Bitcoin Runes: Crypto's Next Big Thing?

When it comes to Bitcoin (BTC), we don’t usually associate anything else beyond its use case as a cryptocurrency. 

Nonetheless, in December 2022, the Bitcoin ecosystem began hosting another kind of asset segment: Ordinals, which are equivalent to non-fungible tokens (NFTs).

Recommended Read: What Are Bitcoin Ordinals?

As Bitcoin underwent its fourth halving in April 2024, a similar asset segment emerged in the Bitcoin ecosystem, i.e. Bitcoin Runes.

A relatively new token standard, Bitcoin Runes has created a lot of buzz of late, becoming increasingly popular among crypto enthusiasts.

In this article, we will learn more about Bitcoin Runes and the importance of the segment in the broader crypto ecosystem.

Let's Define Bitcoin Runes

We usually think of Bitcoin only as a cryptocurrency, but let’s look at it as a platform for digital tokens. This imagination led the way towards Bitcoin Ordinals. A creation of Casey Rodarmor, Ordinals are like NFTs which could be inscribed on additional space available. 

Next, the Bitcoin Request for Comment (BRC-20) token standard was introduced to the crypto ecosystem. BRC-20 tokens are fungible that don’t exist on-chain; however, details about their creation and movement are inscribed into satoshis on-chain. 

An innovation to the Bitcoin ecosystem is the Bitcoin Runes protocol, also created by Rodarmor.

Rodarmor announced Bitcoin Runes in September 2023. He said,

“Creating a good fungible token protocol for Bitcoin might bring significant transaction fee revenue, developer mindshare, and users to Bitcoin.”

 

But the difference between Ordinals and Runes is that while the former is a non-fungible token standard, the latter is a fungible token standard. 

• The launch of Bitcoin Runes coincided with the fourth halving on 20th April 2024.
• The moment the Bitcoin blockchain hit 840,000 blocks, Rodarmor launched Runes.
• Thanks to this dynamic innovation, you can create memecoins or shillcoins via Bitcoin Runes. 

How Does Bitcoin Runes Work?

Bitcoin Runes inherits the Bitcoin network’s two elements:

• Unspent Transaction Outputs (UTXO) model and
• OP_RETURN opcode 

Sounds too technical, but let's try to understand in simple words.

UTXO Model

A UTXO model ensures that you can later use spare cryptocurrency balance that is left over with you after a Bitcoin transaction.

Suppose you decide to purchase a secondhand car in the U.S. for 0.5 BTC. How cryptocurrency transactions work is that the network will send 1 BTC to the seller and will automatically return 0.5 BTC to you.

You are left with a UTXO of 0.5 BTC.

Now, imagine that each UTXO or unspent transaction output can contain multiple spare token balances.

This is the model of Bitcoin Runes that incorporates multiple token balances into a single UTXO and so on. 

OP_RETURN Opcode

The OP_RETURN opcode allows you to add additional data to Bitcoin transactions without any disturbance to UTXOs. The OP_RETURN opcode lets you add up to 80 bytes of data to an unspendable transaction.

You can add information about a token such as the name, ID and symbol to an unspendable transaction. 

These are the two elements that Bitcoin Runes deploys for its functionality. Too technical, right? Even we struggle at times!

Let's summarise quickly:

• A UTXO is a Bitcoin balance left after a certain transaction.
• The OP_RETURN opcode is a function for adding additional data to a Bitcoin transaction. 

The process of creating a new fungible Rune token and assigning it to a UTXO is called Etching. A creator also adds additional information using the OP_Return opcode such as its name and symbol to the token.

It's like peeling a piece of skin off flesh and then making a cool tattoo on it.

A Rune creator can even “premine” a Rune token during this process, i.e. keep a certain amount of Rune before allocating a Rune to the users.

Next comes the process of Minting in which general users can mint Bitcoin Runes. Minting allows the distribution of Runes among users across a network. 

Benefits of Bitcoin Runes

Thanks to Bitcoin Runes, you can create and trade fungible tokens available on the Bitcoin network.

What other benefits can we draw from Runes? Let's see. 

What the Metrics Say...

Bitcoin Runes witnessed record transactions immediately following the launch that coincided with the fourth halving on 20th April 2024.

Runes transactions easily surpassed the transactions related to the usual Bitcoin tokens, BRC-20 tokens and Ordinals. 

Source: Dune Analytics
 

On 23rd April, Bitcoin Runes recorded 753,584 transactions, followed with 171,401 Bitcoin token transactions, 1,335 BRC-20 transactions and 690 Ordinals transactions. This has been the brightest day for Runes so far.

When Runes debuted on 20th April, it accounted for 73.5% of all the transactions on the Bitcoin transactions. 

Source: Dune Analytics
 

On 23rd April, Runes accounted for 81.3% of all the transactions—the highest proportion so far. Later, it even dropped below 10%. Of late, Runes account for 35%-40% of all Bitcoin transactions.

So far, Bitcoin Runes has seen over 8.3 million transactions with 2,322 BTC in fees. 

What Should BitDelta Traders Know?

We recommend that BitDelta traders tread very carefully when it comes to Bitcoin Runes.

The primary launchpad of Bitcoin Runes is Bitcoin Rune. A few marketplaces such as Magic Eden have also started platforming Runes tokens.

Runes is a relatively new asset segment that has generated a lot of noise in the crypto community. However, it is quite expensive and risky to trade Runes tokens.

Nonetheless, Runes has brought the fun of memecoins to the otherwise all-serious king coin’s ecosystem.

Let's wait and see how it evolves with time and if it can impact the crypto ecosystem in the future.

Note: Users should be careful not to confuse Bitcoin Runes with THORChain's RUNE cryptocurrency which is the native token of the THORChain ecosystem.