What is the BRC-20 Standard and Who is Pepe? 🐸🐸🐸
Dear Investors,
Following recent "network congestion issues," Binance has temporarily halted all Bitcoin withdrawals. This disruption has left many curious about the underlying cause of the congestion on the Bitcoin network.
The increase in activity among Bitcoin users has resulted in a surge in transaction fees, which reached over $7 recently, the highest since June 2021.
What is the BRC-20 standard?
BRC-20 tokens are a new type of asset on the Bitcoin network that allow users to mint and trade tokens by inscribing data onto satoshis. While inspired by Ethereum's ERC-20 token standard, BRC-20 tokens do not rely on smart contracts and have fewer features.
These tokens use ordinal inscriptions to attach data to individual satoshis (there is 100M satoshi’s in each Bitcoin), enabling a variety of use cases ranging from digital art ownership to meme tokens. However, creating and transferring BRC-20 tokens requires more data than a regular Bitcoin transaction, leading to more competition for block space and higher fees.
Despite their popularity, some critics argue that BRC-20 tokens and ordinals (NFTs on Bitcoin) go against the original vision of Bitcoin as a simple and efficient peer-to-peer electronic cash system.
The market capitalization of BRC-20 tokens has exploded in the past month, reaching $120 million with a 600% rise in the past week. This surge has been accompanied by a sharp increase in transaction volume, which has even surpassed that of standard BTC transactions on the network. Notably, most BRC-20 tokens are meme-coins such as PEPE and Memetic (MEME).
The number of BRC-20 transactions on the Bitcoin blockchain between April 29 and May 2 reached over 50%, outperforming regular BTC transactions.
Who is Pepe? 🐸
Pepecoin (PEPE), a meme coin that was introduced just weeks ago, has experienced a bewilderingly fast rise in value, now worth over $1 billion. Despite warnings that it is a fad that will end badly, this surge is making some investors enormous fortunes.
The PEPE token is based on the "pepe the frog" meme, a popular symbol in crypto circles.
One such investor is the pseudonymous trader known as dimethyltryptamine.eth, who purchased trillions of PEPE tokens on UniSwap for $263 just three weeks ago. The trader has already sold several million dollars' worth of tokens and still holds about $9 million worth of PEPE. This represents an almost 5,000,000% profit on their initial investment.
Will BRC-20 replace the ERC-20 standard?
The short answer is no.
While the BRC-20 standard shares similarities with the popular ERC-20 standard, it lacks the ability to interact with smart contracts, which is a fundamental feature of ERC-20. ERC-20 is the technical standard for fungible tokens created on the Ethereum blockchain, which is widely known for its robust smart contract capabilities.
The BRC-20 token standard, created by an anonymous on-chain analyst called Domo, was developed to enable the issuance and transfer of fungible tokens on the Bitcoin blockchain by exploiting a loophole in Bitcoin's 2021 Taproot upgrade.
Most of the active BRC-20 tokens are meme-coins. As of writing, the three most popular coins minted using the BRC-20 standard were ORDI, OG, and PEPE.
A unique feature of BRC-20 tokens is that they are traded directly on the Bitcoin blockchain, without the need for exchanges like Binance or Coinbase. Users can create, buy, and sell these tokens using a Bitcoin wallet and sats as a unit of account. Essentially, Bitcoin now serves as gas for BRC-20 tokens.
This Week By the Numbers 📈
Turning our attention to macroeconomics, the Federal Reserve has once again raised rates, this time by 25 basis points. This has brought the overnight rate to its highest level in 16 years, with the central bank aiming to bring down the inflation rate to 2%. The new overnight rate range is now 5-5.25%.
Despite concerns about the banking system, Federal Reserve Chair Jerome Powell has assured the American public that it remains sound. However, regional stocks have continued to suffer, with PacWest and Western Alliance among the hardest hit.
According to a report by the Federal Reserve, 722 regional banks have reported unrealized losses exceeding 50% due to the increase in interest rates.
