A new frenzy is sweeping cryptoland – so-called “BRC-20s” are fungible tokens deployed on the Bitcoin blockchain, and some are beginning to see major market activity. The proposed new standard was introduced in March by a coder known online as Domo, and it has a lot of interesting potential.

Tokens on Bitcoin aren’t a radically new idea – in fact, one of the earliest big experiments in crypto, “colored coins,” was an attempt to do something very similar. But BRC-20s, like Ordinal non-fungible tokens (NFTs), were enabled by new features introduced in Bitcoin’s recent Taproot upgrade.

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That’s the main point of the BRC-20 experiment – to see exactly what the new tech can do. When I reached out, Domo generously recommended a few resources for techies who want to dig deeper on BRC-20s. This basic intro for builders explains how to deploy BRC-20s and discusses some of the broader questions yet to be resolved. This is a more in-depth technical rundown by Domo. And this is a video introduction by YouTuber pazNGMI, which includes info on minting and wallets.

But Domo, and most other experts, have issued strong warnings against financial speculation in the new token format. In fact, just after the experimental standard was launched, Domo declared that “These will be worthless. Please do not waste money mass minting.”

With a flood of new BRC-20 memecoins being traded for real money, at least some people are clearly ignoring that warning. And it’s hard to blame them: in crypto, getting in first on anything new tends to be a decent strategy for speculators.

So why would the first assets created with this exciting new technology be “worthless?” There are two prongs to the explanation.

On the one hand, the BRC-20 standard is just a proposal at this point, and there’s no guarantee it will be widely integrated into blockchain tools like wallets and exchanges. Average users will probably have a hard time accessing BRC-20s for the foreseeable future. Wallets have to have special features to read ordinals, and even more special features to read the new BRC-20s. Same goes for exchanges – as Domo warned in March, “It is unlikely that balances will be safely tradable using existing marketplace infrastructure.” Some exchanges are certainly gearing up to integrate BRC-20s, but the markets won’t be fully liquid for some time, even if BRC-20s become a widely-accepted standard.

But even that standardization could be a long way off: the design of BRC-20 isn’t necessarily finalized, much less fully vetted or adopted. In theory, there might be other ways to deploy tokens on Bitcoin, or further improvements to BRC-20 in its current form. If a competing or improved standard winds up being more widely adopted, the current wave of BRC-20s could become little more than digital museum pieces.

But second, and more fundamentally, it remains unclear just where the economic value of tokens issued on Bitcoin might come from.

Above all, this is a question because BRC-20s aren’t broadly compatible with smart contract or decentralized finance (DeFi) systems. Despite borrowing their nomenclature from Ethereum’s ERC-20s, they’re not technically parallel, and regardless, Bitcoin itself doesn’t have DeFi features. So if and when workarounds emerge, getting BRC-20s onto DeFi will likely involve bridges or other higher-risk structures.

For now, this means BRC-20s can’t serve as the backbone of decentralized autonomous organizations (DAOs) or other more complex systems that would give them utility and value. There are certainly possible use cases for simple tokens on Bitcoin, but their structure may wind up being radically different from tokens on Ethereum – a topic for a deep dive at another time.

There’s a much more immediate downside to BRC-20s current limitations, even for degens happy to play the decentralized Ponzi game of memecoins. The lack of DeFi compatibility means that BRC-20s can’t benefit from liquidity provided by DeFi services like trading pools. So even pure speculation in the tokens may not have the frothy upside of a similar token issued on Ethereum.

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In fact, we’re seeing that play out right now. A BRC-20 known as “Pepe” is among those now being traded by a few daring basement-dwellers. BRC Pepe and all the other BRC-20s that currently exist had a combined fully diluted value (FDV) of $137 million as of May 2.

But there’s also a “Pepe” memecoin on Ethereum, which was launched in April. Its FDV now sits at $1.2 billion.

In short, BRC-20s are a fascinating innovation with seriously interesting potential. But if you’re looking for the lowbrow thrill of riding ephemeral pumps in animal-based casino tokens, it seems Ethereum should still be your home base.