Bitcoin Runes is a protocol that facilitates the creation of fungible tokens on the Bitcoin blockchain. Unlike other tokens, such as BRC-20 and SRC-20, which also operate on the Bitcoin blockchain, Runes do not depend on the Ordinals protocol. Keep reading to learn more about Bitcoin Runes, how they work, and why they are important.
The Bitcoin Runes protocol relies on two fundamental mechanisms of the Bitcoin blockchain: the UTXO (Unspent Transaction Output) transaction model and the OP_RETURN opcode.
1. The UTXO model. The UTXO model treats each transaction output as separate pieces of digital currency. In the context of Bitcoin Runes, UTXOs can hold varying amounts or types of Runes, simplifying token management.
2. The OP_RETURN opcode. The OP_RETURN opcode enables users to attach additional information to Bitcoin transactions. It allows the inclusion of up to 80 bytes of extra data in an unspendable transaction. Bitcoin Runes use the OP_RETURN opcode to store essential token data, such as the token’s name, ID, symbol, and commands for specific actions.
Let’s take a look at some of the key benefits of Bitcoin Runes.
1. Efficiency. Bitcoin Runes offer an efficient method for handling tokens on the Bitcoin network through the OP_RETURN model. This approach prevents the creation of unspendable UTXOs, which can clog the network.
2. Simplicity. Bitcoin Runes can simplify the creation and management of multiple fungible tokens directly on-chain. This can be achieved without the need for off-chain data or the creation of native tokens, avoiding the generation of excessive "junk" UTXOs.
Learn more: What Are Bitcoin Runes?