The Bitcoin Runes protocol, developed by Casey Rodarmor and launched on April 20, 2024, enables the creation and transfer of fungible tokens on the Bitcoin blockchain. Although Bitcoin has limited scripting capabilities compared to dedicated smart contract blockchains like Ethereum, developers have managed to introduce features previously considered unfeasible into Bitcoin.

Bitcoin Runes is not the first protocol to allow the creation of fungible tokens in Bitcoin, but Rodarmor sought a more efficient way to do so. The Runes protocol minimizes the load on the Bitcoin blockchain by reducing the amount of data required for transactions.

The Bitcoin Runes protocol uses a fundamentally different design that is based on Bitcoin's UTXO architecture and the OP_RETURN opcode. Each UTXO can contain varying amounts or types of Runes, streamlining token management. The OP_RETURN opcode allows additional information to be attached to the Bitcoin transaction.

The creation of a Bitcoin Rune is known as "engraving." Once a Rune is recorded, its properties remain immutable on the Bitcoin blockchain. The difference between engraving and minting is that engraving is the act of creating a rune and defining its properties, while minting is obtaining the rune based on the parameters specified in the rune.

Runes are created, minted, and transferred via “runestones,” which are Bitcoin Runes protocol messages embedded in a Bitcoin transaction output.

Despite the negative market situation, innovation in the Bitcoin blockchain, such as the Bitcoin Runes protocol, shows a promising future for BTC. Although Runes are primarily used to mint meme tokens on the Bitcoin blockchain, the ability to create custom tokens that inherit the security of the Bitcoin network could open up fascinating use cases.