Bitcoin Runes: what they are and how they work

The Bitcoin Runes represent one of the most discussed events in the cryptocurrency industry for 2024. This new token standard simplifies the creation of fungible tokens on the Bitcoin blockchain, offering new possibilities for developers and investors

The Impact of the Bitcoin Runes

Origins and Innovation

Launched after Bitcoin’s fourth halving on April 20, 2024, the Bitcoin Runes had a significant impact on transaction fees, which hit new records the same day, with an average cost exceeding $127.

Casey Rodarmor, the developer known for introducing Ordinals in September 2023, is also the creator of the
Bitcoin Runes.

Ordinals innovation

Ordinals allow NFTs to be incorporated directly onto Bitcoin through inscriptions, i.e. pieces of data integrated into satoshis, the smallest units of Bitcoin. This innovation paved the way for new token standards such as the Bitcoin Runes

Problems Solved by the Bitcoin Runes

Limitations of the Bitcoin Blockchain

Originally, the Bitcoin blockchain was designed to support only its native cryptocurrency, BTC. Unlike the Ethereum network, which included a virtual machine for smart contracts, dapps, and fungible and non-fungible tokens, Bitcoin was limited

from the constraints of its scripting language. This has prevented the development of smart contracts and other types of tokens on its platform. However, the situation began to change in 2023 with the introduction of Ordinals


The Emergency of Ordinals and BRC-20

In early 2023, Ordinals transformed the Bitcoin blockchain landscape, allowing users to embed different types of data directly onto the blockchain. Soon after, a pseudonymous developer known as Domo introduced the BRC-20 standard, which allowed fungible tokens to be created and transferred directly to the Bitcoin network
through Ordinal subscriptions.

Criticism and Network Congestion

Despite the innovative approach, the BRC-20 standard has faced criticism for causing network congestion. The BRC-20 tokens generated a high volume of UTXO (Unspent Transaction Outputs), which overloaded the network. UTXOs represent the remnants of Bitcoin after transactions, similar to the rest received from a cash payment

How Bitcoin Runes work

Transaction Management

The Runes protocol makes it easy to create fungible tokens on the Bitcoin blockchain. Every transaction on the Bitcoin network requires input and output in the form of a UTXO. A UTXO represents a certain amount of digital assets deriving from a previous transaction, waiting to be used

Efficiency of the Runes Protocol

The Runes protocol uses the OP_Return function to manage the issuance and tracking of tokens, labeling each asset with critical data without affecting its expendability. The implementation of OP_Return in Bitcoin Runes limits users to adding up to 80 bytes of data per asset, making the system more efficient than the BRC-20 standard, which
requires up to 4MB.

Buy Bitcoin Runes

Runes-Themed NFT Collections

The Bitcoin Runes protocol doesn’t have a dedicated token, but there are several innovative Runes-themed NFT collections that use the Ordinals protocol, such as Satoshi Nakamoto, RSIC, Genesis Rune, Meme Economics, and Dog Go To The Moon.

Purchase Procedure

To buy or sell Runes, follow these steps:

  1. Select a Bitcoin wallet that supports Runes (for example, XVerse and Magic Eden).
  2. Make sure you have some BTC to handle the Runes transactions and pay the associated fees.
  3. Access a marketplace that supports Bitcoin Runes, such as UniSat, OKX, or Magic Eden. Within the marketplace, choose a Runes project, review its trading metrics such as volume, order book, and price history, and proceed with trading
  4. .


Efficiency and Advantages

The Runes protocol offers a highly efficient method for creating and issuing fungible tokens on the Bitcoin blockchain. This system reduces network congestion by recycling and reusing UTXOs, improving overall network efficiency

Compatibility and Applications

An additional advantage of Bitcoin Runes is their compatibility with Bitcoin’s Lightning network, allowing Runes to be issued and traded in seconds and benefiting from the significantly lower fees of Bitcoin’s Layer 2 solutions. Bitcoin Runes can be used to launch various fungible token projects, similar to ERC-20 tokens on the Ethereum network, even if they do not support smart contracts due to the protocol’s
limited programmability.

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