The fourth Bitcoin halving is coming in 2-3 days, and along with it, the Rune protocol will be officially launched. Last year's runes made Ordi, Sats and other runes popular, so what will this year's runes bring? Is there a chance to generate the same wealth effect as last year's runes?
What is a Rune?
Rune is the translation of the English word "Rune". It is a new Bitcoin ecological protocol design concept proposed by Casey Rodarmor, the founder of the Bitcoin NFT protocol Ordinals. It is called "Rune" and is called the "Rune" protocol in Chinese.
“Bitcoin Runes are unique, fungible tokens that exist on the Bitcoin blockchain and are designed to represent fungible assets with unique characteristics and metadata. Runes aim to provide a user-friendly, UTXO-based alternative to existing tokenization protocols such as Ordinals, ORC-20, BRC-20, and Stamps.”
Simply put, the popularity of BRC-20 has created a large number of "junk" UTXOs, causing inscription blockage and lag, and poor user experience. Therefore, we want a smoother way to build the BRC20 ecosystem, and runes came into being.
Runes are a completely new type of fungible token on the Bitcoin network, with no threshold; 巍; wuq6267; and are different from existing alternatives in several ways. First, Runes are a product of the unspent transaction output (UTXO) model native to Bitcoin, which enables more responsible UTXO management and a smaller on-chain footprint by minimizing the generation of "junk" UTXOs. This keeps the Bitcoin blockchain minimal, efficient, and focused on transferring value through Bitcoin transactions.
Runes allow users to flexibly allocate and transfer balances, and invalid protocol messages will cause runes to burn as a guarantee for future upgrades. In addition, runes issue specific human-readable symbols and decimal configurations, and their issuance and transfer do not require the use of native tokens, making the protocol simpler and easier to use. Overall, runes provide a simpler and more intuitive way to handle fungible tokens on the Bitcoin blockchain.
From the complexity of BRC-20 to the bright prospects of Runes, this journey provides valuable proof of the continuous evolution of blockchain and Bitcoin. Every turn, every challenge and solution, depicts an ecosystem that thrives on innovation, but struggles with its fast pace.
As the Runes Protocol steps into the spotlight, it carries with it the lessons of the past and the promise of a simplified future. Its promise of simplicity and efficiency is fascinating, but the responsibility lies with the community, and needs to be embraced with enthusiasm and caution.
Contrast this with protocols like OmniLayer and the newly proposed Runes. All of these protocols can perform token issuance and transfer operations in a single transaction, while BRC-20 lags behind and requires two transactions. This inefficiency is more than a technical oversight; it’s a sign of a protocol that’s driven more by hype than sound design.
“BRC-20’s adoption and popularity is due to its fair launch methods and early adopters enthusiastically spending funds and promoting it on social media. This organic growth and community-driven support has propelled BRC-20 to its current position, demonstrating the power of grassroots movements in crypto.”
"Most of the time, runes are not independent. They can also be part of the inscription ecosystem, enabling more growth and ecological development of inscriptions. Inscriptions and runes still develop in synergy!"
Who created the Runes protocol?
Bitcoin developer Casey Rodarmor proposed the Runes protocol in September 2023 as an optimized token standard for issuing alternative assets on Bitcoin.
Since then, he has been working on the protocol with the goal of launching it in April 2024. Rodarmor is a well-known developer in the crypto space. He is the creator of the Ordinals protocol, which developers have used to develop various token standards for native asset issuance on Bitcoin.
Although the Runes protocol has not yet been released on the Bitcoin mainnet, several developers are already building projects based on it. These projects include Runealpha, PipeBTC, and RSIC, among others.
Why was the Runes Protocol created?
In his blog post, Rodarmor described Runes as a simple protocol with a minimal on-chain footprint and responsible UTXO management.
A UTXO (Unspent Transaction Output) is a unit of Bitcoin value associated with a specific address on the blockchain, representing funds that have not yet been spent and can be used as input for new transactions.
Runes is different from the BRC-20 token standard, which is complex and not based on UTXO. The latter feature causes the BRC-20 token standard to generate too many junk UTXOs, causing congestion in the Bitcoin network.
Runes aims to replace the inefficient BRC-20 token standard based on Ordinals.
Additionally, the Runes Protocol strives to do better than other existing Bitcoin alternative token protocols such as RGB and Taproot Assets, which rely too heavily on off-chain data.
For example, Taproot Assets stores its asset metadata off-chain, making asset information separate from the Bitcoin main layer. Options like Omni Layer and Counterparty require native tokens to operate. In short, Rodarmor believes that these problems make these existing protocols cumbersome and not very user-friendly.
What will Runes bring to the Bitcoin ecosystem?
Let’s look at the potential advantages of the Runes protocol.
(1) More users
The Runes protocol will allow projects to issue different types of fungible tokens on the Bitcoin blockchain, such as security tokens, stablecoins, and governance tokens. This could expand Bitcoin's utility and attract more users, who will enjoy near-instant, low-cost transactions due to the protocol's potential Lightning Network compatibility. In other words, Runes could help Bitcoin achieve its goal of widespread adoption.
(2) More income
As more people interact with Runes tokens, more transaction fees will be generated. This will increase miners' income, incentivizing them to continue to protect the security of the Bitcoin network. With block rewards set to decrease further in April 2024, Bitcoin miners will need more income drivers, and Runes may be just the protocol needed to maintain miners' enthusiasm.
