Popular science: What are the runes on Bitcoin? A new fungible token protocol on Bitcoin?

Original title: What Are Bitcoin Runes? A New Fungible Token Protocol on Bitcoin

Original author: Joel Agbo

Original source: CoinGecko

Compiled by: Vernacular Block Chain

Main Viewpoint

Rune is a new protocol for creating fungible tokens on the Bitcoin blockchain.

By using Bitcoin’s UTXO model and the OP_RETURN opcode, Rune will simplify the creation and management of fungible tokens.

Rune will improve Bitcoin’s efficiency in terms of fungible tokens, while also expanding the utility of the Bitcoin network by making it easier to create meme coins and other community-driven projects on the blockchain, attracting more Broad audience.

Over the past two years, the Bitcoin ecosystem has grown to include both fungible and non-fungible tokens on the Bitcoin network. These tokens have reached a market cap of over $2 billion and generated hundreds of millions of dollars in revenue for miners on the network. With the release of Runes, a protocol that will create tokens on Bitcoin, it will bring exciting changes in the Bitcoin ecosystem, such as MemeCoin.

Translation:

Runes was 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 ordinal numbers or inscriptions, so it is very simple.

The balance is stored in UTXO and can be locked in HTLC so Rune can run on the Lightning Network.

Rune names are optional, if a carved stone does not have a name specified, a reserved name will be assigned. Name-preserving engraved stones are unconditionally valid and are ideal for lightweight clients if they are not minted with a supply cap.

The Ordinal Library provides everything needed to encode and decode runestones, so integration should be straightforward.

I am very skeptical about "serious" Tokens, but Rune is undoubtedly a "serious" Token protocol.

Rune will be released after the fourth Bitcoin halving, which is expected to be completed on Saturday, April 20.

1. Understanding Bitcoin Runes

Casey Rodarmor is the creator of the Ordinals protocol, which allows users to create NFT-like inscriptions on the Bitcoin blockchain. He is releasing Runes, This is a new protocol that allows users to easily create tokens on top of Bitcoins such as Solana and Ethereum.

Although BRC-20 and SRC-20 Token standards already exist, these standards are based on the Ordinals theory, which may lead to the proliferation of UTXO and thus spam Bitcoin. In order to create a A healthier way to etch tokens, Rodarmor announced Runes in September 2023 and has been working on it since then. As the protocol’s release date approaches, interest in Runes and what it means for Bitcoin is growing.

“Creating a good fungible token protocol for Bitcoin could bring significant transaction fee revenue, developer mindshare, and users to Bitcoin.” By Casey Rodarmor, creator of Rune

Bitcoin Rune will be launched on block 840000 after the Bitcoin halving in April 2024. The creators clarified that this arrangement does not make sense for the functioning of the protocol, although it adds to the market excitement following the fourth Bitcoin halving. Rodarmor said that Bitcoin Runes’ simplicity and overall architecture will aid its main reason for development – ​​the creation of fungible tokens on the Bitcoin blockchain. People are looking forward to Rune, with Franklin Templeton saying: “Currently, Bitcoin’s homogeneous token market is quite small compared to ETH and SOL; however, with more efficient token standards ( With the launch of Runes, Bitcoin is well-positioned to close the gap between its fungible market cap and other blockchains.

Bitcoin Runes are tokens created on the Bitcoin blockchain. Is a set of executable data that allows specified assets to be created and used on the network. Like BRC-20 and SRC-20 Tokens, Runes rely on the Bitcoin blockchain to operate, however, Runes is designed to be simpler and not dependent on it. for Ordinals, and is healthier and more efficient than other token standards, and adopts key (existing) models of the Bitcoin blockchain, such as the UTXO model and the OP_RETURN opcode. In addition, it is compatible with other existing fungible tokens on Bitcoin. The protocol is different. Runes does not rely on off-chain data like RGB and Taprot Assets, and does 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 Rune works

These two terms are crucial to understanding how the Bitcoin Rune protocol works;

• Bitcoin’s UTXO transaction model
• OP_RETURN operation code

In the UTXO (unspent transaction output) transaction model, each transaction consumes the user ledger The total assets held in , where the algorithm calculates the new balance after transferring the expected number of Tokens to the recipient. Each UTXO can hold any number of runes.

