24-04-21 10:30 It takes 17 minutes to read this article AI Summary See Summary
Original title: 《INTRODUCTION TO RUNES: FUNGIBLE TOKENS ON BITCOIN》
Original author: Bobby Shell, Voltage
Original translation: Lucy, BlockBeats
Editor’s Note:
Bobby Shell, VP of Marketing at Voltage, introduced the Runes protocol, a new standard for creating and transferring interchangeable tokens on the Bitcoin blockchain. The launch of the Runes protocol means more developers and users for the Bitcoin ecosystem and more revenue for miners. However, like inscriptions, Runes has also sparked some controversy, with some Bitcoin maximalists arguing that token creation will have a negative impact on the nature of Bitcoin.
Bobby Shell discussed in depth how Runes works, how it compares to existing standards, its impact on the Bitcoin network, and possible challenges and criticisms in the future. He pointed out that although the impact of Runes is still unclear, it provides a worthwhile experimental field for exploring the potential and limitations of Bitcoin. BlockBeats translated the original text as follows:
Introduction to RUNES
Runes Protocol is a new standard for natively issuing interchangeable tokens on the Bitcoin blockchain. It allows users to create interchangeable tokens.
Some key concepts:
· Fungible tokens: tokens that can be interchanged with each other. For example, 1 Beef Token can be equivalent to any other Beef Token.
BRC-20: is an existing standard for issuing fungible tokens on top of Bitcoin.
Non-fungible tokens (NFTs): These are tokens that are unique and non-interchangeable, such as a specific “beef NFT” image.
Ordinality: is a system for assigning unique properties to individual satoshis (the smallest unit of Bitcoin). This makes it possible to implement NFT-like functionality on Bitcoin.
UTXO: Unspent transaction output, which refers to the amount of Bitcoin authorized by the sender and can be spent by the recipient.
Runes aims to provide a simple and efficient way to create and trade interchangeable tokens on Bitcoin. It improves existing token standards such as BRC-20 and utilizes UTXO to implement token balances and transfers.
Its purpose is to attract more developer activity and mainstream users to Bitcoin. However, there are concerns about its impact on the capacity and culture of the Bitcoin network.
RUNES Background
Runes was created by Casey Rodarmor, who also created the Ordinals protocol for Bitcoin. Rodarmor had several goals when developing Runes:
Transaction Fee Revenue: By increasing usage of the Bitcoin blockchain, Runes will drive transaction fees up. This is profitable for miners but can be costly for regular users.
Developer Attention: Altcoin networks like Ethereum and Solana have attracted many developers. Creating developer tools like Runes on Bitcoin can help attract some of that talent to build applications on Bitcoin.
Attract users from other chains: Rodarmor believes that creating better use cases for altcoins on top of Bitcoin, such as memecoins, will attract these users to switch to Bitcoin.
At a high level, Runes allow users to simply and efficiently create mutually fungible tokens on top of Bitcoin. This enables capabilities like memecoins that were previously not natively possible on Bitcoin.
How RUNES works
Runes is based on the Ordinals protocol and generates transactions by using Bitcoin's unspent transaction outputs (UTXOs). UTXOs are the amount of Bitcoin left after a transaction, similar to the change left after a cash purchase.
The Runes protocol extends the concept of UTXO by allowing each UTXO to contain balances of different Runes tokens. For example, a single UTXO could hold 10 units of Rune A, 100 units of Rune B, and 1000 units of Rune C.
This is accomplished by attaching data to UTXOs using a type of Bitcoin transaction called OP_RETURN. This OP_RETURN transaction contains information specifying the Rune balance in that UTXO.
When a transaction occurs, the Runes balance can be transferred to new UTXOs. Any remaining UTXO amount that is not transferred is destroyed.
Runes allow for more efficient transfers compared to the existing BRC-20 standard. With BRC-20, users can only transfer one token type at a time. However, with Runes, users can transfer any amount of Rune balance from input to desired output in a single transaction.
By building on top of Bitcoin’s base layer functionality, Runes aims to make it simple and efficient to create and transfer fungible tokens natively on Bitcoin.
Impact on the Bitcoin Network
Runes are designed to alleviate the UTXO bloat problem caused by BRC-20 tokens and other fungible tokens created on Bitcoin. As more tokens are traded, more small UTXOs are created over time, increasing the overall size of the set of UTXOs that every node in the Bitcoin network needs to track.
For example, the UTXO set grew from 86 million UTXOs (5 GB) in April 2022 to 140 million UTXOs (8.74 GB) in November 2022. This increased data can cause network congestion and, if left unchecked, make transactions more expensive over time.
Runes helps solve this problem by allowing users to bundle multiple token transfers into a single transaction. The goal is to reduce the rate of new UTXO creation caused by token transactions.
However, there is ongoing controversy regarding tokens on the Bitcoin network.
One side believes that Bitcoin should focus on being digital cash and a store of value. They see tokens as unnecessary bloat or an attack on Bitcoin’s core goals.
The other side believes that Bitcoin should evolve into a multi-purpose blockchain that supports the creation of tokens. They believe this expands Bitcoin’s utility and makes the network more competitive.
In the long run, it’s unclear whether tokens like Runes will irreparably clog Bitcoin or bring benefits to the network like miner revenue and new users. For now, tokens are likely here to stay, so improvements like Runes could help mitigate their potential downsides.
