What Are Bitcoin Runes?
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What Are Bitcoin Runes?

3 Min.

Bitcoin Runes is a protocol that enables the creation of fungible tokens on the Bitcoin blockchain. This protocol uses Bitcoin’s UTXO model and the OP_RETURN opcode to simplify the creation and management of fungible tokens on the Bitcoin network. Some benefits of Bitcoin Runes include increased efficiency and a straightforward approach to creating fungible tokens.

Basics

The Bitcoin network has evolved to support both fungible and non-fungible tokens (NFTs). This article examines the Bitcoin Runes protocol, its functionality, distinctions from BRC-20 tokens, and potential advantages.

What Are Bitcoin Runes?

Bitcoin Runes is a protocol facilitating the creation of fungible tokens on the Bitcoin blockchain. Unlike BRC-20 and SRC-20 tokens, which also function on the Bitcoin network, Runes do not depend on the Ordinals protocol. Instead, they leverage existing Bitcoin models like the UTXO model and the OP_RETURN opcode for greater simplicity and efficiency.

How Bitcoin Runes Work

Bitcoin Runes operate using the UTXO (Unspent Transaction Output) model and the OP_RETURN opcode of the Bitcoin blockchain. The UTXO model treats each transaction output as a separate piece of digital currency, used as inputs for new transactions. In Bitcoin Runes, UTXOs manage various amounts or types of Runes, ensuring efficient token tracking.

The OP_RETURN opcode allows the inclusion of up to 80 bytes of additional data in a Bitcoin transaction. Bitcoin Runes utilize this opcode to store essential token information, including the token's name, ID, symbol, and specific action commands, within a data structure known as the Runestone.

Creating and Minting Bitcoin Runes

The creation of a new Rune, known as etching, involves defining essential details such as the Rune’s name, symbol, ID, supply amount, and divisibility. This information is embedded in the OP_RETURN output of a blockchain transaction. During etching, creators can choose to allocate a portion of the Rune to themselves, a process called "premine."

After etching, Runes can be minted through either open or closed mints. Open minting allows anyone to generate new Runes via mint transactions. Closed minting restricts new token creation to specific conditions, such as a set time period, after which minting ceases.

Bitcoin Runes vs. BRC-20 Tokens

CriteriaBitcoin RunesBRC-20 Tokens
Operational FrameworkLeverage the UTXO (Unspent Transaction Output) model of BitcoinRely on the Bitcoin Ordinals protocol, attaching data directly to individual satoshis
Transfer MechanismTransfers generate new UTXOs using data stored in the OP_RETURN fieldRequire new inscriptions for each transfer
Minting ProcessOffer both open and closed minting options, with premining available for developersRestricted to open minting only
ManagementCompatible with the Bitcoin Lightning network and support both lightning clients and SPV (Simplified Payment Verification) walletsNecessitate wallets that support the Ordinals protoco

Advantages of Bitcoin Runes

Efficiency

Utilizing the OP_RETURN model, Bitcoin Runes handle tokens efficiently on the Bitcoin network. Unlike BRC-20 inscriptions, which can occupy up to 4MB, the OP_RETURN code only requires 80 bytes. This significant difference in data usage reduces network congestion and enhances overall performance.

Simplicity

Bitcoin Runes simplify the creation and management of multiple fungible tokens directly on-chain. By avoiding off-chain data and native token creation, Runes prevent the generation of excessive unspendable UTXOs, streamlining token management and making it more accessible.

User Base Expansion

The Bitcoin Runes have attracted attention from cryptocurrency communities and meme coin enthusiasts, especially after they were launched in April 2024. While activity decreased after the launch, Runes represent a new use case for Bitcoin and could potentially attract a broader user base in the future.

Conclusion

Bitcoin Runes enable the creation of fungible tokens on the Bitcoin blockchain, utilizing the UTXO model and OP_RETURN opcode for enhanced efficiency. This protocol simplifies token creation and has the potential to draw more users to the Bitcoin network.

Bitcoin Runes
BRC-20
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