Runes is about to stir things up, introducing a new fungible token standard to Bitcoin’s Ecosystem. Fungible tokens are digital assets that can be traded on a one-to-one basis. Runes’ launch coincided with the Halving, which “halves” the reward for mining Bitcoin every four years, limiting new supply. This happened on April 19th.
Runes was created by well-known developer Casey Rodarmor in September of 2023. Casey is also the creator of Ordinals, a new feature on the Bitcoin blockchain that allows for the creation of unique, digital artifacts by inscribing data directly onto individual Satoshis, the smallest units of Bitcoin.
BRC-20s have been the current Bitcoin token standard, but they have an issue of creating surplus “junk” UTXOs. These can clog up the network, making for a less-than seamless experience for users.
UTXOs, or Unspent Transaction Outputs, are essentially digital assets that you have received but haven't spent yet.
Bitcoin Runes is an attempt to clean up the network, while allowing traders to enjoy their memecoins on the mother chain.
We can’t write about why you should be excited for the Runes standard without mentioning its creator, Casey Rodarmor. A huge amount of the excitement around Runes comes from the fact that Runes has Casey’s name on it – him blessing the protocol and working on the core team adds a whole new layer of umph to the project.
Runes has the potential to attract a wider audience. Runestone, a pre-Runes NFT project, airdropped a free Runestone to wallets that had 3 or more digital items (inscriptions) on the Bitcoin blockchain before the Runestone project launched. Runestone is attracting a lot of excitement around what holding this Ordinal could mean for receiving Runes.
Excitement isn’t the only thing that could attract more users. Typically Ordinals and other NFT collections limit their size to preserve collectibility, but Runes and similar types of tokens can be made in much larger amounts. This means it's easier for more people to own them and join the community of collectors.
The attention around Runes as well as its accessibility could attract more worldwide adoption, something that is core to Bitcoin’s mission.
“Our mission is to help everyone, everywhere be more economically free.”
Source: Bitcoin.com
Runes could offer a more secure and reliable platform for token creation and transactions. By using the UTXO for on-chain data storage, it inherits the security model of Bitcoin for stronger safety features and a reduced risk of security holes, aka vulnerabilities.
Being UTXO-based also means that Runes will be more resistant to reorganizations, which are when the Bitcoin network has to choose between two versions of its transaction history. Being more resistant to reorganizations means Runes transactions are less likely to be affected by changes in the Bitcoin network's transaction history, providing greater stability for these transactions.
Runes makes creating and managing new tokens simple and streamlined for developers. For the user, this means more developers are willing to build, which means more tokens and more things to get excited about.
The Runes Protocol is designed for the Bitcoin network, allowing the creation and management of various types of digital tokens.
Bitcoin Runes uses a UTXO-based protocol, where each transaction starts by picking up pieces of Bitcoin that haven't been spent yet (like digital change) and uses them to create new transactions. Tracing each Bitcoin back to its creation ensures that every coin is unique and hasn't been falsely duplicated, giving you confidence that the Bitcoin you own or accept in a transaction is genuine and truly yours.
Compared to other protocols that may rely on off-chain data or special tokens, Runes utilizes Bitcoin's native features for on-chain data storage. This allows for less of the “junk” UTXOs we mentioned earlier, which can bog down the network, causing transactions to be slower, more expensive and less reliable.
Specifically, Bitcoin Runes’ on-chain data storage is in the OP_RETURN part of a transaction. Picture jotting down a secret note on your Bitcoin transaction. OP_RETURN is that magic pen that lets you leave your mark without moving any actual Bitcoin. This keeps Bitcoin transactions neat and tidy because it doesn't add extra work for the network, which can affect the overall user experience.
You may also hear people talking about Runes having lightning compatibility. This means that Runes can use the Lightning Network, a separate layer on top of Bitcoin, to enable faster and cheaper transactions. This allows Runes transactions to bypass the usual delays and high fees of the Bitcoin network by using this faster, more efficient system.
