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01
Apr
bitcoin runes

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Runes is a new token protocol on the Bitcoin blockchain

Runes is a new token protocol that will be launched on the Bitcoin blockchain in April 2024. The exact time is block number 840,000, the same moment when the Bitcoin halving will take place. Despite the timing, the Runes protocol is unrelated to the Bitcoin halving.

The developer of the new technology is Casey Rodarmor. He came to the general public’s attention a little over a year ago by launching the Ordinals protocol. Ordinals brought NFTs to the Bitcoin blockchain. It makes it possible to attach metadata to one satoshi (the smallest unit in the Bitcoin blockchain), which can be text, image, or video.

Ordinals were made possible by the Taproot update (November 2021). It removed restrictions on the use of metadata in Bitcoin’s blockchain.

Ordinals became very popular in 2023, resulting in the creation of new protocols on Bitcoin. The most popular of the new protocols is BRC-20. It brings the functionality of Ethereum’s ERC-20 standard to Bitcoin. BRC-20 was launched in March 2023.

BRC-20 is based on the Ordinals protocol. Although the tech is functional in principle, it is too complex and creates a lot of unnecessary load on the Bitcoin blockchain.

The popularity of Ordinals and BRC-20 has increased Bitcoin’s transaction fees by hundreds of percent. At worst, the price of one transaction has risen to tens of dollars. Bitcoin transactions have been priced at $1-$2 in recent years. Since 2023, the average fee has increased to between $5 and $10.

Ordinals developer Casey Rodarmor wanted to fix the problem and developed the Runes protocol as a solution in late 2023. Runes will be launched when the Bitcoin halving 2024 takes place.

Both Runes and BRC-20 are protocols for creating ordinary, fungible tokens. Tokens are minted by sending a transaction to the Bitcoin network with metadata defining their characteristics, such as name, ticker, and maximum supply.

In the Runes protocol, the term etching is used for minting. Runes transactions are called runestones. The table below shows the basic information and differences between the Runes and BRC-20 protocols.

FeatureRunesBRC-20
Launched April 2024 March 2023
Developer Casey Rodarmor Domo (pseudonym)
Token type Fungible tokens Fungible tokens
Transaction model UTXO Ordinals
Design Simple Complex
On-chain load Low High
Lightning compatibility Compatible Not compatible

In short, Runes can do the same things as BRC-20 but more efficiently. Runes utilizes Bitcoin’s UTXO model for processing transactions. It’s also Lightning-compatible and produces significantly less load to the blockchain than the BRC-20 standard.

Although BRC-20 was mainly an experimental project, it quickly gained massive popularity. The most popular BRC-20 tokens, ORDI and SATS, have over one billion dollars market cap. Both can be purchased on the most popular cryptocurrency exchanges.

It will be interesting to see how popular the new Runes protocol becomes. After BRC-20, other token protocols were also published, which tried to solve the problems of BRC-20. None of them has been more popular.

If the Runes protocol becomes famous, what will happen to the value of BRC-20 tokens? Is there room for two different token standards in the Bitcoin market?

AboutBitcoin Team

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