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.
New terrible idea just dropped: Runes.
A worse-is-better fungible token protocol for Bitcoin.https://t.co/TPVrUvWxm8
— Casey (@rodarmor) September 25, 2023
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.
🟧 What happened in the last 24 hours in the Ordinals ecosystem 🟧
LOTS of experimentation on Runes, and much more
— Jiurn 🧙🏽♂️ (@Jiurn) September 27, 2023
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.
• Why a new standard when we have BRC-20 already?
• How do you mint or buy Runes tokens?
Here is everything you need to know👇🧵:
— Ordinals Global (@OrdinalsGlobal_) September 26, 2023
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.
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