Top Stories 🗞️
US Treasury announces first buyback scheme in decades to boost liquidity
The Treasury Department on Wednesday said it would repurchase US government debt next year for the first time in decades, in an effort to boost liquidity in the $23tn government bond market. The programme would allow the Treasury to buy back older bonds, which are typically harder to trade, from primary dealers — banks that act as market makers for the Federal Reserve — and help improve functioning in some corners of the market. The buybacks are expected to help with cash management, allowing the department to issue more consistent levels of shorter-dated debt. This would be the Treasury’s first buyback programme since the early 2000s, and comes after liquidity — the ability to easily buy and sell an asset at prevailing market prices — deteriorated late last year to its worst levels since March 2020. The programme is not expected to interfere with the Fed’s efforts to shrink its balance sheet as the Treasury’s bond repurchases would be comparatively small and ultimately offset by issuance over time.
Coinbase launches international crypto derivatives exchange
Coinbase Global Inc launched an international exchange for cryptocurrency derivatives on Tuesday, as the company looks to expand its global footprint amid escalating tensions between the crypto sector and regulators in the United States. The exchange will let institutional users in eligible jurisdictions outside the U.S. to trade in perpetual futures, Coinbase said. The digital assets industry is recovering from several blow-ups last year, including the bankruptcy of Sam Bankman-Fried's crypto exchange FTX. Last month, Coinbase Chief Executive Brian Armstrong had warned that crypto firms would develop in "offshore havens", unless the U.S. and Britain make their rules for the industry much clearer. Coinbase, engaged in a tussle with the U.S. Securities and Exchange Commission, said on Tuesday that countries around the world were developing themselves as crypto hubs due to a responsible regulatory framework.
Bernie Sanders says income over $1bn should be taxed at 100%
The US government should confiscate 100% of any money that Americans make above $999m, the leftwing independent senator Bernie Sanders said late last week, in an interview with HBO’s Wallace. Wallace had earlier mentioned how the late Sam Walton could make the giant retail chain Walmart the largest single private employer in the US thanks to his family’s net worth of about $225bn. Sanders countered that Walmart in many cases pays starvation wages to its 1.2 million employees despite how rich the Waltons are. “Many of their workers are on Medicaid or food stamps,” Sanders said, referring to forms of government assistance for which low-income Americans can qualify. “In other words, taxpayers are subsidizing the wealthiest family in the country. Do I think that’s right? No, I don’t.” “It is an attack upon a system,” Sanders said. “You can have a vibrant economy without [a few] people owning more wealth than the bottom half of American society” combined.
SEC probing First Republic Bank executives for insider trading
The U.S. Securities and Exchange Commission is investigating the conduct of First Republic Bank executives before the government seizure and sale to JPMorgan Chase & Co (JPM.N), Bloomberg News reported on Friday. The SEC is looking into whether any members of the then-executive team of First Republic improperly traded on inside information, according to the report. The development comes a day after U.S. Senator Elizabeth Warren accused First Republic executives of "mismanagement" in a letter to its former CEO Micahel Roffler and raised questions on the failed lender's risk management as well as pay and bonuses. Regulators seized troubled First Republic Bank and JPMorgan agreed to buy majority of its assets earlier this week, marking the largest U.S. bank failure since the 2008 financial crisis.
Digital Bank Revolut Now Offering Crypto Investments in Brazil
Digital bank Revolut, which already offers crypto investments across Europe, is now open for business in Brazil. Revolut is making its first foray into Latin America, attempting to tap into Brazil's growing demand for crypto assets, the bank said in an emailed announcement on Tuesday. Crypto users in Brazil number some 10 million, according to Revolut's announcement. Revolut has around 29 million customers worldwide and is looking to carve out a share in Latin America's most populous country, where digital bank Nubank is entrenched as the market leader with around 70 million customers.
Thank you for reading this week’s edition of the Myth of Money.🚀
Until next week,
Tatiana Koffman
About the Author: Tatiana Koffman
Hi there and thanks for reading! If you stumble upon my newsletter, you will notice that I write about money, economics, and technology. I hold a JD/MBA and spent my career in Capital Markets working across Mergers & Acquisitions, Derivatives, Venture Capital, and Cryptocurrencies. I write to make financial topics more accessible and create equal opportunity for the next generation of investors. I have personally invested in 20+ companies and funds (👉 my portfolio).