What are Runes? A guide to the Bitcoin based fungible token protocol

Have you heard of the Runes Protocol? It's a unique addition to the Bitcoin environment, providing a fresh perspective on fungible tokens compared to protocols like BRC-20 and Taproot Assets. What makes it so different? Unlike other token standards, the UTXO-structured system incorporated into the Bitcoin network has an added focus on user-friendliness.

Like digital versions of traditional currencies, Runes makes creating and overseeing tokens easier. Its foundation is in the UTXO model, which is essential to Bitcoin, and records possession and exchanges in a decentralized way. This technique allows Runes to store multiple tokens in one UTXO, potentially making the procedure more efficient when compared to other protocols that often employ address-based or off-chain techniques.

It's important to do your own research and not mix up the THORChain native token RUNE with Runes. Read on for more insight to help keep you informed.


  • Runes Protocol is a UTXO-based fungible token protocol for the Bitcoin blockchain. The system focuses on efficiency, enhanced features, and community involvement and is timed to coincide with the Bitcoin halving.

  • Runes provides an alternative to traditional models like BRC-20 and ORC-20.

  • With its UTXO model, Runes simplifies token creation and management, offering a more streamlined approach than address-based or off-chain protocols.

  • Runes integrates seamlessly with Bitcoin's architecture, helping to reduce blockchain bloat and improve scalability.

  • Runes sets a new benchmark for Bitcoin token protocols, offering a user-friendly system that minimizes the creation of "junk" UTXOs.

  • Runes are considered by many to be less complex. The data-efficient structure may attract developers and foster innovation within the Bitcoin community.

What is the Runes Protocol in Bitcoin?

The Runes Protocol is an addition to the Bitcoin ecosystem, introducing a novel approach to fungible tokens. Unlike the more traditional protocols like BRC-20, Taproot Assets, RGB, Counterparty, and Omni Layer, Runes has a distinctive UTXO (Unspent Transaction Output)-based model. This unique feature sets Runes apart on the Bitcoin network.

The Runes Protocol is intended to make generating and supervising interchangeable tokens on the Bitcoin blockchain easier. These tokens are digital assets in which every unit is indistinguishable and exchangeable, much like traditional currencies.

The UTXO model used by Runes is a fundamental concept in Bitcoin, representing the amount of digital currency someone has available to spend. This model is crucial for decentralized tracking of ownership and transactions within the Bitcoin network.

The Runes Protocol stands out because it stores any number of runes in a single UTXO. This is a distinction from the restrictions regularly seen in other token protocols, where address-based or off-chain approaches are more common. To many users within the Bitcoin network, the UTXO-based approach adopted by Runes provides a smoother and more integrated experience.

Meanwhile, integrating the Runes Protocol into Bitcoin enhances blockchain's capabilities, offering new asset issuance and management avenues. This expansion is a technical advancement and a step towards greater adoption and utility of Bitcoin for various applications beyond mere currency exchange. Its unique UTXO-based fungible token system provides a versatile and efficient means of handling digital assets, setting a new standard for token protocols.

Who developed the Runes Protocol and why?

The Runes protocol was developed by Casey Rodarmor, who's known for creating the Ordinals protocol. Rodarmor's venture into fungible tokens through Runes was reportedly fueled by a desire to enhance Bitcoin's capabilities while addressing existing challenges in tokenization protocols.

Rodarmor initially doubted the need for a new fungible token protocol for Bitcoin, recognizing the fraudulent activities sometimes in the fungible token space. Despite knowing that such coins would likely persist for a long time, much like casinos, he identified a chance to impact the Bitcoin network.

The idea behind Runes was to design a protocol to bring in transaction fees, attract developers, and draw users to Bitcoin. A major part of this plan was to create a protocol with a low on-chain footprint and promote responsible control of UTXO. This, in theory, could help to address the challenges brought by protocols like BRC-20 that caused some UTXO buildup.

