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As Bitcoin continues to evolve, a range of new Bitcoin-native digital assets have emerged. Both fungible and non-fungible tokens (NFTs) can now be found on Bitcoin with each featuring unique properties, characteristics, and use cases.
Read on as we delve into the differences between fungible and non-fungible Bitcoin assets.
What Are Bitcoin-Native Assets?
Bitcoin-native assets are digital tokens operating on the Bitcoin blockchain, similar to tokens on other blockchains, such as Ethereum or Solana.
Investors can mint, transfer, and trade on-chain assets on the Bitcoin blockchain since these assets match the blockchain’s protocol standards. These tokens can also be invested in and managed by crypto asset management companies on behalf of their clients.
What Are Fungible Bitcoin Assets?
Fungible Bitcoin assets are duplicatable, interchangeable, and of equal worth.
Examples of fungible tokens built on Bitcoin include those whose issuance or creation is made possible by the Ordinals protocol, such as BRC-20 and CRBC-20 tokens. The Ordinals protocol enables individual satoshis to be inscribed with data, enabling developers to create digital tokens on Bitcoin.
Examples of Fungible Tokens on Bitcoin
The two leading fungible token standards on Bitcoin include BRC-20 and Runes.
BRC-20 Tokens
BRC-20 tokens launched in March 2023. Domo, the creator, was inspired by Ethereum’s ERC-20 token standard. The Ordinals standard allows developers to inscribe JSON code within a sat to generate fungible tokens on the Bitcoin network; these fungible tokens are known as BRC-20 tokens.
Bitcoin Runes
Runes are fungible tokens powered by the Runes Protocol. Bitcoin runes were created on the Bitcoin blockchain to substitute BRC-20 tokens. Rather than operating on off-chain data or a native token, runes rely on a UTXO-based model that assigns a specific amount of runes. The Runes Protocol then uses UTXOs (unspent transaction outputs) to keep track of the Runes token balance.
What Are Non-Fungible Bitcoin Assets?
Non-fungible tokens on Bitcoin are sats inscribed with unique digital content. The Ordinals protocol makes this possible, enabling Bitcoin users to inscribe content on individual satoshis to generate a new type of on-chain NFT.
In other words, non-fungible Bitcoin assets refer to digital tokens that represent ownership and proof of authenticity of unique digital assets and physical items.
Examples of Non-Fungible Tokens on Bitcoin
Non-fungible tokens on Bitcoin come in the form of ordinal inscriptions.
Bitcoin Ordinal Inscriptions
Ordinal inscriptions are individual satoshis bearing digital content in the form of text, images, video, and more. The data is recorded on-chain with Bitcoin users inscribing customized digital assets directly on satoshis, the smallest units of bitcoin.
Bitcoin ordinal inscriptions present an innovative way of storing data on Bitcoin with the inscribed sats acting as distinct transactions that users can track and identify. Bitcoin ordinals are also known as Bitcoin NFTs or digital artifacts.
The Takeaway
Both fungible and non-fungible tokens have their place in the Bitcoin ecosystem, providing opportunities for new use cases built on Bitcoin.
While the token economy on Bitcoin is still in its nascency, it has the potential to attract more users to the Bitcoin network, contributing to global adoption.
