Key Points:
On May 7, Alexei Zamyatin, inventor of the Interlay cross-chain interoperability project, suggested the creation of the BRC-21 standard, which would establish completely decentralized cross-chain assets on the Bitcoin network and utilize them in the Lightning Network.
The proposal specifies the protocol for minting and redeeming BRC-20 tokens to and from Bitcoin that were issued on other “source” chains like Ethereum, Cosmos, Polkadot, or Interlay. So, BRC-21 is a token standard that allows tokens from other chains to be produced and redeemed on the Bitcoin Blockchain.
According to Zamyatin, the proposed standard would enable the deployment of decentralized stablecoins into the Lightning Network or any other comparable payment protocols, which is the primary use case. BRC-21 assets, on the other hand, may be used to represent ETH, DOT, SOL, and other cryptocurrencies on Bitcoin.
The proposed method does not require trust in any 3rd party.
Interlay Labs has also released document V 0.1 on the BRC-21 Token Standard. According to the document’s description, BRC-21 content is still essentially BRC-20 content, but unlike BRC-20 content that is “born out of the air,” BRC-21 needs to be generated by the initial asset key (such as ETH, DOT, ATOM, and DAI, etc.), in other words, the BRC-21 standard provides the ability to mint the BRC-20 version of ETH, DAI, and other online assets on Bitcoin network.
Although it is feasible to utilize BRC-21 assets to represent ETH, DOT, SOL, and other cryptocurrencies on Bitcoin, the key use case that will arise from this standard is the deployment of decentralized stablecoins on Lightning Network or comparable payment protocols.
To keep their peg, decentralized stablecoins like MakerDAO, Liquity, or RAI need complex minting, redemption, and liquidation processes. Due to a lack of programmability, these protocols cannot be installed directly on Bitcoin. Instead of spending effort designing protocols for Bitcoin that can be represented by a few lines of code elsewhere, the proposal claims that this totally decentralized approach of minting and redeeming cross-chain assets to/from Bitcoin has a far better chance of attaining universal acceptance.
From a technical point of view, the cross-chain of BRC-21 assets only needs to rely on three components to complete, and the whole process is expected to achieve complete decentralization:
See, for example, here for specifications, here for a proof-of-concept implementation on Ethereum, and here for an audited production implementation in Rust on Interlay.
While Interlay Labs did not illustrate the deployment of the BRC-21 asset on the beginning chain in the paper, it is worth mentioning how it is deployed on the Bitcoin network.
In general, the implementation of BRC-21 and BRC-20 tokens is similar, however, there are some variances in specifics, such as:
{
"p": "brc-21",
"op": "deploy",
"tick": "30sResearcg",
"max": "10000000" (optional),
“src”: “CHAIN”,
“id”: “contract-address-on-CHAIN”
}
The DEPLOY procedure is dependent on the SOURCE chain’s implementation. The smart contract CONTRACT criteria are as follows:
This presupposes that a BTC-RELAY contract has been implemented on the chain or that the chain has Bitcoin Lite client capability built in.
Locks X COIN tokens on CHAIN and mints X bCOIN BRC-21 tokens on Bitcoin
The “mint” operation on Bitcoin is defined as follows (inscription):
{
"p": "brc-21",
"op": "mint",
"tick": "bCOIN",
"amt": "100",
"src": "CHAIN"
}
TRANSFER operation remains the same as specified in the BRC-20 . standard:
{
"p": "brc-21",
"op": "transfer",
"tick": "30sResearch",
"amt": "100",
}
X bCOIN tokens are burned on Bitcoin, and X COIN is unlocked on CHAIN.
The operation “redeem” is defined as follows:
{
"p": "brc-21",
"op": "redeem",
"tick": "bCOIN",
"amt": "1000",
“dest”: “CHAIN”,
“acc”: “account-on-CHAIN”
}
The dest field specifies the destination CHAIN and MUST be the same as the src field in the mint operation. The acc field specifies the recipient account of COIN on CHAIN.
DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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Harold
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