(3) Innovation
As we have already seen with the RSIC example, the Runes protocol encourages developers to innovate in exciting new ways, giving users the opportunity to experience activities on the Bitcoin blockchain that no one would have thought of before. It will also open the door for developers who want to innovate on Bitcoin on the world's most stable and secure public blockchain.
(4) Efficient issuance of homogeneous tokens
The Runes protocol aims to enable the issuance of assets directly on Bitcoin with minimal negative impact. As mentioned earlier, the protocol is improving the current alternative token protocol that relies on native tokens and off-chain data. In addition, its design is more thoughtful than the BRC-20 token standard, which was launched to show what kind of functions the Ordinals protocol can achieve and is more entertaining.
Therefore, the seriousness of the protocol may make Runes more successful than BRC-20 tokens.
What is the difference between inscriptions and runes?
We have actually mentioned above that the Runes Protocol is the Rune Protocol.
However, the Runes protocol did not cause much market commotion at the time, until a project called Rune Alpha was launched recently, which directly boosted market sentiment and caused FOMO among users (the reason for FOMO may also be because the name is too similar to the Runes protocol).
Although Casey Rodarmor immediately stated on social media that Rune Alpha has nothing to do with his Runes, and the Rune Alpha project also explained that it has nothing to do with it, Rune Alpha's first issued token COOK still attracted many users to mint it crazily.
At the same time, the first token based on the Pipe protocol, pipe, also began to be hyped, and even the flames directly burned the tokens of the Ethrunes protocol. Ethrunes is based on the token protocol of ERC-1155 (Ethereum) and combines the characteristics of BRC20. The first token of this protocol is ERS.
So, what is the difference between inscriptions and runes?
From a technical perspective, let's directly quote what Mr. Yu Xian said: A key difference between Bitcoin Inscription and Rune is that Inscription is engraved in the Segregated Witness data, while Rune is engraved in OP_RETURN. The size of data that OP_RETURN can store is very limited, but it is more than enough for issuing coins. This is also a new technology.
Can runes replace inscriptions?
With a total market cap of $2.65 billion, BRC-20 tokens have a sizable market share in the Bitcoin market. The narrative surrounding runes is primarily driven by speculators who believe that runes will replace
BRC-20, becoming the new widely used token standard on Bitcoin.
Are Runes a Better Token Standard?
As we highlighted in our deep dive into Ordinals and Runes, the differences between the two are quite stark:
In parallel with the halving, decrypting Runes: native fungible tokens on Bitcoin
Runes do not use witness data, but instead utilize the OP_RETURN field to simplify the process of creating tokens. Runes can be etched (deployed), minted, and transferred through Runestones, making regular Bitcoin transactions possible.
Runestones are Rune protocol messages that store transfer instructions in Bitcoin's unspent transaction outputs (UTXOs). These transfer instructions determine how to transfer runes in an output, such as the destination address and the transfer amount. By default, the rune balance on an input UTXO is destroyed when it is transferred to a new UTXO.
This approach is more friendly to the network than the BRC-20 standard, which currently generates a large number of unused UTXOs, cluttering the network. Another disadvantage of BRC-20 is that new inscriptions must be created for each token transfer.
Additionally, runes are more flexible in how they are created. They can be open minted, have a fair distribution, or users can choose to mint the entire supply into a single address (like ERC-20). BRC-20 is limited to open minting.
More importantly, BRC-20 inscriptions are more prone to front-running. This is because anyone can see the inscription transaction in the mempool and then execute it early by paying a higher transaction fee, which is bound to be troublesome for trying to deploy new tokens. In contrast, Runes attempts to prevent front-running using a "submit first, then disclose" scheme. At a higher level, it is also possible for users to commit to transactions privately. Disclosing details only shortly before confirmation can greatly reduce the time window for front-running.
Finally, Runes supports compatibility with SPV wallets and Bitcoin L2, which uses the UTXO model. Therefore, in theory, it is possible to use lightweight wallets and integrate with the Lightning Network for faster and cheaper transactions. The emphasis is on "in theory" because although interoperability already exists, the infrastructure must be developed first.
Tokens representing inscriptions and runes
Next, we will use the simplest way to sort out the tokens of related protocols for you (there are too many, only a very small part is listed here)
1. Bitcoin
BRC-20 (inscription): Ordi (dragon head), sats, rats
ARC-20 (Inscription): ATOM (Dragon Head), Realm
SRC-20 (stamp): stamp, kevin, utxo
Rune: Pipe
Rune Alpha: COOK, PSBTS
2. Ethereum
Ethscription: eths (leader), Facet
IERC-20：say
Of course, because the inscription/rune hotspot is very high now, there are many inscriptions appearing, such as inscriptions based on other chains:
DRC-20 (Dogecoin): dogi
BSC-20（BSC）：bnbs
SPL-20（SOL）：Sols
LRC-20 (Litecoin): lite
PRC-20 (polygon): pols
ASC-20 (Avalanche): avav, asct, avas
TRC-20（TRON）：trxi
ORC-20 etc.
Summarize
As a new focus in the field of Bitcoin asset issuance, the Runes protocol has become a hot topic in the crypto community due to its crypto legitimacy, innovative project breeding capabilities, and RuneAlpha's important role in raising industry attention. With the official release of the Runes protocol and the emergence of more innovative projects, we expect this field to usher in more prosperous development.
