Runes are a new protocol on the Bitcoin blockchain that allows for the creation of fungible tokens. By utilizing Bitcoin’s UTXO model and the OP_RETURN opcode, Runes simplifies the creation and management of fungible tokens on the blockchain. This protocol aims to improve the efficiency of Bitcoin in the realm of fungible tokens and expand the practicality of the Bitcoin network by making it easier to create meme coins and other community-driven projects, attracting a wider audience.
In the past two years, the Bitcoin ecosystem has evolved to include both fungible and non-fungible tokens on the Bitcoin network. These tokens have reached a market value of over $2 billion and have generated hundreds of millions of dollars in revenue for miners on the network. With the release of Runes, a protocol for creating tokens on Bitcoin, there is anticipation for transformative changes in the Bitcoin ecosystem, such as the creation of MemeCoins.
Runes is built for degen and meme coins, but the protocol is simple, efficient, and secure. It is a legitimate competitor to Taproot assets and RGB.
The protocol is independent and does not rely on ordinals or inscriptions, making it straightforward. Balances are stored in UTXOs and can be locked in HTLCs, allowing Runes to operate on the Lightning Network.
The naming of Runes is optional, and if a rune does not specify a name, a reserved name will be assigned. Reserved name runes are unconditionally valid and are well-suited for lightweight clients as they do not require the minting of an unlimited supply.
The Ordinal library provides everything needed to encode and decode rune stones, making integration straightforward.
While I am skeptical of “serious” tokens, Runes is undoubtedly a “serious” token protocol.
Runes is set to be released after the fourth Bitcoin halving, which is expected to be completed on Saturday, April 20th.
1. Understanding Bitcoin Runes
Casey Rodarmor, the creator of the Ordinals protocol, which allows users to create NFT-like inscriptions on the Bitcoin blockchain, is launching Runes, a new protocol that enables easy token creation on Bitcoin, Solana, and Ethereum.
While the BRC-20 and SRC-20 token standards already exist, these standards are based on the Ordinals theory, which could lead to UTXO bloat and spamming Bitcoin. To create a healthier token inscription method on the Bitcoin network, Rodarmor announced Runes in September 2023 and has been working on it since then. As the release date of the protocol approaches, interest in Runes and its significance for Bitcoin is growing.
“Creating a good fungible token protocol for Bitcoin could bring substantial transaction fee revenue, developer mindshare, and users to Bitcoin.” – Casey Rodarmor, Creator of Runes
Bitcoin Runes will be launched on block 840,000 after the fourth Bitcoin halving in April 2024. The creator clarifies that this arrangement is arbitrary and does not have any significance for the operation of the protocol, although it adds excitement to the market after the fourth Bitcoin halving. Rodarmor states that the simplicity and overall architecture of Bitcoin Runes are the main reasons for its development – to create fungible tokens on the Bitcoin blockchain. Franklin Dupton expresses anticipation for Runes:
“Currently, the Bitcoin market for fungible tokens is relatively small compared to ETH and SOL; however, with the release of a more efficient token standard (Runes), Bitcoin is positioned to narrow the gap in market capitalization with other blockchains.”
Bitcoin Runes are tokens created on the Bitcoin blockchain. They are a set of executable data that allows for the creation and use of specified assets on the network. Similar to BRC-20 and SRC-20 tokens, Runes rely on the Bitcoin blockchain for operation. However, Runes are designed to be simpler, not relying on Ordinals, and are healthier and more efficient than other token standards. They utilize key (existing) models of the Bitcoin blockchain, such as the UTXO model and OP_RETURN opcode. Additionally, unlike other existing fungible token protocols on Bitcoin, Runes do not rely on off-chain data like RGB and Taproot assets, and do not require native tokens for operations such as Omni Layer and Counterparty.
Now let’s take a closer look at how Bitcoin Runes work.
2. How Bitcoin Runes Work
Two terms are crucial for understanding how the Bitcoin Runes protocol operates:
– Bitcoin’s UTXO transaction model
– OP_RETURN opcode
In the UTXO (Unspent Transaction Output) transaction model of Bitcoin, each transaction consumes the total asset holdings in a user’s ledger, with the algorithm calculating the new balance after transferring the expected amount of tokens to the recipient. Each UTXO can hold any number of runes.