Once you're ready to check out Runes, here are some steps you can take:
Runes – A new fungible token standard that is set to launch on Bitcoin. Developers, or etchers, will be able to launch their own Rune tokens that they can name, set terms to and manage.
Bitcoin Ecosystem – A network of technologies, participants and services that interact to support and facilitate the use of Bitcoin as a digital currency and financial system.
Burn – Permanently removing Runes from circulation by sending them to a place where they can’t be spent or recovered.
Cap – The maximum number of times a Rune can be minted. Once this limit is met, no more Runes can be made and the mint is closed. This limit is set by the Rune’s etcher at the time of creation.
Casey Rodarmor – A well-known developer responsible for the creation of Runes and Ordinals on Bitcoin.
Cenotaph – Runestones that are malformed; this can happen for a number of reasons. Cenotaphs can’t be minted and are burned.
Divisibility – How small a Rune can be divided; not all Runes can be divided the same. Runes with a divisibility of 0 can’t be divided, a unit with a divisibility of 2 means the smallest Rune amount is 0.01.
Etchers – The developers, or creators, of Rune tokens.
Etching – How Runes are created. This is similar to how it sounds – etching creates a Rune and sets its properties. These properties can’t be changed after etching.
Fungible Token – A token where each one is exactly like the others, so they can be easily swapped.
Lightning Compatibility – Runes will be compatible with the Lightning Network, which can allow Runes transactions to skip delays and high fees on the Bitcoin network.
Lightning Network – A separate layer on top of Bitcoin that can enable transactions that are faster and less expensive.
Minting Runes – The process of creating a new Rune token. This process makes the token unique and traceable, ensuring its authenticity and ownership within the Bitcoin ecosystem. Once the mint limit (which is set by the etcher) is reached, the mint closes and no more new tokens can be made, the ones that exist are the only ones that can be in circulation.
Minting Terms – Each mint has their own minting terms for when the mint starts and ends, created by the etcher of the token.
Names – Etchers have to name their Rune token within 28 characters with the letters A through Z. Etchers can also add a spacer to separate words, which shows as a bullet point in between words.
Premine – The etcher of a Rune can give themselves units of the Rune token that is being created during the etching process.
Rune ID – A label that lists the block where a Rune was etched and the index of the etched transaction within that block. For example, a Rune minted in the 98th transaction in the 570th block is labeled as 570:98.
Rune Protocol – The underlying system that makes the operations behind Runes possible.
Runestones – Rune Protocol messages that can create, mint and transfer existing Runes from a transaction's input to its output.
Symbol – This is essentially what it sounds like – a symbol that is displayed after the quantity of a specific Rune. This symbol is decided by the etcher during the token’s conception. If a Rune is not assigned a symbol, the generic currency sign (¤) is used.
The Halving – An event that happens in the Bitcoin ecosystem about every four years, where Bitcoin miners’ rewards are slashed in half. This is done to control Bitcoin’s inflation, making sure that the total supply of Bitcoin will never exceed 21 million. Runes’ launch will coincide with this year’s halving.
Transferring Runes – When Runes are included in the inputs of a transaction, or when new Runes are generated through a premine or minting process, those runes move to the outputs of the same transaction. The way Runes are moved from inputs to outputs can be altered by the transaction's Runestone.
UTXO-based protocol – A system where each transaction starts by picking up pieces of Bitcoin that haven't been spent yet (like digital change) and uses them to create new outputs.
UTXOs – Unspent Transaction Outputs. These are basically digital assets that you have received but haven't spent yet.
We’re excited to see this new era ushered in for Bitcoin’s ecosystem. Magic Eden wants to make it easier for everyone to use NFTs – Runes is a part of that journey. We believe the future of BTC is on Magic Eden, and we hope you join us there.
The information provided on this website is provided for general educational purposes only and is in no way financial or investment advice. Certain information may have also been provided to us or prepared by third parties; these materials are provided for convenience and are not an endorsement by Magic Eden. Magic Eden is not liable for any errors, changes or amendments to such information, including any actions taken in reliance on such information.
