Key Takeaways
- Runes is a new fungible token protocol on Bitcoin, developed by the creator of Ordinals, offering a more efficient way to issue and manage tokens.
- Unlike Ordinals, which focus on inscribing unique NFTs onto individual satoshis, Runes are designed for interchangeable tokens.
- Runes projects have gained traction, with notable tokens such as GOODS, SATOSHI, and DOG attracting attention in the market.
- To store Runes, users need a compatible Bitcoin wallet such as Xverse, Leather, or Ordinals Wallet.
Bitcoin is the biggest cryptocurrency in the world, but it lacks support for smart contracts. This seriously limits its ability to handle non-fungible tokens (NFTs) or unique digital assets. This changed with the Ordinals protocol, which utilized the BRC-20 standard to create NFTs on the Bitcoin blockchain. However, within months, the Runes protocol emerged, offering similar capabilities with enhanced efficiency. So what’s the difference between Runes and Ordinals?
In this article, we’ll explore the Runes protocol, how it works, why it’s necessary, and how it differs from Ordinals.
What Is Runes Protocol on Bitcoin?
The Runes protocol is a fungible token standard on the Bitcoin network, enabling the creation and management of interchangeable tokens directly on the blockchain. Developed by Casey Rodarmor, the same innovator behind the Ordinals protocol, Runes aims to provide a more efficient and Bitcoin-integrated token system compared to previous standards like BRC-20.
By leveraging Bitcoin’s existing Unspent Transaction Output (UTXO) model, Runes minimizes additional data storage on the blockchain. As a result, it ensures a more streamlined and resource-efficient approach to tokenization.
Why Does Bitcoin Need Runes?
While Bitcoin excels as a decentralized digital currency, its architecture lacks native support for complex smart contracts, limiting its ability to handle diverse digital assets and functionalities. Previous attempts to introduce tokenization, such as the BRC-20 standard, often resulted in inefficiencies, including excessive data storage and network congestion.
The Runes protocol addresses these challenges by utilizing Bitcoin’s inherent UTXO model, allowing for the creation and management of fungible tokens. Unlike Ordinals, it achieves this without overburdening the Bitcoin network. Consequently, it preserves Bitcoin’s core principles while expanding its utility. Runes enables applications like decentralized finance (DeFi), gaming assets, and more, all while maintaining network efficiency and security.
How Do Runes Work?
Runes operate by embedding specific data into Bitcoin transactions, effectively “etching” information that defines the token’s properties such as its name, symbol, and total supply. This process uses the OP_RETURN field in Bitcoin transactions, which allows for the insertion of arbitrary data up to 80 bytes.
As a result, Runes can define and manage token behavior directly within the Bitcoin network’s existing framework. This method leads to more efficient token creation and transfers, minimizing the impact on blockchain storage and maintaining the integrity of the network.
Creating a Rune: Step by Step
The Runes protocol token creation process is straightforward and usually consists of a couple of steps. These include:
- Define Token Parameters: Users have to determine the token’s attributes, including its name, symbol, and total supply.
- Prepare a Bitcoin Transaction: Then, they can construct a Bitcoin transaction that includes the OP_RETURN output and embeds the token’s defining data.
- Broadcast the Transaction: After that, the transaction is sent to the Bitcoin network, where it will be validated and added to the blockchain.
- Token Distribution: Finally, once the transaction is confirmed, the newly created tokens can be distributed to designated addresses as specified in the initial parameters.
Runes vs Ordinals: What’s the Difference?
Although both Runes and Ordinals were developed by Casey Rodarmor and released in close succession, they serve different purposes and operate differently. Ordinals focuses on creating non-fungible tokens (NFTs) by inscribing unique data onto individual satoshis, effectively turning them into distinct digital artifacts.
By contrast, Runes are designed for fungible tokens, meaning each unit is identical and interchangeable, similar to traditional cryptocurrencies. In addition, Runes utilizes the UTXO model and OP_RETURN field for token management. As a result, it offers greater efficiency and less blockchain bloat compared to the method employed by Ordinals.
Top Runes Projects
Since the introduction of the Runes protocol, several notable projects have emerged, each leveraging its capabilities to offer unique tokens on the Bitcoin network:
- UNCOMMON•GOODS (GOODS): This was the first Rune project, hard-coded by Casey Rodarmor himself. It allows minting until the next Bitcoin halving event, adding a layer of exclusivity.
