Bitcoin Runes is a protocol that allows users to create fungible tokens directly on the Bitcoin blockchain. Unlike BRC-20 and SRC-20 tokens, which also exist on Bitcoin, Runes are designed to be more straightforward and efficient, operating independently from the Ordinals protocol. They leverage well-established features of the Bitcoin blockchain, such as the UTXO model and the OP_RETURN opcode.
How Do Bitcoin Runes Work?
The Bitcoin Runes protocol utilizes two key components of the Bitcoin blockchain:
1. UTXO Model
The UTXO (Unspent Transaction Output) model is a system where each transaction generates outputs that function as distinct pieces of cryptocurrency. When making a transaction, you use these outputs as inputs. This model allows for precise tracking of every unit of Bitcoin. In the context of Bitcoin Runes, each UTXO can represent various amounts or types of Runes, making token management simpler.
2. OP_RETURN Opcode
The OP_RETURN opcode enables users to attach extra data to Bitcoin transactions. It allows for the inclusion of up to 80 bytes of information in a transaction that canât be spent later. Bitcoin Runes take advantage of this opcode to store essential token data, like the token's name, ID, symbol, and specific commands. This data is kept in whatâs known as a Runestone, which is embedded within the OP_RETURN field of a Bitcoin transaction.
Summary
In essence, Bitcoin Runes offer a streamlined way to create and manage fungible tokens on the Bitcoin network by utilizing its existing structures efficiently. This makes them a compelling option for developers and users interested in tokenization on the Bitcoin blockchain.
