Reported by News.Bitcoin, as the halving is set to occur between April 19-20, 2024, a substantial number of crypto enthusiasts are eagerly preparing for the Runes protocol. The concept of Runes was developed by the creator of Ordinals, Casey Rodarmor, and has been met with considerable enthusiasm since its announcement in September 2023. The following is a comprehensive overview of what to expect from this anticipated protocol.
Six months ago, Casey Rodarmor, the originator of Bitcoin’s Ordinal theory, unveiled the Runes protocol on his blog. He expressed uncertainty about whether developing a new protocol on Bitcoin that enables the creation of fungible tokens was a good idea, but acknowledged that it could potentially generate substantial transaction fee revenue, attract developer interest, and increase Bitcoin’s user base.
Fundamentally, the Rune protocol serves exactly this purpose: a token standard built on Bitcoin that facilitates the issuance of fungible tokens, aiming to provide a more streamlined way for users to create them. While some might point out that BTC already has a token standard, the BRC20, developed by Domo, Rune sets itself apart. It adopts the Unspent Transaction Output (UTXO) model, in contrast to the account-based model used by BRC20 tokens.
This crucial distinction aligns Runes more closely with the fundamental architecture of Bitcoin. Rodarmor’s blog post articulately describes how in this system, runes function as digital units housed within UTXOs—these are essentially repositories capable of containing varying quantities and types of runes. Transactions incorporate a specific script that indicates a protocol message (marked by OP_RETURN and the letter ‘R’) to govern the transfer or creation of runes.
Such transactions employ a series of numbers to detail the rune ID, the transaction output to which they should be allocated, and the number of runes to be transferred. Contrary to the BRC20 and other non-UTXO-based systems that might need additional components (such as a native token or dependency on Ordinal theory), Runes achieves simplicity through the use of direct transaction scripts for managing and allocating digital units.
The protocol is set to launch concurrently with the halving, and currently, it’s undergoing testing on Bitcoin’s testnet. One user on the social media platform X reported significant testnet activity, noting that the testnet mempool reached 25 blocks deep. This person mentioned that testnet fees were elevated and a market for testnet satoshis was emerging. The same individual anticipates a rise in Bitcoin fees as people begin etching runes, based on the initial interest observed so far.