What Are Bitcoin Runes?

There’s a new token standard called Runes for Bitcoin. It simplifies and improves the process of creating fungible tokens on the blockchain. In essence, Runes is a protocol designed specifically for generating fungible tokens on the Bitcoin blockchain.

What are Bitcoin Runes and why they’re significant?

• Fungible Token Standard: Bitcoin Runes provide a standard for issuing fungible tokens, which means each token is identical and interchangeable with others of the same type. This opens up the possibility of having a wider variety of tokens on the Bitcoin network.
• Efficiency and Integration: The Runes protocol is designed to be more efficient than previous methods of issuing tokens on Bitcoin. It uses Bitcoin’s Unspent Transaction Output (UTXO) model and the OP_RETURN opcode to streamline the process.
• Potential for Memecoins: Bitcoin Runes have been described as a way to bring memecoins to the Bitcoin blockchain, potentially increasing their legitimacy and security.

Launch:

Bitcoin Runes are a very new development, having been proposed in September 2023 and scheduled to launch in April 2024, coinciding with the Bitcoin halving event.

Runes and Bitcoin

Runes interacts seamlessly with the current infrastructure. It harmonizes well with the Lightning Network, a secondary layer of the Bitcoin system that enables quicker and more cost-effective transactions. This advantage potentially sets Runes apart from other token protocols on Bitcoin. Moreover, Runes enhances Bitcoin’s ability to handle fungible tokens on its network. A Runestone represents a specific unspent transaction output (UTXO). By utilizing Hashed Time-Locked Contracts, Runes can be effortlessly integrated into the Lightning Network.

How BTC Runes Work

Bitcoin Runes is a system that allows people to use Bitcoin in a unique way, adding extra information to the transactions. It works by using the UTXO transaction model and the OP_RETURN opcode.

In the UTXO model, when someone sends Bitcoin, the entire amount they have is used up, just like spending all the money in your wallet.

The OP_RETURN opcode is a special instruction that lets people add extra information to Bitcoin transactions without affecting their ability to spend the bitcoin. It’s like storing data. In the case of Runes, this opcode stores information like the name, symbol, and other details.

Runes are different from BRC-20, another system. With Runes, you can send multiple types in one transaction, while BRC-20 only allows one type per transaction. So, you can send different runes to different people in a single transaction.

If there’s a problem with a rune transaction, the runes will be burned and destroyed. This prevents the accidental creation of new runes.

Runes Ecosystem

You can see part of the Bitcoin Runes ecosystem in this tweet that lays it out in a great way:

Bitcoin Runes and Bitcoin Ordinals

Bitcoin Runes are closely related to Bitcoin Ordinals in a few key ways:

• Same Creator: Both Runes and Ordinals were created by the same person, Casey Rodarmor.
• Underlying Technology: Ordinals laid the groundwork for Runes. Ordinals introduced the concept of inscribing data onto individual Satoshis (the smallest unit of Bitcoin) on the blockchain.
• Addressing Limitations: Runes were designed to address some of the limitations of Ordinals, particularly when it comes to fungible tokens. Ordinals are better suited for non-fungible tokens (NFTs) due to the way data is inscribed.

Here’s a table summarizing the key differences:

Overall, Bitcoin Runes can be seen as an evolution of Bitcoin Ordinals, aiming to bring fungible tokens to the Bitcoin blockchain in a more optimized way.