What Is ARC-20 token? A Detailed Overview of the ARC-20 Token Standard

What Is ARC-20 token? A Detailed Overview of the ARC-20 Token Standard

Get the full scoop on how the ARC-20 standard is reshaping crypto possibilities. Or is it?

A new challenger enters the arena to take on dominant token standards BRC-20 and REC-20. Welcome ARC-20 — bringing unique capabilities to reshape the blockchain ecosystem.

Bucklemania has struck the Bitcoin blockchain with shiny new toys like ARC-20 tokens being peddled to wide-eyed investors. But before you empty your digital wallets, let's peek behind the curtain.

ARC-20 is just the latest in a conga line of token standards doing the hustle on Bitcoin. BRC-20 offered basic static tokens, SRC-20 touted "unprunable" tokens, and ORC-20 added staking to static tokens. Now, ARC-20 uses an updated version of Ordinals, filling up blockchain space with yet more promises like bringing NFTs and tokenized assets to Bitcoin.

In the past, token speculation happened on altcoin chains outside of Bitcoin. But this isn't altcoin-land anymore — now the shilling is happening right on the Bitcoin blockchain, making it easier for folks to swap their BTC for these magical beans. Since ARC-20 are making such headlines, we thought it reasonable to examine them closely.

What Is an ARC Token?

Let’s start a little further back. See — Ethereum popularized fungible tokens with its ERC-20 standard and that has spawned major tokens like UNI and SHIB. Many smart contract platforms now offer fungible tokens, like Solana's SLP and BNB's BEP-20. Bitcoin's limited smart contract capabilities made tokens difficult. But developers found creative ways to represent digital assets on Bitcoin's blockchain, like colored coins.

Colored coins map attributes onto bitcoin units to signify fungible or non-fungible tokens. This finally enabled Bitcoin-based tokens by essentially "coloring" specific bitcoins for different purposes.

And here’s where ARC-20 tokens come in. Think of ARC-20 tokens like chocolates in a box. Each chocolate has a unique colored wrapper. This wrapper gives it a special flavor and purpose — dark brown for mint, gold for caramel, etc. Now swap chocolates for satoshis, the tiniest bits of bitcoin. The ARC-20 standard colors each satoshi wrapper to create unique and tradeable tokens on the bitcoin blockchain.

These color-coded satoshis can now represent anything — ownership in a company, certificates for gold, points in a loyalty program.

So in other words, the ARC-20 standard creates colored coins on Bitcoin's blockchain by linking tokens to satoshis. Each token unit has a satoshi backing it forever, establishing inherent value. ARC-20 tokens have digital gold content — their satoshi reserves. This gives them a value floor of 1 satoshi. The tokens utilize Bitcoin's native satoshi units for divisibility and combining. Anyone can issue ARC-20 tokens to any Bitcoin address using UTXO-supporting wallets. Deployment modes include direct issuance or decentralized governance. An integrated ticker symbol service provides unique names for each token.

Atomicals are created through Bitcoin transactions, which can mint either ARC-20 tokens or NFT realms hosting metadata. For example, a realm could contain a profile with your social media and website details, offering an immutable online identity. But is this blockchain bling a brillant innovation or a clunky complication? Some argue that while ARC-20 spruces up Bitcoin, the accessories might not fit right. Fancy coins and profile bling can weigh down its core purpose and performance.

BRC-20 and ARC-20 Differences & Possible Synergy

BRC-20, abbreviation of Bitcoin Request for Comment, is yet another token standard for creating fungible tokens on Bitcoin's network, similar to ERC-20 on Ethereum.

BRC-20 allows developers to generate customized tokens that can be seamlessly traded on the Bitcoin blockchain. The tokens are interoperable with Bitcoin thanks to the Ordinals protocol.

Ordinals inscribes extra metadata onto Bitcoin's satoshis to represent token properties like value, ownership, expiration date, etc. This effectively "colors" the satoshis into fungible tokens.

So, BRC-20 finally opened the door for Ethereum-style tokens on Bitcoin. The idea being that by leveraging Bitcoin's security and longevity, BRC-20 tokens can potentially symbolize real world assets.

The popularity of BRC-20 tokens partly stems from a feature known as "fair mints," which require a Bitcoin transaction to participate in limited token distributions. However, wealthier users still have an advantage in these lotteries, staking multiple claims and paying miners for priority.

To disrupt this, Atomicals introduced GPU Mineable Tokens—minting tokens now requires actual proof of work, not just a transaction fee. Users must perform computational hashing with a CPU or GPU miner and submit the proof as part of the minting transaction.

This proof of work requirement ensures true scarcity and fairness—obtaining a token now requires expending tangible computing resources, not just money. The playing field is leveled by necessitating energy and hardware, making minting accessible to more than just the wealthy.

