 9th, 2023. Because things are just starting for BRC-20 right now, there's no way of knowing whether they will continue to be in high demand. This is worth keeping in mind if you're considering investing in BRC-20 tokens.

The most important thing to note here is that the BRC-20 standard is based on ERC-20, so there is definitely a correlation between the two.

At the time of writing, ERC-20 tokens are the more versatile choice for crypto traders. This is because ERC-20 is a well-established token standard that has been around for years, whereas BRC-20 has only been in use for a few months at the time of writing. This isn't to say that BRC-20 doesn't have the same potential as ERC-20, but newer products in the crypto industry should always be looked upon with a degree of skepticism, as trends come and go a lot in the market, with some amounting to nothing at all.

ERC-20 tokens are also more widely accepted by different crypto wallets.

If you're a big fan of smart contracts, you also may not like BRC-20. The BRC-20 standard uses Ordinals inscriptions, not smart contracts, to function.

However, BRC-20 has already gained a large following of passionate enthusiasts who are excited to see where things head. As the BRC-20 market grows, more traders are questioning whether this token standard will soon rise through the ranks to meet ERC-20.

Furthermore, as BRC-20 is a new yet widely popular token standard, many criminals are already looking to capitalize on yet another crypto trend. Because of this, there are heaps of scam BRC-20 tokens, and rug-pulls are a common issue.

It's also important to remember that the Bitcoin blockchain frequently suffers from scalability issues and high transaction fees, largely exacerbated by its use of the proof of work consensus mechanism. Ethereum, on the other hand, uses the proof of stake mechanism, which is generally more efficient.

ERC-20 and BRC-20 tokens exist on hugely popular blockchains, which certainly works to their advantage.

While the Ethereum blockchain is already a popular destination for crypto developers, the Bitcoin blockchain may now also gain even more popularity for its support of token creation and minting. Over the coming months and years, Bitcoin could become a top choice for token development through BRC-20. But, for now, ERC-20 tokens remain the superior choice.

Excerpt from:

BRC-20 vs. ERC-20 Tokens: What's the Difference? - MUO - MakeUseOf