What Are Bitcoin Runes & How Do They Work?
No doubt, you would have heard about Bitcoin runes and quite possibly have absolutely no idea what they are or how they work? In the cryptoverse new terms and concepts are constantly emerging and Bitcoin runes are the flavor of the month! Let’s dive in…
So What Are Runes?
Runes, a protocol introducing fungible tokens to the Bitcoin blockchain, was launched in April 2024 on block 840,000, coinciding with the last Bitcoin halving event. Runes allow users to etch, mint, and transfer Bitcoin-native digital assets. This makes it easier to create interchangeable tokens for various purposes. Here’s a formal definition for Bitcoin Runes:
Bitcoin Runes are fungible tokens issued via the Runes protocol on the Bitcoin network. They are designed to be more efficient, cost-effective, and secure compared to existing token standards. Additionally, they allow for a variety of use cases, including memecoins.
Runes maintains minimal data to ensure blockchain scalability and efficient Bitcoin transactions. It can leverage the Lightning Network for speed. The protocol simplifies fungible token creation on Bitcoin, facilitating asset tokenization and digital currency creation.
Who Created Runes?
The Runes Protocol was developed by Casey Rodarmor, a crypto expert with extensive experience in creating innovative decentralized protocols. Rodarmor gained recognition in the crypto community for his significant contribution to the Bitcoin Ordinals Protocol.
Why Was It Created?
The Runes Protocol, developed by Casey Rodarmor, targets the shortcomings of the BRC-20 standard to offer improved functionality. It aims for faster, more secure, and scalable transactions, enhancing the user experience in creating fungible tokens.
Runes Protocol sought to enhance fungible token protocols like RGB and Taproot Assets by minimizing their on-chain footprint and UTXOs management, thus reducing unnecessary information and improving security.
The Bitcoin Runes Protocol, designed to decrease network congestion and fees, embeds asset info into Bitcoin transactions, expediting transactions and enhancing scalability and user-friendliness.
How Runes Protocol Works
At its core, the Runes Protocol uses a system of Runes, which are the fundamental units representing fungible tokens. Each Rune has a unique Rune ID, which is a cryptographic hash linked to a specific UTXO on the Bitcoin blockchain.
Etching is the process of creating a new Rune, where users define its name, symbol, ID, supply, divisibility, etc. Creators can also opt for a "premine," allocating a set amount of Rune to themselves before public release.
Minting Runes
After etching, Runes can be minted in two ways:
- Open Minting: After the initial etching, anyone can create new Runes by initiating a mint transaction, which produces a fixed number of new Runes.
- Closed Minting: New tokens can only be created under certain conditions, such as after a specified time period or when the token supply is capped.
Transferring Runes: Edicts
Edicts enable Rune transfers in batches or to a single account. The Runes Protocol, unlike Ethereum's ERC-20, utilizes Bitcoin's infrastructure for enhanced security, wider adoption, and compatibility with Bitcoin wallets. Runes are tied to specific UTXOs, simplifying token tracking and eliminating off-chain balances or complex transfers.
BRC-20 vs. Runes
BRC-20 and Runes differ in blockchain efficiency, usability, and security. Understanding these differences can guide the choice of Runes for certain applications.
| Bitcoin Runes | BRC-20 | |
|---|---|---|
| Launched | April 2024 | March 2023 |
| Creator | Casey Rodarmor | Domo |
| Purpose | Issuance of fungible tokens | Issuance of fungible tokens |
| Model | UTXO-based | Ordinals-based |
| Open Mint | Allowed | Allowed |
| On-Chain Footprint | Low | High due to "junk data" |
| Lighting Compatibility | Yes | No |
- BRC-20: Uses the Bitcoin Ordinals protocol, which attaches data to a Bitcoin satoshi. This approach can be demanding on Bitcoin’s network resources.
- Runes: Based on Bitcoin’s UTXO (Unspent Transaction Output) model. It stores data in the OP_RETURN field of a bitcoin transaction, which is more efficient and less resource-intensive.
Runes offers superior efficiency, user-friendliness, and security over BRC-20 tokens. Its UTXO model reliance, compatibility with Bitcoin infrastructure, and data integrity mechanisms make it a robust alternative.
Bitcoin Runes & Bitcoin Memecoins
Bitcoin Runes simplifies memecoin creation on the Bitcoin blockchain, enhancing accessibility. It allows people with limited technical skills to create tokens easily through a user-friendly interface and efficient tools. This scalable protocol ensures the Bitcoin network won't slow down due to memecoin management.
How To Rune
Step 1: Set Up a Bitcoin Wallet
First, to securely store your Bitcoin, which is necessary for purchasing Runes, you need a Bitcoin wallet. Choose a reputable self-custodial wallet provider, such as Savl, and create an account.
Step 2: Get Some Bitcoin
To use Runes on the Bitcoin network, you need Bitcoin for fees and transfers. Buy Bitcoin via your Savl Wallet or a preferred crypto exchange. After that, you're ready to use Runes.
Step 3: Buy Rune Tokens
Buy Runes from online platforms like UniSat, Magic Eden, or OKX. These platforms let you deal with digital assets like Runes. Follow their guidelines to purchase Runes using Bitcoin.
How to Sell Runes
Selling Runes is simple. List your Runes on a Bitcoin marketplace, set a price, and add details. Buyers will purchase with Bitcoin, with the transaction securely handled by the marketplace.
Final Thoughts
Bitcoin Runes introduce a new level of innovation to the Bitcoin network, expanding its excitement and potential. Even though there was an initial surge and later decrease in activity and fee revenue after the Bitcoin halving, the potential of Bitcoin Runes remains immense. This development proves that even the oldest blockchain can adapt to the constantly changing needs of its community.