By tying minting to meaningful computation, Atomicals moves away from "pay-to-mint" lotteries towards a more equitable distribution rooted in proof of work. The tokens become representations of expended effort.

Also, while BRC-20 tokens are fungible, making them useful for decentralized apps, ARC-20 tokens represent tangible asset ownership. Theoretically, merging these two protocols could unlock new opportunities for crafting decentralized financial tools, streamline the transfer of property, and boost the efficacy of blockchain networks as a whole. Whether they'll truly transform the blockchain ecosystem or just add another layer of complexity is a page yet to be turned.

How Does ARC 20 Work?

Unlike typical NFTs which have immutable data, Atomicals introduces updatable NFTs and tokens. These can be modified by linking a series of "revised" transactions together, rather than minting once and leaving it unchanged forever.

It's like having a collaborative Google Doc, but built on Bitcoin's blockchain. Any updates to your Atomical NFT or token are recorded as new transactions that append to the existing data.

This allows creating mutable assets with a recorded history of changes. The protocol tracks the revisions chronologically, enabling dynamic NFTs and tokens while still utilizing Bitcoin's permanence and security.

The key innovation is overcoming blockchain's inherent immutability by socially coordinating on how to interpret this sequence of transactions as a singular, evolving entity. This shared agreement allows the community to see the linked transactions as revisions of the same token, rather than separate transactions.

ARC-20 Use Cases & Viability

ARC-20 tokens aim to standardize the proliferating protocols in the crypto asset space, which currently rely on fragmented approaches. Rather than having apps and wallets manage proprietary standards that require custom integrations, ARC-20 offers an open-source unified standard for indexing and managing tokens.

Adoption remains an open question. Even if technically superior, network effects and existing momentum may hinder ARC-20. And while chaotic, BRC-20's simplicity has an appeal — it achieves its purpose of facilitating speculative mania and pump-and-dump schemes.

ARC-20's more sophisticated feature set may add unnecessary complexity to what is essentially a hype-driven market. Despite purported improvements, ARC-20 lacks a clear and concrete use case. Propositions range from NFTs to digital IDs to file storage, but no specific application stands out.

Without a solid foundation and killer use case, ARC-20 feels precarious, like trying to build a sandcastle on shifting glacial ice. Technical elegance alone is insufficient; crypto assets need tangible utility. Unless ARC-20 can anchor itself to a compelling real-world purpose, adoption will likely remain limited.

Bottom Line

When encountering novel concepts, it's wise to exercise healthy skepticism—if something seems too good to be true, it likely is. Focus on core principles, and consider investing in companies driving real-world impact rather than chasing fleeting trends.

Always make informed decisions through your own diligent research.

Regarding ARC-20 tokens specifically, use this as a starting point but not the sole source. Dedicate time to investigate thoroughly, consulting official documentation and diverse reviews.

For those interested in trading bitcoins or tokens, take a look at Bitsgap. As a premier cryptocurrency aggregator and trading hub, Bitsgap links you to more than 15 different exchanges through a single interface. It boasts a sophisticated smart trading terminal and automation tools tailored to perform regardless of market trends. Sign up today and enjoy a complimentary seven-day trial of the PRO plan. Why not give it a try right away?


What Is an ERC20 Token?

An ERC20 token is a standard for creating and issuing smart contracts on the Ethereum blockchain. ERC stands for Ethereum Request for Comment, and 20 is the proposal identifier. This standard ensures that tokens have certain properties and follow a specific set of rules within the Ethereum ecosystem. ERC20 tokens are widely used for creating fungible tokens, which have properties similar to traditional currencies, shares, or commodities.

Where to Find ERC20 Token List?

You can find a list of ERC20 tokens on various cryptocurrency market data platforms and websites that track blockchain assets. Some of the most popular include:

These platforms maintain comprehensive databases of ERC20 tokens, providing information on their market cap, trading volume, price history, and more.

How to Create ERC20 Token?

Creating an ERC20 token involves several steps, usually requiring programming knowledge, specifically in Solidity (Ethereum's native programming language). Here's a simplified process:

  • Learn Solidity: Understand the basics of Solidity and smart contract development.
  • Write the Smart Contract: Code the smart contract using Solidity, incorporating the ERC20 standard's required functions and events.
  • Test the contract: Before deploying, thoroughly test your contract in a safe environment using Ethereum test networks like Ropsten or Rinkeby.
  • Deploy the contract: After testing, deploy the smart contract to the Ethereum network. This will require some ETH to cover the gas costs of deployment.
  • Verify and publish: Verify your contract on Etherscan so that others can interact with it and confirm its legitimacy.

For a non-technical person, there are also platforms that offer token creation services where you can create an ERC20 token without coding, but it's essential to be cautious when using these services to ensure the security and integrity of your token.

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