The OP_RETURN opcode allows users to attach additional information to Bitcoin transactions without affecting network efficiency. The OP_RETURN opcode enables Bitcoin users to add up to 80 bytes of data to an unspendable transaction. This data includes information about the token, such as its name, ID, symbol, commands for specific operations, and other necessary data. The protocol message for Runes stored in the OP_RETURN area of a Bitcoin transaction can also be referred to as a rune stone.
Each Rune transaction can specify multiple operations across different runes. In the case of token transfers, the Runes protocol splits UTXOs into multiple new UTXOs based on instructions in the OP_RETURN data. Each UTXO represents a different quantity of tokens, which are then sent to their respective recipients.
If a Rune transaction fails due to an invalid protocol message, the runes will be destroyed to prevent unintended token creation.
3. Inscribing and Minting Runes on Bitcoin
The process of creating new runes is called inscription. Users wishing to inscribe new runes need to specify the name, symbol, ID, supply, divisibility, and parameters related to rune generation and distribution, and record them in the OP_RETURN output. Creators can also include “pre-mining” during the inscription process, where a certain number of runes are allocated to the creator before they are available to the public.
After inscription, runes can be minted through open or closed minting. Open minting allows anyone to mint runes after inscription, where anyone can create a minting transaction to mint a certain quantity of new runes. Closed minting, on the other hand, allows for the creation of new tokens only after certain conditions are met, such as after a specific period of time, where the minting process terminates, limiting the token supply.
Ordisc defines how runes can be transferred after inscription or minting. With the Ordisc functionality, batch rune transfers, airdrops, and transferring all minted runes to a single account can be performed.
Symbol squatting issues on Bitcoin Runes
The Runes protocol does not regulate symbol squatting to maintain protocol simplicity. This means that squatters can hold desirable symbols, which can be combinations of letters (A-Z) of arbitrary lengths. Rodarmor proposes solutions such as allowing the allocation of symbols of a certain length initially during launch, gradually decreasing the length over time. According to information on OrdiscanThe benefits of Bitcoin Runes
Runes are designed to simplify the creation of interchangeable tokens on the Bitcoin blockchain, while also aiming to minimize on-chain occupancy and improve UTXO management. Let’s take a closer look at some of the benefits that Runes will bring to users and the Bitcoin network.
1) Simplicity
Compared to other alternative solutions such as BRC-20, RGB, and Taproot, Bitcoin Runes are expected to provide a simpler way for users to create interchangeable tokens on the Bitcoin network. With Runes, users can easily create and manage multiple tokens on-chain without relying on off-chain data or native tokens, and without generating a large number of “garbage” UTXOs.
2) Resource Efficiency
It is claimed that BRC-20 is an expensive way to create and manage tokens on Bitcoin. This is due to its operational mode leading to an increase in UTXOs. Bitcoin is currently dealing with an influx of UTXOs that will never be used, which burdens the network and leads to performance issues. Bitcoin Runes avoid this issue through its design. The OP_RETURN model does not create unspendable UTXOs and consumes fewer resources in terms of storage parameters. Compared to BRC-20 runes with up to 4MB of memory capacity, the OP_RETURN opcode is only 80 bytes, which more efficiently utilizes the resources of the Bitcoin network.
3) Integration with Bitcoin’s UTXO Model
The UTXO model is the way Bitcoin manages user assets. According to Rodarmor, Bitcoin Runes also inherit this design, complementing the Bitcoin blockchain and making Bitcoin Runes suitable for UTXO-based functionality. Bitcoin Runes’ spending model sets it apart from standards like BRC-20 and SRC-20.
4) Expanding the User Base
According to the protocol’s creators, the primary use case for Bitcoin Runes is “fun and meme coins.” Meme coins are a novel community-building strategy that has attracted interest from both native crypto users and mainstream investors. Ordinals and BRC-20 have already enabled the creation of interchangeable tokens used as meme coins and have attracted a large number of new users to the Bitcoin network.
