The Bitcoin network is undergoing a major upgrade designed to significantly increase the use of memecoins on the Bitcoin network, coinciding with the halving event. Called Runes, it is expected to formalize how runes (essentially Bitcoin NFTs) and tokens are minted and traded on the largest digital asset network.

Currently, launching and speculating on a memecoin or NFT on Bitcoin is a fairly difficult experience.

Ordinals Inscriptions was the first real-world test of Bitcoin as a token launchpad, generating more than $431 million since 2022.

Casey Rodarmor, the famous Bitcoin builder who created Ordinals, hopes to use Runes to tap into new demand and increase capacity.

But what is the Rune Protocol and how does it work?

Bitcoin Tokens Are Faster

The core of Runes is to use Bitcoin's UTXO model.

In this model, each transaction first identifies unspent Bitcoin fragments and uses them to create new transactions.

Runes store data in the OP_RETURN field of Bitcoin transactions for digital identification purposes.

This method of storing data does not change the value of the transaction, but allows metadata to be added to transactions without cluttering the network with unnecessary data.

This helps the network run efficiently, reducing latency and costs, which is especially beneficial for a network like Bitcoin.

Brian Rudick, senior strategist at cryptocurrency market maker GSR, said the changes were a significant upgrade.

“I personally think that Runes has a good chance of becoming the token standard that replaces Bitcoin because it is based on UTXO, maintains all transaction data on the chain, and takes up less space on the chain.”

The most important gain from this upgrade is that it gives Bitcoin more practicality.

Bitcoin with Runes is considered digital gold for HODLing, rather than spending or issuing memecoins, and it looks a lot like the first layer blockchain that allows users to trade tokens.

Demand for Bitcoin NFTs Soars

When the upgrade began, the demand for Bitcoin NFTs was extremely high.

Bitcoin NFTs lead all blockchains over the past 30 days.

Runestone is one such project, which first airdropped tokens to more than 112,000 users who held at least 3 non-text numbers in their Bitcoin wallets. The value of this airdrop is estimated to be around $300 million, with NFT market trading volume exceeding $215 million.

After the rune is upgraded, the rune holder is expected to receive tokens from three different rune memecoin projects.

The first short sale of DOG is expected to take place later this month, while the other two memecoins are expected to be shorted later this year.

On the other hand, the BRC-20 project (the current Bitcoin-based token standard) is facing a difficult decision: stick with BRC-20 or switch to the Runes standard.

PUPS, a memecoin that airdrops Bitcoin Puppet and OPIUM holders, has said it will switch to Runes. PUPS is the third-largest BRC-20 token and is up more than 1,226% in the past 30 days.

WZRD, another memecoin that will also migrate to the new rune standard, is up 257% in the past seven days.

Rune Items Forged

Runes, the latest product from Casey Rodamor, has attracted attention, even among longtime blockchain developers who disdain the digital tokens that can be minted on the platform.

Runes are similar to ordinals in that they allow people to “record” data and mint on-chain tokens, but the main difference is that ordinals are “non-fungible” (i.e. unique), while runes function similarly to the memecoins that have taken the cryptocurrency market by storm recently.

As of post-halving, Rune minters have paid 143,433 BTC in usage to purchase the rarest items, suggesting that, like Ordinals, the Runes protocol could benefit Bitcoin’s growing usage economy.

(Personal opinion, not a recommendation)

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