- Z•Z•Z•Z•Z•FEHU•Z•Z•Z•Z•Z (ᚠ): Fehu was inspired by the first runes in the oldest runic alphabet. It was the first Rune after the launch of the protocol, notable for its early adoption and unique naming convention.
- DECENTRALIZED: A Rune created by the NFT project CyberKongz, it was pre-mined and distributed to its holders.
- SATOSHI•NAKAMOTO (SATOSHI): A tribute token that gained significant traction, reaching one of the highest market caps in its initial week.
- DOG•GO•TO•THE•MOON (DOG): A memecoin project that rewarded early supporters by airdropping tokens to holders of specific Bitcoin Ordinals before the Bitcoin halving.
As the projects above demonstrate, the Runes protocol is highly versatile and can be used for various goals. It expands Bitcoin’s utility, allowing creators to build on its network.
Where and How To Buy Runes
The Runes protocol is available on several marketplaces and platforms. Since Runes are built directly on Bitcoin, their availability is tied to platforms that specialize in Bitcoin-based assets like Ordinals. Some of the most notable marketplaces where you can buy Runes include:
- Magic Eden (Bitcoin Marketplace): A well-established NFT marketplace that has expanded to support Bitcoin-based tokens, including Runes.
- Ordinals Wallet: A dedicated platform for Bitcoin Ordinals and Runes, offering a user-friendly interface for buying and selling.
- OKX Marketplace: Some centralized exchanges, such as OKX, offer users to directly purchase Runes from their platform.
- Unisat: Originally built for BRC-20 tokens, Unisat has integrated support for the Runes protocol.
If you’re looking to purchase Runes, you can do so by following these steps:
Step 1: Set Up a Compatible Wallet
Ensure you have a Bitcoin wallet that supports Runes. Wallets like Xverse, Leather, or Ordinals Wallet are ideal for managing Runes-based assets.
Step 2: Fund Your Wallet with Bitcoin
Runes transactions require BTC for purchases and network fees. Make sure to transfer enough Bitcoin into your wallet to cover the cost of your desired transaction.
Step 3: Connect to a Runes Marketplace
Visit a marketplace that supports Runes trading, such as Magic Eden (Bitcoin), Ordinals Wallet, or Unisat. Then, connect your wallet to the platform.
Step 4: Browse Available Runes
Explore the available Runes collections and check details such as supply, price, and transaction fees. Always verify that the project is legitimate before making a purchase.
Step 5: Purchase and Confirm the Transaction
Once you’ve selected a Rune token, confirm the purchase. The transaction will be processed on the Bitcoin network, and your Rune will appear in your connected wallet after confirmation.
If you’re purchasing a Rune on a centralized exchange such as OKX, you can simply fund your account there and purchase it directly. At the same time, if you want to take it off the platform, you’ll still need to install a crypto wallet and transfer it there.
Can You Secure Runes in a Regular Bitcoin Wallet?
Since Runes operates directly on the Bitcoin blockchain, it requires wallets that support its unique transaction structure. While standard Bitcoin wallets can store the BTC used to acquire Runes, not all wallets can manage Rune transactions and display token balances.
For the best experience, look for Bitcoin wallets that explicitly support Runes, such as:
- Xverse Wallet: One of the first wallets to add native Rune support.
- Leather Wallet: Previously known as Hiro, it offers Rune transaction compatibility.
- Ordinals Wallet: Designed for both Ordinals and Runes, it allows users to easily manage the two types of assets.
Closing Thoughts
The Runes protocol expands on the initial utility of the Bitcoin network, allowing users to create fungible tokens on its blockchain. In contrast to BRC-20 tokens, which caused network congestion due to inefficient data storage, Runes leverages Bitcoin’s UTXO model, ensuring better scalability and reduced blockchain bloat.
Many Runes projects are already available on centralized exchanges and decentralized marketplaces. Ultimately, whether the project will continue to gain traction will most likely depend on the success of Bitcoin.
How are Runes different from Ordinals?
Unlike Ordinals, which create non-fungible tokens (NFTs) by inscribing data onto individual satoshis, Runes focuses on fungible tokens. It uses Bitcoin’s UTXO model to minimize blockchain congestion.
Where can I buy and store Runes?
You can buy Runes on platforms like Magic Eden, Ordinals Wallet, the OKX Marketplace, and others. To store them, use wallets that support Runes, such as Xverse, Leather, or Ordinals Wallet.