Bitcoin Runes have garnered attention from the meme coin community, as meme coin projects dominate the list of pre-launch projects. Before its official release, the Bitcoin network may welcome a wave of new users seeking to trade these meme coins. The expansion of the user base and increased network usage will also increase the network’s revenue system and incentivize more miners to join the network.
Expanding the Utility of the Bitcoin Network
The various protocols enabling token creation on the Bitcoin blockchain add additional utility to the network. As the Rune project introduces its individual strategies to the network, the scope of applications for the Bitcoin network will broaden. The extent of this expansion will depend on the innovative capabilities of these projects.
5) Bitcoin Rune Ecosystem
The Bitcoin Rune ecosystem will see the launch of new projects, while some existing projects have already shared their plans to enter the Rune ecosystem after the protocol goes live. Some of these projects will interact directly with the protocol, creating assets on the Bitcoin blockchain, while others will provide practical tools for Bitcoin Rune enthusiasts. Here are examples of different types of projects that will join the Bitcoin Rune ecosystem.
1) Tokens
Projects aiming to create Rune-based interchangeable tokens on the Bitcoin network include Rune Pups, Runevo, Runestone, and RSIC. Currently, most of these are NFTs that earn corresponding Runes for their holders until the Rune protocol goes live. In the case of Runestones, three meme coins will be airdropped to each Runestone holder.
2) Launch Platforms
Bitcoin Rune launch platforms will provide a platform for Rune projects to embark on their launch journey. One such launch platform is Bitcoin Rune, which allows users to get a glimpse of what these platforms offer for Bitcoin Rune projects. While still in the testnet phase, Bitcoin Rune will enable projects to create runes and perform various operations, including rune transfers. Bitcoin Rune will also provide a marketplace where newly launched and existing Bitcoin Rune projects can start trading.
3) Marketplaces
Certain marketplaces will support Bitcoin Runes, allowing users to list and trade these tokens on their platforms. NFT platform Magic Eden has already launched a section for Bitcoin Runes, including a pre-rune section prepared for upcoming Bitcoin Rune projects. Pre-marketplace platform Whales Market has also launched a Bitcoin Rune marketplace, including a pre-release platform where users can trade their allocations from Bitcoin Rune projects’ Token Generation Events (TGEs).
4) Wallets
While Bitcoin Runes are minted on the Bitcoin blockchain, they require specific wallet applications for asset management. Users can use wallets that support BRC-20 tokens like Xverse to manage their Bitcoin Runes.
5) Bitcoin Runes vs. BRC-20
Similar to BRC-20, the Rune protocol enables token creation on the Bitcoin blockchain. BRC-20 uses the Ordinals protocol, a technique that allows data to be attached to Bitcoin sats. Bitcoin Runes are introduced as an improvement to this design, as they require fewer resources from the Bitcoin network. There are significant differences between the two designs in terms of asset creation, regular operations, and adoption. BRC-20 tokens have a first-mover advantage and have already seen significant adoption. Here is a summary of the differences between BRC-20 and Bitcoin Runes:
6) Final Thoughts
With Bitcoin Runes, the Bitcoin network gains another token issuance mechanism. While the network was not initially designed for this purpose, seeing the oldest model in modern blockchain bring more fun is refreshing. Many projects have already been building communities and preparing for their respective launches as they get ready for release. The model described for Bitcoin Runes is intriguing as it leverages some of the network’s old properties to provide potentially another significant addition to the space. As excitement builds, the use and adoption of the Bitcoin network are growing. It is unclear at this point what impact this will have on mainstream investors, but for local cryptocurrency enthusiasts, more use cases for the Bitcoin network can only be a good thing.
However, Bitcoin Runes are still in the early stages of development, and like any other new product, they are prone to critical changes and performance fluctuations. Projects launching and joining the Bitcoin Rune ecosystem using this technology also carry a high degree of speculation at the time of writing. Before investing in any cryptocurrency, be sure to conduct your own research. Also, note that this article only discusses Bitcoin Runes from a technical perspective and should not be considered financial advice.
Tags:
2023 Market Trend
BRC
UTXO
Tokens
Protocol
Bitcoin
Rune Topic
Source link:
https://www.hellobtc.com/kp/du/04/5148.html
Original article link:
https://www.bitpush.news/articles/6631515
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