Due to the popularity of the BRC-20, there are currently over 400,000 transactions pending confirmation on the Bitcoin (BTC) network, which marks a record high.
As it is known, a large number of tokens, which can be described as meme tokens, are printed in the new BRC-20 network using the Bitcoin network. With some major exchanges starting to list these tokens, a major congestion started in the BTC network. So much so that recently, Binance temporarily stopped Bitcoin withdrawals due to network congestion.
Extra Data Used by BRC-20 Tokens Leads to Congestion of Bitcoin Network
However, Bitcoin developers are not happy with the situation, they think that these BRC-20 transactions are causing the BTC network to be congested and causing transaction fees to rise to a very high level.
BRC-20 tokens use a protocol called Ordinals that allows users to write data to the Bitcoin network using JSON, a format for data storage and exchange.
Ordinals use JSON functionality to store information about token contracts, such as the name, symbol, supply, and owner of the tokens.
Simply put, BRC-20 tokens are actually nothing but Satoshis, the smallest unit of Bitcoin. Extra data is associated only to these Satoshis using the Ordinals protocol.
This extra data shows what kind of token the token is and how many tokens are in one satoshi. For example, if you have a BRC-20 token named ABC with a supply of 100 million and a rate of 1000 coins per satoshi, one satoshi of ABC is equal to 1000 ABC tokens. The data also informs who owns the tokens and how they will be transferred to other users.
BRC-20 tokens use more data and space on the Bitcoin network compared to normal BTC transactions because they have to store extra information about the tokens. This means they are increasing the demand for block space and raising transaction fees for anyone who wants to use the network.
*Not investment advice.