What are STAMPS and SRC20 Token Standard on Bitcoin Blockchain?

SRC20 tokens, often called stamps, are unique tokens built on top of the Bitcoin blockchain. They provide an additional layer of functionality to the network, expanding its capabilities beyond just transferring and storing Bitcoin, popularly known as a "store of value." These tokens are created through the STAMPS protocol, a development that has recently gained significant traction. They are not just another type of cryptocurrency, but they represent a new way of leveraging the Bitcoin blockchain's power for various applications.

Understanding Stamps and how they differ from Ordinals and BRC20.

Stamps are a new protocol in the Bitcoin ecosystem that provides a new method for adding data to the Bitcoin blockchain, resulting in the production of SRC-20 tokens. SRC20 tokens offer distinct features compared to ordinals and inscriptions. While both protocols work on similar data embedding techniques in Bitcoin transactions, they employ fundamentally different methods. The difference between these BRC20 and SRC210 is small but technically distinguishing.

In the BRC-20 protocol, all transactions are stored in witness data. In contrast, SRC-20 stores the data in spendable data transactions. 

Mike In Space, the creator of the SRC-20 token standard, claims that STAMPS ensures permanence compared to other protocols. SRC20 tokens reside on the UTXO (unspent transaction output) set, making their pruning (removing) impossible.

In contrast, if core developers or nodes choose to discard outdated witness data to free up some space on the blockchain, this could theoretically remove all the BRC20 tokens and ordinals from the Bitcoin blockchain. As a result, Bitcoin STAMPS become more permanent, making them an appealing choice for anyone looking for long-term, secure storage for collectibles and other priceless assets. This difference necessitates additional resources and incurs higher costs for SRC20 transactions.

SRC20 vs BRC20 Tokens

When examining SRC20 tokens, comparing them with their BRC20 counterparts is essential. While BRC20 tokens have gained significant popularity, SRC20 tokens present unique advantages and challenges. Deployed using inscriptions or JSON files, SRC20 tokens are still relatively experimental but offer a fresh perspective in the rapidly evolving crypto landscape. They provide a different approach to token creation and management on the blockchain, which could lead to innovative applications and use cases.

While both inscriptions and stamps serve their purposes, BRC20 tokens currently have advantages over their counterpart SRC20 tokens. The main differences between these two token protocols are as follows —

1. Pruning

SRC-20 data cannot be pruned/removed due to its storage in spendable data transactions.

Core developers can remove BRC-20 data to free up some space on the blockchain.

2. Transaction Fee 

SRC-20 transactions tend to be more expensive due to their larger data size.

BRC-20 transactions are typically more cost-effective as they are stored in witness data, enabling them to take advantage of the "SegWit Discount."

3. Tool Availability 

BRC-20 is supported by numerous wallets, APIs, and other resources, making it easier to interact with.

Currently, SRC-20 has fewer tools available, one of the main reasons limiting its potential. But that could change soon. Also, Hiro Wallet is expected to support SRC-20 soon.

Challenges and Future Trends of SRC20 Tokens

Originally, SRC-20 was built on another system called Counterparty. This system made it complicated for users to trade SRC-20 tokens due to specific transaction requirements.

After block 796,000 was mined, the SRC-20 token standard finally became free from all restrictions of the Counterparty system. It is now allowed to operate directly on the Bitcoin blockchain.

According to records, over 11,000 stamps were minted in June, bringing the cumulative count of Stamps to 67,911.

Despite their growing popularity and potential, SRC20 tokens also face certain challenges. These include a lack of standardized tooling and infrastructure, making it more difficult for developers to create and interact with these tokens. It was also noticed that some technical issues arose from the increased demand for SRC-20 token mints. Consequently, delays were faced during the minting process, causing some minting services to suspend temporarily.

Closing Thoughts:

Looking ahead, the future of SRC20 tokens appears promising. As the space continues to innovate and evolve, we expect to see more standardized tooling, protocols, and best practices emerge. This will make it easier for developers to create and interact with SRC20 tokens and for users to understand and use them.