The OP_RETURN opcode enables users to append 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 non-spendable transactions. This data includes information about the token, including name, ID, symbol, commands for specific operations, and other required data. Rune protocol messages stored in the OP_RETURN area of ​​Bitcoin transactions can also be called rune stones.

Each Rune transaction can specify multiple operations across different Runes. In the case of token transfer, the Runes protocol will split the UTXO into multiple new UTXOs according to the instructions in the OP_RETURN data. Each UTXO represents a different number of tokens, which are then sent to its recipient.

If a rune transaction fails due to an invalid protocol message, the rune will be destroyed to prevent accidental creation of runes.

3. Engraving and Minting Runes on Bitcoin

The process of creating new runes is called engraving. Users wishing to inscribe new runes need to specify the rune's name, symbol, ID, supply, divisibility, and parameters related to rune generation and distribution, and record this in the OP_RETURN output. Creators can also include "pre-mining" in the inscription process, which allocates a certain number of runes to the creator before the runes are available to the public.

After the inscription is completed, the runes can be minted through open or closed minting. Open minting allows anyone to mint runes after they are inscribed, and anyone can create a minting transaction to mint a certain amount of new runes. Closed minting can only create new tokens after predetermined conditions are met. For example, after a certain period of time, the minting process is terminated and the supply of tokens is limited.

The decree defines how runes are transferred after being inscribed or minted. Using the Decree feature, it is possible to perform bulk rune transfers, airdrops, and transfers of all minted runes to a single account.

Possible symbol squatting issues on Bitcoin Rune

The Rune protocol will not regulate symbol squatting to keep the protocol simple. This means that squatters can hold onto coveted symbols, which can be combinations of letters (A-Z) of any length. Rodarmor proposed some solutions, such as allowing allocation of only symbols longer than a certain value at startup, with the length gradually decreasing over time. According to information on Ordiscan, the runes for the first three characters won't be available for about three years.

4. Benefits of Bitcoin Rune

Rune is designed to simplify the creation of interchangeable tokens on the Bitcoin blockchain, while also having other goals, such as minimizing on-chain occupancy and improved UTXO management. Let’s look in more detail at some of the benefits Runes will bring to users and the Bitcoin network.

1) Simplicity

Relative to other alternatives such as BRC-20, RGB and Taproot, Bitcoin Rune is expected to provide users with the ability to create fungibles on the Bitcoin network A simpler way to use Token. Using Rune, users can easily create and manage multiple Tokens on the chain without relying on off-chain data or native Tokens, or generating large amounts of "junk" UTXOs.

2) Resource Efficiency

It is said that BRC-20 is an expensive way to create and manage Tokens on Bitcoin. This is due to the surge in UTXOs due to its mode of operation. Bitcoin is currently dealing with an influx of UTXOs that will never be used. This puts a burden on the network, causing performance issues. Bitcoin Rune avoids this problem through its design. The OP_RETURN model does not create UTXOs that cannot be spent, and storing parameters consumes fewer resources. Compared to BRC-20 Inscription, which has up to 4MB of memory capacity, the OP_RETURN opcode is only 80 bytes; this makes more economical use of 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. This complements the Bitcoin blockchain, making Bitcoin Runes suitable for UTXO-based functions. Bitcoin Rune’s payout model sets it apart from standards like BRC-20 and SRC-20.

4) Expand the user base

According to the protocol’s creators, Bitcoin Rune’s primary use is “fun and meme coins.” Memecoins are a novel community-building strategy that has attracted interest from crypto-native users and mainstream investors. Ordinals and BRC-20 have enabled the creation of fungible tokens used as meme coins and attracted a large number of new users to the Bitcoin network.

