On Thursday, bitcoin Ordinals founder Casey Rodarmor unveiled documentation for a new bitcoin-native digital product protocol known as Runes. This groundbreaking update will coincide with the upcoming bitcoin halving, marking a significant evolution in the bitcoin protocol's capabilities to handle digital assets directly on its blockchain.
THE RUNES HAVE DOCUMENTS
Here you will find a simple description of the protocol:https://t.co/2d8eHGtLjJ
And a lower level that isn't actually a spec is here:https://t.co/w87yWmTk0g
Comments and suggestions are welcome, here or on GitHub!
-Casey (@rodarmor) March 28, 2024
What are bitcoin runes?
Runes introduces a novel fungible token protocol into bitcoin, using an indexer-based model that builds on the social consensus mechanisms first popularized by the Ordinals initiative. This new protocol facilitates the engraving, minting and transfer of native bitcoin digital products, potentially altering the landscape of how digital assets are created and exchanged on the bitcoin network.
According to analysis by ren (wassie arc) (@0xren_cf) of Electric Capital, shared via X (formerly Twitter), “Biggest update since Ordinals coming to btc in the halving…RUNES.” Ren's analysis highlights several key features and improvements that Runes brings:
- Simplified transactions: Unlike the BRC-20 token standard, which requires multiple transactions for deployment, minting, and claiming, Runes simplifies these operations into a single transaction.
- Expandability and future-proofing: Runes feature an odd and even field labeling system within their protocol, allowing for future extensions and programmability through soft forks.
- Largest namespace for tokens: Runes expand the character space available for token names up to 28 characters, compared to BRC-20's four-character limit.
- Security improvements: Runes addresses several security issues, including preventing spoofing by excluding Unicode symbols and mitigating the risk of token balance locking by attackers.
- Unique token denomination: Runes enforces unique names for tokens, preventing the creation of tokens with duplicate names. “Rune names shorter than 13 characters will be released gradually over a period of 4 years after the release of the runes to avoid immediate capture of shorter names,” Ren commented.
One of the most innovative aspects of the Runes protocol is its approach to token issuance and transfer. Using a UTXO-based system, Runes tokens are issued directly into a UTXO during the transaction which establishes its initial supply, ticker symbol and decimal precision. This mechanism not only closely aligns with bitcoin's native design principles, but also allows for more efficient and flexible management of token balances and transfers.
The introduction of Runestones, described as the “pre-builds” of Runes, further enhances the protocol's capabilities. These instructions, stored within the OP_RETURN of a transaction, facilitate the movement of Runes from inputs to outputs and ensure future compatibility through an odd-even tagging system.
However, users are cautioned to be aware of the specific labels used, as runestones with even labels can result in the effective burning of the runes involved, a process Rodarmor calls the creation of a “cenotaph.”
Vision for the future
Looking ahead, the Runes protocol aims to support a wide range of applications and interactions, from intricate inscriptions that could, for example, influence the capabilities of digital collectibles based on the amount of a specific Rune one owns, to facilitating off-chain liquidity pools for Rune Trading. This opens up new possibilities for decentralized finance (DeFi) on the bitcoin network, a prospect that has generated excitement within the community.
Ordiswap Labs, through a statement on “Runes aims to provide a simple token system, native to bitcoin, with a unique issuance model and an efficient on-chain footprint (…) Runes is something we are now looking at specifically, and we couldn't be more excited about the potential.” of btc. DeFi ecosystem in the coming months!
Rune standard in bitcoin, explained
TL;DR: Runes aims to provide a simple bitcoin-native token system with a single issuance model and efficient on-chain footprint – its UTXO (unspent transaction output) approach differs from standards like BRC-20.
Although BRC-20 is the… pic.twitter.com/MYKaLVjVhR
-Ordiswap (@OrdiswapLabs) March 27, 2024
The activation of the Runes protocol is strategically timed to coincide with the bitcoin halving, with expectations set for a block height of 840,000, around April 20.
At the time of publication, btc was trading at $70,366.
Featured image created with DALL·E, chart from TradingView.com
