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  • These Bitcoin Stamps are capable of forming tokenized investment funds and Exchange Traded Funds (ETFs).
  • These SRC-20 tokens can represent ownership rights to commodities like gold, oil, and more.

What are SRC-20 Tokens?

The SRC-20 tokens are the tokens that form the basis for Bitcoin stamps, which is a protocol for a safe and tradeable art maintained securely. These tokens have garnered significant attention in recent times.

The job of these tokens is to implant data into Bitcoin transactions, which is the same as what BRC-20 tokens do. The only difference between them is their approach toward embedding the data into Bitcoin transactions.

These SRC-20 tokens are often referred to as Bitcoin’s NFT. These stamps employ the concepts inspired by Counterparty, a P2P platform based on Bitcoin. The origins of this platform date back to the time of colored coins, a technique that was used to differentiate a certain set of cryptocurrencies from others.

Similar to ERC-20 tokens on Ethereum, SRC-20 enables users to mint tokens on Bitcoin. With the introduction of ordinals and SRC-20 tokens, the utility of the Bitcoin Blockchain has widened to a significant extent, allowing it to perform more functions than just being a store of value platform.

However, there are individuals who believe that this new innovation is adversely affecting the vision that Satoshi Nakamoto laid out for Bitcoin. Interestingly, the token rhymes with ERC-20 and BRC-20 tokens.

Understanding SRC-20-Based Stamps

Stamps were created by a Twitter user called Mike in Space. They are used for directly storing the data, such as text and images, by using the Unspent Transaction Output (UTXO). This guarantees blockchain storage that is impossible to prune. UTXOs can be termed individual units of crypto that are held and created in view of previous transactions on that blockchain.

On the other hand, the metadata on BRC-20 tokens and Ordinals can be obstructed. The Bitcoin community resisted the BRC-20 system, due to which the developers had to turn to ORC-20 and SRC-20 tokens.   

SRC-20 Token vs BRC-20 Token

  • Since the data is still there in the UTXO set for SRC-20 tokens, it is extremely challenging to eliminate or reduce the quantity of data. This unique sort of token is significantly more costly than conventional BRC-20 tokens and calls for several signatures.

The SRC-20 token can be destroyed if the UTXO set tied to it is spent.

  • On the other hand, in contrast to SRC-20 tokens, by removing witness data, nodes can prune the data on BRC-20 tokens. It is a single-signature token. This token allows SegWit discounts, due to which the transactions are relatively cheaper. 

Upon the destruction of the token, the witness data becomes immutable.

Use Cases and Applications of SRC-20 Token

  • Real-world assets like stocks, bonds, real estate, etc. may be converted into digital assets using SRC-20 tokens, enabling widespread market participation, divisibility, liquidity, and more.
  • These tokens are also applicable to the gaming sector. In-game items, virtual money, and other virtual assets may all be represented by SRC-20 tokens. Players may also sell and buy their in-game items on the secondary market to monetize them.
  • The SRC-20 tokens can facilitate P2P lending by tokenizing debt instruments. Borrowers can tokenize their loan requirements, and investors can choose to invest in the token of their choice.  
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