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Seven Risks of BRC-20 Tokens That Cannot Be Ignored.

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The author expressed concerns about BRC-20 tokens and raised corresponding risks.

Original Title: "The Dangers Of BRC-20 Tokens"

Original Author: Che Kohler

Original Translation: Web3 Map

Welcome to the automated summary extracted from a review article on thebitcoinmanual.com by ChatGPT. In this article, the original author expresses a cautious attitude towards BRC-20 tokens. However, please note that this does not represent our viewpoint.

We adopt an open attitude towards BRC-20, neither denying its future potential nor conveying a cautious voice. We encourage readers to think independently and make wise decisions based on understanding various perspectives. Now, please continue reading the article to learn about the author's concerns and related risks regarding BRC-20 tokens.

This article is translated from the TBM website by "Web3 Map". The summary information is extracted by AI. The views expressed in the article are those of the original author and are not intended as financial advice. They are for informational reference and research purposes only.In recent years, the cryptocurrency market has grown significantly, with numerous tokens and projects emerging. In this market, there are many other currencies besides Bitcoin that are dispersed in terms of liquidity. Although many tokens attempt to become the next Bitcoin, most end up failing and only bring wealth to a few.

剖析BRE-20代币的7大风险

1. Be wary of the risks of BRC20 tokens: BRC-20 tokens are not related to Bitcoin assets

Firstly, BRC-20 tokens are not related to Bitcoin assets and are simply JSON script files added to the Bitcoin blockchain through the ordinals protocol. Although BRC-20 tokens exist on the Bitcoin blockchain, they are a secondary market that requires a separate set of software for searching, categorizing, and displaying. BRC-20 tokens attempt to leverage Bitcoin's reputation to attract investors, but they do not possess the same level of security, decentralization, or widespread acceptance as Bitcoin.

2、BRC-20 Token Management is Complex

Compared to the simplicity of using Bitcoin, BRC-20 tokens introduce unnecessary complexity for managing digital assets. These tokens require separate wallets, protocols, and currency controls, as well as additional steps for storage and trading. This complexity can confuse users, increase the risk of human error, and potentially lead to file loss.

3. Encouraging centralized exchange trading of BRC-20 tokens

Due to the complexity of managing BRC-20 tokens, many users are unwilling to spend the effort to manage these tokens and are also unwilling to pay the on-chain fees for P2P transactions. In addition, there is no on-chain automated market maker on Bitcoin, so users can only trade on centralized exchanges (CEX). This provides CEX with more opportunities to manage assets and collect transaction fees. However, CEX is vulnerable to attacks, fraud, and other security issues, which exposes users to these risks when trading BRC-20 tokens.

4、BRC-20 tokens are easy to create

Although BRC-20 tokens are based on Bitcoin, the Bitcoin blockchain cannot enforce rules on them. The cost of creating BRC-20 tokens is only the addition of a file to the blockchain and the movement of UTXOs associated with the tokens in the future. This easy-to-create feature may seem advantageous for the rapid development of new projects and applications, but it also means that the market may soon be flooded with worthless, low-quality tokens. As a result, investors may have difficulty distinguishing which projects are legitimate and which are just hype generated by the BRC-20 standard.

5、BRC-20 tokens confuse beginners

For newcomers in the Bitcoin industry, the multitude of tokens and projects can be overwhelming. The misleading association between BRC-20 tokens and Bitcoin further adds to the confusion for new investors. They may mistakenly believe that they are investing in a secure and stable network like Bitcoin, only to find out that they have invested in unproven and high-risk tokens.

6、BRC-20 tokens attempt to establish unregistered securities market on Bitcoin

BRC-20 tokens may facilitate an unregistered securities market on the Bitcoin blockchain. By issuing tokens that represent shares of a project, company, or other enterprise, BRC-20 tokens can bypass regulatory oversight and enable the sale and trading of unregistered securities. This lack of regulation and oversight increases the risk of fraud and market manipulation, exposing investors to significant risks that could lead to increased scrutiny of Bitcoin.

7, BRC: Bitcoin Rug Scam

Although the idea of creating and trading digital assets on the Bitcoin blockchain may seem attractive, BRC-20 tokens are actually just another scheme to capitalize on the next cycle and transfer capital that should flow into Bitcoin into the pockets of scammers. The risks of BRC-20 tokens far outweigh their claimed benefits; it is simply a new form of fool's digital gold.If you enjoy speculation, you can ignore these warnings and try BRC-20 tokens. But if you want to protect your hard-earned money or resist the depreciation of fiat currency, then they are not the right tools for you.

By avoiding these tokens and focusing on Bitcoin, investors can reduce unnecessary risks and contribute to the growth and stability of the wider Bitcoin ecosystem. Real progress is being made in this field, such as establishing a circular economy and demand response plans to improve energy security. By self-custodying Bitcoin, you can enjoy all the innovations in this field; holding BRC-20 tokens only provides exit liquidity for those who add text files to the blockchain and convince you of their value.So you can decide which side to stand on.