What Runes Are in Bitcoin? An Introduction to the New BRC-20 Token Substitute
The newest fungible token mechanism to enter the Bitcoin ecosystem, Runes, claims to be easy to use and effective. You will learn about Bitcoin Runes, their functions, how they differ regular BRC-20 tokens, and how to securely store them in your Xverse Runes wallet in this article.
what are bitcoin runes?
Using the Runes protocol, fungible tokens known as Runes are directly issued on Bitcoin. The new protocol was suggested by Casey Rodarmor, the author of Ordinals, in September 2023. He positioned it as a more improved and straightforward substitute for the experimental BRC-20 standard for fungible tokens.
Soon after the Bitcoin token standard was introduced in March 2023 by the anonymous developer Domo, BRC-20 tokens became extremely popular. After almost three months, BRC-20 tokens saw an exponential increase in value, reaching a $1 billion market cap.
The token standard caused an excessive amount of “junk” UTXOs to be produced, which clogged the network even as it allowed users to generate fungible tokens that were native to Bitcoin for the first time. A UTXO-based protocol called Rodarmor aims to address this problem by halting the production of “junk” UTXOs.
The UTXO model, which Bitcoin employs, divides a transaction into inputs and outputs. An output is produced and the input is erased during a transaction. A UTXO is the output that is left over and can be utilized in a subsequent transaction. To put it another way, the coins that remain in a wallet after a transaction is completed are known as unspent transaction outputs, or UTOs.
Runes doesn’t require off-chain data or a native token to function, in contrast to existing fungible token systems for Bitcoin. The Taproot Assets Protocol, for example, keeps asset metadata off-chain but still makes use of UTXOs. On the other hand, Counterparty, a system developed on top of the Bitcoin blockchain, is not UTXO-based and requires a native token for some functions.
The first Rune token, $RUNE, was released the same day Rodarmor made the announcement, demonstrating how enthusiastically the Bitcoin community has responded to the Runes protocol.
That same day, Trevor Owens of BTC Frontier Fund also made a $100,000 grant offer to the first team to create a functional Runes indexer, issuance, or transfer application. A few days later, Runes issuance was made possible by Luminex, which gave users the ability to design and distribute their own Rune tokens.
In addition, Rodarmor has been developing the token standard requirements, which were just made public in advance of the launch in April 2024, when the Runes protocol will be triggered on Bitcoin block 840,000. This deployment coincides with the day that Bitcoin will halve.
How Are Runes Token Standards Operated?
How Are Runes Token Standards Operated?
Runestones
Runestones (not to be confused with the Runestones Ordinals collection) are messages on the Runes protocol. They have the ability to move runes from transaction inputs to outputs, mint new tokens, and etch old tokens.
Runestones are kept in the outputs of Bitcoin transactions that start with OP_RETURN, a unique function used to store data on the blockchain. A transaction may have only one rune at most.
How to Configure Mint Runes and a Bitcoin Node
To uphold the decentralized tenets of Bitcoin, Xverse invites everyone to set up a node. It is only advised for individuals with advanced technical knowledge and command line proficiency to run a node for minting and etching Runes.
To make it simple for anyone to start using Runes, Xverse is collaborating with numerous ecosystem partners to provide all of the same services in addition to additional ones. Even if the market for Runes minting and etching services is expanding quickly, some users could still favor operating their own Bitcoin node over depending on outside providers.
Here’s a quick tutorial on how to setup a Bitcoin node and mint Runes.
Making Tokens for Runes
Etching is the first step in creating a new Rune token, during which parameters including the token supply, name, amount of decimals, and minting terms are specified. Because the token supply is linked to a particular UTXO, any quantity of Runes—billions, millions, or less—can be found in a single UTXO. The Rune token balances are monitored via UTXOs.
The code to etch a fresh Rune token is as follows:
Minting and Transferring
Etching is followed by minting and transfer, which split a UTXO into multiple new UTXOs holding varying amounts of runes to send records to recipients, and minting, which creates the actual tokens based on the predetermined terms, transfers Runes tokens from transaction inputs to outputs via edict messages.
An edict consists of the output number, the amount, the Rune ID block height, and the transaction index. The block in which a rune was etched and the index of the etching transaction recorded inside that block make up the Rune ID, which is used to identify tokens.