Bitcoin Rune has caught the attention of the memecoin community as the memecoin project dominates the list of pre-release projects. Ahead of the official launch, the Bitcoin network may welcome a new wave of users looking 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

Different protocols that implement token creation on the Bitcoin blockchain add additional utility to the network. As the Rune Project brings its individual strategies to the network, the scope of applications for the Bitcoin network will become even broader. This expansion will depend on the innovative capabilities of these projects.

5. Bitcoin Rune Ecosystem

There will be new projects launched in the Bitcoin Rune ecosystem, and some existing projects have been shared Plan to enter the rune ecosystem after the protocol goes live. Some of these projects will interact directly with the protocol to create assets on the Bitcoin blockchain, while others will provide practical tools for Bitcoin Rune enthusiasts. Below are examples of the different types of projects that will join the Bitcoin Rune ecosystem.

1) Token

Fungible Token projects that hope to use the Bitcoin Rune Protocol to engrave runes 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 Platform

Bitcoin Rune’s launch platform will provide a platform for the Rune project to launch its journey. One of the launch platforms is Bitcoin Rune, which gives users a glimpse of the possibilities these platforms offer for Bitcoin Rune projects. While still in the testnet phase, Bitcoin Runes will enable projects to engrave runes and perform various operations, including rune transfers. Bitcoin Rune will also provide a marketplace where newly released and existing Bitcoin Rune projects can start trading.

3) Markets

Some markets will support Bitcoin Runes, allowing users to list and trade these Tokens on their platforms. NFT platform Magic Eden has launched a section for Bitcoin Runes, including a pre-rune section for the yet-to-be-released Bitcoin Runes project. Pre-market platform Whales Market has also launched a Bitcoin rune market. These include a pre-release platform where users can trade their TGE (Token Generation Event) allocations in the Bitcoin Rune project.

4) Wallet

While Bitcoin Runes are minted on the Bitcoin blockchain, they require a specific wallet application for asset management. Users can manage their Bitcoin runes using wallets that support BRC-20Token such as Xverse.

5) Bitcoin Rune and BRC-20

Similar to BRC-20, the Rune protocol makes it possible to create Tokens on the Bitcoin blockchain. BRC-20 uses the Ordinals protocol - a technology that allows data to be attached to Bitcoin sats. Bitcoin Rune was introduced as an improvement over this design because it requires less resources on the Bitcoin network. There are important differences between the two designs in terms of asset creation, routine operation, and adoption. BRC-20Token has a first-mover advantage and has already seen significant adoption. Below is a summary of the differences between BRC-20 and Bitcoin Rune.

6. Final Thoughts

Through Bitcoin Runes, the Bitcoin network has gained another Token issuance mechanism. While the network wasn’t originally designed for this, it’s refreshing to see a little more fun brought to the oldest model of modern blockchain. In preparation for launch, many projects are already building communities in preparation for their respective launches. The model described for Bitcoin Rune is very interesting as it leverages some old properties of the network to provide what could be another important addition to the entire space. As excitement builds, so does the use and adoption of the Bitcoin network. It’s uncertain what impact this will have on mainstream investors, but for local cryptocurrency enthusiasts, more use cases for the Bitcoin network can’t hurt.

However, Bitcoin Rune is in the earliest stages of development, and like any other new product, it is prone to critical changes and performance fluctuations. At the time of writing, projects launched using the technology and joining the Bitcoin Rune ecosystem are also highly speculative. Always conduct your own research before investing in any cryptocurrency. Please also note that this article only discusses Bitcoin Runes from a technical perspective and should not be considered financial advice.

Disclaimer: This article does not constitute investment advice. Users should consider whether any opinions, views or conclusions in this article are consistent with their specific circumstances, and comply with the relevant laws and regulations of the country and region where they are located.

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