what are runes?

Bitcoin has had very interesting developments in the last months. From new token standards and technologies to the forefront.

One of the latest developments in this ever-changing ecosystem is the emergence of Runes. A groundbreaking token standard poised to replace the BRC-20 tokens. In this article, we’ll introduce what is this new innovation.

Bitcoin Needs to Evolve

BRC-20 tokens, inspired by ERC-20, were introduced in an attempt to address some of these limitations. While they made some improvements, the pace of innovation in the blockchain space demanded a more robust and flexible token standard. Also, there are too many BRC-20 tokens with no utility. Too much noise with scams and meme coins. This is where Runes steps in.

What Casey Rodarmor wanted to create is a new token standard that could have:

  • Small on-chain footprint.
  • Responsible for UTXO management.

Note: UTXO (Unspent Transaction Output) is an unspent transaction output. The term is related to the concept of double-spending.

On Twitter Spaces, Rodarmor said: “Runes are harm reduction. BRC-20s create a lot of unused UTXOs. In order to spend Runes, you have to destroy UTXOs, which is good for the system as a whole. It’s also beneficial for users, enabling simpler PSBT-based swaps. Since a UTXO can only be spent once, you can create a set of transactions, and then out of those transactions, you can guarantee only one of those can be mined. BRC-20 transactions can’t do this.”

What are Runes?

Runes is a Bitcoin fungible token protocol that aims to compete not only with BRC-20, but also with Taproot Assets, RGB, Counterparty, and Omni Layer. What makes runes unique is that the others either work off-chain or are address (account) based.

According to Rodarmor, Off-chain fungible tokens, like the ones mentioned above, need to settle off-chain data with the blockchain, resulting in an unpleasant user experience. These tokens do not integrate well with Bitcoin’s UTXO-based method.

In one day, the Bitcoin ecosystem is working very fast to integrate Runes. Here is a summary of what is going on so far.

How Rune Benefits Bitcoin?

Rodarmor designed Runes to have a small on-chain footprint and to encourage careful UTXO management. Here is another benefit:

  • Compatibility with Lightning Network and DLCs: This is a distinct advantage over BRC-20s. In simple words, users can add Runes into various multisig wallets and settle their balances to a diverse group of providers. All while introducing new use cases, developers, and users to the Lightning Network.

The BRC-20 vs. Runes test is an excellent way to determine what end customers genuinely value. Although Runes is a stronger technological implementation of fungible tokens on Bitcoin, BRC-20 has developed strong network effects with holders and developers, particularly in Asia, and can adapt if necessary.

Conclusion

As Rodarmor himself put it, the post he published yesterday on his blog was just a draft of what he had in mind. So, there are many developments in Runes that we will cover in the following articles.

Disclaimer
The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies are thoughts and opinions relevant to the accepted levels of risk tolerance of the writer/reviewers and their risk tolerance may be different than yours. We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments so please do your due diligence. Copyright Altcoin Buzz Pte Ltd.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.