The following are the code structures for mint and transfer:
Information Storage
Content such as pictures, audio files, and HTML files can be added to the witness area of a Bitcoin transaction to generate ordinal inscriptions. The SegWit upgrade split the Bitcoin transaction format into two halves, introducing the witness section. Transaction signatures are contained in the witness segment, and the sender and recipient’s wallet addresses are held in the first section.
Runes saves all data, including transfer messages, etching messages, and minting messages, in OP_RETURN rather than in the witness portion of a transaction. This is what distinguishes the Runes and Ordinals protocols from one another.
The Runes Environment Is Expanding
Since Runes is set to launch on the day of the upcoming Bitcoin halving, developers of the cryptocurrency are already preparing for the launch by constructing the infrastructure needed to handle Runes tokens.
Let’s examine the developing Runes ecosystem.
Marketplaces for Runes
Once the protocol debuts, users will be able to purchase and sell runes using their Xverse wallets on markets.
On Magic Eden, investors can presently exchange pre-rune tokens such as RuneX: Unnamed, Runestone, RSIC, and Rune Pups.
Launchpads for Runes
Launchpads for Runes are webpages where projects can go live and release their tokens. BitX and Magic Eden both have launchpads that provide projects with marketing assistance. Runes Terminal, CraftRunes, and Meta Runes are other platforms where Runes token projects can be launched.
While the Runes Terminal launchpad hasn’t been released yet, project submissions are presently being accepted through the Meta Runes and CraftRunes launchpads.
Platforms for Lending Runes
Decentralized applications (dApps) known as “runes lending platforms” let users lend and borrow runes using their Xverse wallets directly.
One example of a runes lending dApp on Bitcoin is Fluid Tokens. It provides runes and Ordinals for permissionless lending and borrowing. Runestones, The Rune Guardians, and RSIC are a few pre-rune tokens that you can borrow.
Advantages And Difficulties Of Runes
- Reduces on-chain footprint because of the concept based on UTXO.
- simplifies the Bitcoin native fungible token issuance process.
- Its ease of use might encourage creativity within the Bitcoin community.
- doesn’t need off-chain data to function
- permits open minting under conditions established by the etcher
Challenges
- The widely used BRC-20 token standard poses competition.
- Error-related token burning can negatively impact user experience.
- Still hasn’t shown to be a reliable Bitcoin token standard.
The Ascent of Bitcoin's Fungible Tokens
Since the Ordinals protocol became live in 2023 and introduced the idea of numbering satoshis (sats) in the order that they are mined, the growth of fungible tokens on Bitcoin has progressed considerably.
Ordinal Theory is a numbering technique that was originally utilized on the Bitcoin blockchain to directly construct non-fungible coins by appending random data to individual sats. These NFTs were distinguished from NFTs struck on other chains by being referred to as Ordinal inscriptions or digital artifacts.
Based on the Ordinal Theory, the experimental BRC-20 token standard was released in March, shortly after Ordinal inscriptions gained momentum in early 2023. It directly introduced fungible tokens to Bitcoin and sparked the meme token explosion. However, because users had to mint an NFT before they could create a BRC-20 token, the BRC-20 token standard was cumbersome and inefficient.
Because of this, the ORC-20 token standard was unveiled a month later to overcome the inefficiencies of BRC-20 as well as other problems including the four-letter naming method and the inadequate anti-double-spending mechanism.
In order to address these issues and other issues like as the four-letter naming scheme and the insufficient anti-double-spending mechanism, the ORC-20 token standard was introduced a month later.
Download Mitracrypto right now to manage your runes tokens in a safe and secure manner!
FAQs
In Bitcoin, what are Runes?
Runes are native to Bitcoin and fungible tokens based on the Runes system. With appropriate UTXO management and a small on-chain footprint, the protocol aims to improve fungible token issuance on Bitcoin and outperform the Ordinals-based BRC-20 token standard.
What is the Bitcoin Runes protocol?
A method for directly producing, minting, and transmitting fungible tokens on Bitcoin is the Runes protocol. It aims to reduce the on-chain footprint and provide proper UTXO administration in order to outperform the BRC-20 token standard in terms of efficiency. In order to do this, the Runes protocol makes use of a UTXO-based paradigm that is well suited to Bitcoin’s design. Launched in April 2024, Runes was proposed in September 2023.
How can I buy Runes?
By acquiring the different rune tokens, you can make investments in runes. As an alternative, you can lend your Runes tokens and earn interest by using the runes lending protocols. Keep in mind that rune investments are extremely dangerous if you’re thinking about doing so. Therefore, before purchasing any rune tokens, do extensive research.
