Learn about Runes Protocol, the founder of Ordinals New Baby

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Runes is set to shake things up by bringing a fresh fungible token standard to Bitcoin’s ecosystem. Fungible tokens are digital assets that can be exchanged on a one-to-one basis. The introduction of Runes aligns with the Halving event, which reduces the reward for mining Bitcoin every four years, thereby constraining new supply.

What is the Runes Protocol?

The Runes Protocol is a standard protocol for issuing fungible tokens on the Bitcoin network. It was initially presented by Casey Rodarmor, the creator of Bitcoin Ordinals, in September 2023

Runes functions similarly to BRC-20 in token issuance, but whereas BRC-20 relies on the Ordinals protocol, Runes employs the UTXO(Unspent Transaction Outputs) model. This difference distinguishes the Runes Protocol from other protocols for issuing fungible tokens.

How Runes Protocol works?

Runes primarily aims to simplify the creation and oversight of fungible tokens on the Bitcoin network. Like BRC-20, Runes will utilize Bitcoin and Bitcoin-based fees to generate new tokens.

The UTXO model represents the amount of digital currency someone currently holds for spending, its important role is in tracking ownership and facilitating decentralized transactions on the Bitcoin network.

The key difference between Runes and BRC-20 lies in Runes' utilization of the UTXO model, akin to Bitcoin, as opposed to the Account-based model employed by certain Layer 1 chains like Ethereum.

Many people believe that the UTXO model is superior, and one of the reasons Ethereum lags is its use of the Account-based model. Rodarmor asserts the superiority of the UTXO model because while other standard tokens tend to rely on off-chain data, Runes operates entirely on-chain.

With Runes, issuers can create tokens and limit the number of tokens one can mint in a single transaction. This ensures equal access and purchasing opportunities for token creators and future buyers in the community.

What are the differences between Runes and other Bitcoin token standards?

Runes vs BRC-20

• Runes: Uses a UTXO-based model, minimizing "junk" UTXOs and easy tokenizing.
• BRC-20: BRC-20 is considered more complex, requiring the minting of an NFT before creating a token, causing network congestion due to excessive "junk" UTXOs.

Runes vs ORC-20

• Runes: Offers a simpler and more efficient fungible token protocol, designed to fit seamlessly into the Bitcoin ecosystem.
• ORC-20: This was brought about to address the inefficiencies of BRC-20, hoping to fix issues such as minimal naming systems and the absence of solid anti-double-spending systems.

Runes vs other protocols (Taproot Assets, Counterparty)

• Runes: Differentiates itself by not requiring off-chain data or a native token, unlike Counterparty, which isn't UTXO-based.
• Other protocols: Often rely on complex frameworks or need extra elements like native tokens or off-chain data management.

How Runes will affect Bitcoin

Scalability and blockchain bloat

• Enhancing scalability: Its unique tokenization method is distinct from existing solutions and could alleviate issues of blockchain bloat.
• Alleviating bloat: The protocol uses a UTXO-based approach for managing token balances, unlike BRC-20, which is address-based and reduces blockchain bloat.

Technical Approach

• Token issuance: Runes begins with an issuance transaction defining the token's symbol, supply, and decimals. The supply is tied to a specific UTXO, and following transfers split this UTXO into new ones.
• Data storage: Runes uses the OP_RETURN function to store data in contrast to the Ordinals protocol, which uses the witness part of a transaction.

Bitfinity EVM Integration

• Smart contract expansion: The combination of Runes and Bitfinity EVM, a layer-2 technology for Bitcoin, could improve the capability of smart contracts on the Bitcoin network.
• Developer and user benefits: This integration would provide a scalable, Ethereum-compatible environment for Solidity programming while leveraging Bitcoin's liquidity.

Summary

Currently, Runes is in the development phase and has not yet launched its mainnet. However, the community's and developers' enthusiasm for the project demonstrates a collective interest in Bitcoin and its surrounding ecosystem. Runes is expected to introduce a new token standard, simplifying the creation and management of tokens on the Bitcoin network, thereby diversifying the Bitcoin ecosystem.

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