RUNES VS BRC-20
Runes aims to improve upon the existing BRC-20 standard for creating tokens on top of Bitcoin. The key differences between Runes and BRC-20 include:
Allows more token types and destinations per transaction - With BRC-20, users can only transfer one type of token to one destination in a transaction. Runes allow users to send multiple token types to multiple destinations in a single transaction, making transactions more efficient.
Simpler and more efficient than BRC-20 - Due to how inscriptions work, transferring a BRC-20 token requires 3 transactions. Runes are designed to be more efficient, with most operations requiring only one transaction, except for creating a new Rune which requires 2 transactions. Runes also do not rely on the Ordinals protocol, making it a simpler standalone system.
Avoiding UTXO bloat — BRC-20 and other token systems cause Bitcoin’s UTXO bloat, increasing the storage and bandwidth requirements of running nodes. Runes are designed to avoid creating too many unspent transaction outputs.
Overall, Runes aims to provide a simpler and more efficient system for creating fungible tokens on Bitcoin compared to existing standards such as BRC-20. Its main advantage is bundling multiple token transfers into a single transaction.
Creating and transferring runs
Creating new Runes tokens begins with "scratching", which mints new Runes. This is done by sending Bitcoin to the OP_RETURN output containing the Rune definition. (Also known as burning Bitcoin, which can no longer be spent)
To transfer Runes between users, the sender includes the Rune balance they want to send in the transaction input. The Runes are then transferred to the receiver by specifying the output address and the Rune amount.
Some key benefits of Runes Transfer include:
Users can send multiple Runes in a single transaction, allowing “fan-out” to multiple recipients.
Runes transfers only require one transaction, while BRC-20 requires three transactions.
Transactions are very small and efficient. They only include the Runes to be transferred, not the entire balance.
No unspent UTXOs are created, reducing blockchain bloat over time.
Transfers explicitly specify the Runes being sent, preventing the wrong tokens from being accidentally sent.
Overall, the Runes Protocol provides a simple and powerful system for creating and transferring tokenized assets on Bitcoin. The streamlined process makes use cases like memes, badges, collectibles, and other custom assets possible without congesting the blockchain.
Adoption potential
The question surrounding Runes is whether it will drive usage and adoption like Ordinals, which was extremely popular and generated over $250 million in mining fees. However, the increase in transactions led to network congestion.
Runes has the potential to become a more popular project for speculators and gamblers who want to mint tokens on Bitcoin and trade memecoins. The ability to quickly mint fungible tokens will certainly attract the interest of this group.
However, Bitcoin maximalists may not like Runes very much. Many maximalists believe that tokens other than the native BTC are unnecessary and negatively impact Bitcoin's core purpose as a store of value. They believe that these tokens waste valuable blockchain space and tarnish the image of Bitcoin.
It’s unclear whether the benefits of increased usage and mining fees will outweigh the downsides of congestion and UTXO bloat. Runes could bring more developer activity to Bitcoin, but they could also push the boundaries of acceptable usage.
The extent of Runes’ adoption will likely depend on how interested speculators are in it and how much resistance there is from BTC purists. Its ultimate impact remains uncertain, but it’s a fascinating experiment regardless.
Criticisms and concerns
Runes have been criticized by some members of the Bitcoin community. Here are some of the main concerns that have been raised:
Moral arguments against gambling/speculation: Some Bitcoin maximalists believe that tokens are unnecessary and promote irresponsible gambling or speculation. They believe that tokens undermine Bitcoin's core purpose as a store of value and digital gold. These are moral arguments against encouraging gambling behavior.
Concerns about congesting the Bitcoin network: One thing that has been experienced, and is expected, is that Runes could also cause significant congestion on the Bitcoin network. As more tokens are created and traded, this could cause the UTXO set to swell if not properly managed.
Every node must be able to parse the entire UTXO set to verify transactions. Therefore, a significantly increased UTXO set makes it harder for nodes to run, which could lead to more centralization. This could make Bitcoin more expensive to use and harder to verify.
Some argue that Ordinals and other token projects have added considerable bloat. They worry that if Runes are used in large numbers, it could exacerbate the problem. Supporters argue that Runes are more efficient than other token designs. But the impact has not yet been tested.
in conclusion
Runes is an interesting new protocol launched on the Bitcoin network that allows users to create and transfer fungible tokens, called Runes, natively on Bitcoin. This new feature could attract new developers and users to Bitcoin while generating more fees for miners. However, it remains controversial for some Bitcoin maximalists who believe that token creation is unnecessary and wasteful.
Here are some key points about Runes:
Runes are fungible tokens that can be created and transferred on the Bitcoin blockchain using a new protocol designed by Casey Rodarmor.
The protocol is more efficient than existing standards such as BRC-20, allowing users to bundle multiple token transfers into a single transaction.
Runes leverage Bitcoin’s UTXO model and the OP_RETURN function to associate token balances with unspent transaction outputs.
Supporters believe Runes can bring more developers, users, and transaction fees to Bitcoin. Critics worry that it will clog the network and tarnish Bitcoin's reputation.
There are questions about whether Runes can alleviate the UTXO bloat problem caused by existing token projects on Bitcoin.
The launch of Runes coincides with Bitcoin’s next halving event, sparking excitement and speculation within the community.
Understanding new protocols like Runes is important to tracking the evolution of Bitcoin. While the impact is uncertain, Runes is willing to experiment and expand Bitcoin's capabilities. However, it also highlights the tension between Bitcoin's roots as sound money and as a platform for innovation. It will be interesting to see how this plays out in the months and years after Runes goes live.