Runes focused on three critical points while being designed: complexity, user experience, and the state model. The goal was to create something simpler and more convenient than other protocols. Runes capitalizes on the UTXO-based system, which aligns with the structure of Bitcoin. It also steered away from creating any unnecessary UTXOs. These measures allowed for a simpler process that didn't require running servers.

Runes was imagined as a basic, UTXO-based interchangeable token process to give a positive user experience on the Bitcoin platform. Its simplicity, non-reliance on off-chain data, lack of a native token, and compatibility with Bitcoin's UTXO model set it apart from other protocols like BRC-20, RGB, Counterparty, Omni Layer, and Taproot Assets. Some consider these alternatives to be either more complex, not UTXO-based, or reliant on off-chain data.

This design philosophy aimed to draw users and developers to Bitcoin, potentially leading to broader adoption of Bitcoin itself. However, Rodarmor remained aware of the pitfalls and challenges of introducing new protocols in the Bitcoin community.

How does Runes differ from other Bitcoin token standards?

The Runes Protocol in Bitcoin presents a significant shift from traditional Bitcoin token protocols like BRC-20, ORC-20, and Stamps.

Runes vs BRC-20

  • Runes: Uses a UTXO-based model, minimizing "junk" UTXOs and tokenizing easily.

  • BRC-20: BRC-20 is considered to be 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: 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.

What are the technical features of Runes?

Let's explore the technical features of the Rune protocol in Bitcoin, which can improve the user experience and potentially change the way assets are issued on the Bitcoin network.

  • UTXO-based structure: Runes are native to the UTXO model of Bitcoin. This approach minimizes "junk" UTXOs, which reduces the on-chain footprint.

  • Simplified token management: Runes are different from other protocols that introduce additional data into each transaction (like Ordinals and Stamps), which causes blockchain scalability and performance issues.

  • User-friendly protocol design: Runes are simple, which could encourage wider developer participation and accelerate innovation within the Bitcoin community. This could also lead to more mainstream adoption, removing the need for handling native tokens or dealing with off-chain complexities.

  • Flexible assignment and transfer of balances: OP_RETURN transactions and additional data pushes allow for flexible assignment and transfer of Rune balances. Invalid protocol messages burn Runes, protecting future upgrades.

For many, the Runes protocol provides a simpler way of managing interchangeable tokens on the Bitcoin blockchain. It's designed to minimize excess outputs, ease token management, and improve the Bitcoin user experience.

How could Runes impact Bitcoin scalability and blockchain bloat?

The Runes protocol has the potential to affect Bitcoin's scalability and blockchain size and provide the Bitfinity EVM with smart contract capabilities.

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 use the OP_RETURN function to store data in contrast to the Ordinals protocol, which uses the witness part of a transaction.

Integration with Bitfinity EVM

  • 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.

What challenges and controversies surround the adoption of Runes?

The Runes protocol in the Bitcoin community has met some hurdles, from technical issues to community approval and contrasting protocols.

Many commentators believe that the primary issue in the Runes protocol is the lack of a unified standard, which has caused fragmentation and multiple paths with the emergence of Runestone and PIPE. This lack of a set standard can lead to difficulties with infrastructure, especially with indexing Runes. This challenge is heightened by the need for more consistency.

Runes UTXO-based approach, offering potential compatibility with the Lightning Network, is a contrast to the established account-based model of BRC-20. Runes strives to be more efficient with its on-chain footprint and data storage. However, it has a different level of established infrastructure and the widespread acceptance that BRC-20 has, particularly in Asia.

Community engagement and adoption could also pose significant hurdles. BRC-20, although more established than Runes, caused a divide among the Bitcoin community when it was first released. Runes, despite its promises, got the same frosty greeting, too. Concerns about Runes not having a community-driven launch add to the challenges, although initiatives like Trac Systems $PIPE show potential to address these issues.

