What are Bitcoin Stamps and SRC-20 Tokens?

Every few years, a new innovation emerges on crypto that leads to a wave of advancements in the industry. One fairly recent catalyst was the Ordinals protocol on Bitcoin, launched by Casey Rodarmor in early 2023. With Ordinals, new ideas and implementations on Bitcoin exploded. 

Among this wave of new protocols was the Bitcoin Stamps protocol and the SRC-20 token standard associated with it. But what are Bitcoin Stamps, and how do they relate to SRC-20 tokens?

The History of SRC-20 Tokens

Robert Dermody, Adam Krellenstein, and Evan Wagner developed the Counterparty protocol in 2014. This protocol paved the way for Bitcoin Stamps and played a major role in the history of the Bitcoin network. Like Ordinals, it helped bring a new chapter for tokenized assets on the Bitcoin blockchain.

By pioneering the concept of tokenization on Bitcoin, Counterparty revealed that additional use cases for Bitcoin could exist. The protocol's decentralized exchange (DEX) and token enabled users to create, trade, and authenticate ownership of digital assets within the Bitcoin ecosystem.

As a precursor to Bitcoin Stamps, Counterparty provided the framework for embedding additional data within Bitcoin transactions, a capability that would later be refined by protocols like Stamps. In fact, SRC-20 tokens were initially implemented on the Counterparty protocol. However, as of block 796,000 of the Bitcoin blockchain, SRC-20 tokens are encoded directly onto BTC transactions.

Inspired by the ERC-20 and BRC-20 token standards, SRC-20 tokens use the Stamps protocol to introduce a new approach to tokens on Bitcoin. Instead of adding information to the witness data of a Bitcoin transaction like BRC-20, SRC-20 uses the unspent transaction outputs (UTXOs) model. 

Placing token information in the UXTO was an idea seeded by Counterparty a decade ago. The successful implementation of Ordinals reinvigorated enthusiasm for new tokens on Bitcoin — and Bitcoin Stamps is a result of innovations like these.

What is SRC-20 and How Does It Work?

SRC-20 tokens use the Bitcoin Stamps (Bitcoin Secure Tradeable Art Maintained Securely). Stamps were created by Mike in Space, who was inspired by Ordinals to invent new ways of creating NFTs on Bitcoin. He wanted them to be even more secure and immutable than Ordinals.

The Bitcoin Stamps protocol achieves its immutability by existing in the UXTO of Bitcoin transactions rather than the witness data. This means Stamps data cannot be pruned, unlike BRC-20 tokens, since witness data can be removed from the blockchain.

Essentially, Stamps adds image data into Bitcoin transactions, placing them directly onto the blockchain. These images can be JPG, GIF, PNG, or SVG files and can be a maximum of 24x24 pixels. Bitcoin Stamps are numerical with a unique identifier and they’re created by adding the "stamp:base64" string in a new transaction.

The SRC-20 token standard has also enabled semi-fungible tokens using the same method of inscribing data into the UXTO set. Minting tokens requires encoding a "STAMP:base64" string into the description key of a Bitcoin transaction. 

Bitcoin Stamps data is then decoded for the information added to the Bitcoin transaction. When Stamps moved from using the Counterparty API to adding data directly on-chain, the process became simpler and used less data storage, also reducing transaction fees.

Bitcoin Stamps vs. Bitcoin Ordinals

While Bitcoin Stamps were inspired by Ordinals, they have several key differences. As we’ve mentioned, Stamps data is stored in the UXTO set while Ordinals inscribe information into a transaction’s witness data. 

Both token standards allow peer-to-peer transactions on Bitcoin, but Stamps use multisig and Ordinals are single-sig. Ordinals can be removed from the blockchain and Stamps cannot be pruned. Stamps are limited to certain types of image files while Ordinals can be a variety of different data like audio, video, or text.

How do I Buy SRC-20 Tokens? 

Buying SRC-20 tokens is easy on exchanges that support Stamps and the SRC-20 token standard. Users can access these marketplaces with a Bitcoin wallet that supports Stamps like Leather.

The process of buying SRC-20 tokens is similar to trading other digital assets. Users can browse available tokens, view order books to determine market prices, and place buy orders for the tokens they want. Once the order is filled, SRC-20 tokens are credited to the user's Bitcoin wallet within the exchange platform.

Platforms that support SRC-20 and integrated wallets like Leather are becoming easier to use every day. If you’ve bought other types of crypto tokens or explored the DeFi ecosystem, getting into SRC-20 tokens will not be difficult.

Popular SRC-20 Tokens

Bitcoin Stamps launched in March of 2023 and by January of 2024, the total market cap for SRC-20 tokens was more than $100 million. STAMP and KEVIN, two of the first, most popular tokens made up 60% of that market cap.

KEVIN was the first SRC-20 token minted in May of 2023. STAMPS is also a popular early SRC-20 token. Other topi Bitcoin Stamps include LUFFY, PEPE, HODL, and SATO.

Some still criticize Ordinals, Bitcoin Stamps, and other attempts to add NFTs or fungible tokens on top of Bitcoin. Others view them merely as memecoins that are destined to fade. But many in the Bitcoin community — including Ordinals creator Casey Rodarmor — understand that for all their faults, memecoins are pushing innovation forward on the Bitcoin blockchain.

Protocols like Bitcoin Stamps and Ordinals may require larger data sizes on the blockchain, but they are also still iterating and evolving. With each new idea and optimization, developers and enthusiasts are searching for ways to increase speed, reduce data storage, and maintain security.

Conclusion

SRC-20 tokens and Bitcoin Stamps aim to simplify the method for adding data to the blockchain and creating tokens on Bitcoin. They’ve expanded on ideas that came before and solved problems in a new way.

Bitcoin changed the future of finance by making currency digital, trustless, and permissionless. New technologies building onto Bitcoin like the Counterparty protocol and Ordinals drove new ideas and excitement. In 2024, the future of crypto is brighter than ever with projects like Bitcoin Stamps and other new facets of the Bitcoin DeFi ecosystem.

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