Looking forward, the dialogue around Runes and BRC-20 symbolizes the evolving nature of the Bitcoin fungible token space. There's a possibility that the best attributes of both protocols could lead to a potent and efficient standard for the community.

Nevertheless, it is yet to be determined whether Runes will be able to match the audience and interaction of BRC-20, and the market's inclination to prefer one standard further complicates the prospects for these protocols.

What's new with Runes?

In a recent Protos article, Casey Rodarmor shared has a somewhat pessimistic and resigned attitude about fungible tokens.

"Fungible tokens are 99.9% scams and memes. However, they don't appear to be going away any time soon."

Specifically, he is initiating the release of Runes due to his disdain for the unapproved iteration of interchangeable tokens on Bitcoin, known as BRC-20s. Rodarmor believes that non-Runes protocols for fungible tokens, such as BRC-20s, are of lower quality.

According to him, Runes will outperform BRC-20 for several reasons, one of which being that they minimize the number of on-chain minting transactions. For instance, the BRC-20 token ORDI had thousands of minting transactions upon its release. By utilizing alternative methods, Rodarmor's Runes protocol will combine the minting transactions, thereby decreasing the on-chain impact of Runes. Similarly, Ordinals also employed advanced techniques to merge data and minimize their on-chain presence.

Runestone airdrop

The Runestone airdrop, a component of the Bitcoin Ordinals project, represents the community's unwavering aspiration to make a lasting impact and connect with future generations. This distribution of 112,383 Runestones to Bitcoin wallets was a significant undertaking, to acknowledge early advocates of the Ordinals movement, particularly those actively involved in its first year.

To qualify for the airdrop, participants must have a minimum of three inscriptions, except for specific file formats that weren't included. The project emphasized the collaborative and voluntary aspect of the initiative, with no portion set aside for the team or investors.

RSIC premining

The Metaprotocol of the Rune Specific Inscription Circuit (RSIC) incorporates both Ordinals and yield farming, providing a collection of 21,000 Bitcoin NFTs that showcase runic symbols. Almost 90% of these NFTs were distributed through airdrops to chosen active Ordinals wallet addresses. Upon the launch of the Runes protocol, these RSIC inscriptions have the potential to generate "runes" tokens, although they are not yet officially launched by Rodarmor.

Uncommon goods & Casey's hard-coded Rune #0

The narrative around Runes and related projects like Runestone and RSIC premining involves:

  • A deep integration with Bitcoin's architecture.

  • Emphasizing interoperability.

  • Improved UTXO management.

  • A simpler user experience.

Although the sources don't directly mention Casey's creation of a hard-coded Rune #0 or the project Uncommon.goods, they do suggest that he is primarily interested in implementing these innovations using Bitcoin's UTXO model.

Runes liquid fund

Sora Ventures, focusing on the Bitcoin ecosystem, has raised $3 million for its Runes liquid fund to support the Runes Protocol's liquid assets. The fund has attracted investments from notable entities like Bankless Ventures, SpaceshipDAO, BTC Inc. Bitcoin Magazine, and Serafund.

The final word

Casey Rodarmor, the creator of the Ordinals protocol, has added a fresh take on fungible tokens to the Bitcoin environment with the introduction of the Runes Protocol. Using a UTXO (Unspent Transaction Output)-based model, it stands out from other similar Bitcoin token protocols such as BRC-20, ORC-20, and Stamps.

Runes aims to make generating and managing interchangeable tokens on the Bitcoin blockchain simpler and better. Its design emphasizes reducing the chain's complexity and footprint, and removes the need to create unnecessary UTXOs. Unlike BRC-20 protocols that can congest the network, Runes offers a more unified and effective system that works within the Bitcoin network.

Runes stands out from other protocols as it doesn't require any off-chain data or its own token. Incorporation with Bitcoin could bring about greater adoption and fresh asset management opportunities. Nevertheless, it may face difficulties such as gaining the community's approval and competing with long-standing protocols like BRC-20.

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