The Bitcoin (BTC) halving on April 19 has been one of the biggest cryptocurrency headlines of 2024 so far. But in addition to reducing mining rewards, the halving marked the launch of something you’ve probably never heard of: Bitcoin Runes.
The new Runes protocol will allow crypto enthusiasts to create and trade meme coins on the Bitcoin blockchain itself. Bitcoin Runes will serve as an alternative to Bitcoin Ordinals and the BRC-20 protocol on the Bitcoin blockchain. If successful, it could also ultimately disrupt the massive non-fungible token (NFT) market that exists on the Ethereum network.
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Here’s an overview of what Bitcoin Runes bring to the table:
— What are Bitcoin Ordinals?
— What are Bitcoin Runes?
— Bitcoin Runes pros and cons.
— How to buy Bitcoin Runes meme coins.
— What’s next for Bitcoin Runes?
What Are Bitcoin Ordinals?
The story of Bitcoin Runes begins with a developer named Casey Rodarmor and his 2023 project called Bitcoin Ordinals. Bitcoin Ordinals was launched on the Bitcoin mainnet in January 2023. It is a protocol that allows users to attach “inscriptions” to satoshis — the smallest denomination of Bitcoin — on the Bitcoin network. The creation of Ordinals effectively brought NFTs to the Bitcoin network for the first time.
NFTs are unique, digital creations that are authenticated and verified via blockchain technology. An NFT represents ownership of some form of digital property, such as a work of art, a piece of real estate, a song or a video.
The popularity of NFT trading on the Ethereum network and other blockchains has exploded in recent years. The launch of Bitcoin Ordinals allows so-called artifacts to be created and traded on the Bitcoin blockchain.
These artifacts are similar to traditional Ethereum NFTs with a few key differences. Artifacts are stored directly on the Bitcoin blockchain, whereas NFTs typically use smart contracts and are stored on centralized third-party servers. Ethereum NFTs also allow creators to earn royalties each time they are sold, a feature not currently supported by Bitcoin artifacts. In addition, NFTs support a wider range of functions than artifacts do, including supply chain management, ticketing and other use cases outside of data storage and collectibles.
What Are Bitcoin Runes?
Soon after the creation of Bitcoin Ordinals, developer Domo launched BRC-20, a protocol for creating fungible tokens on the Bitcoin network. As the name implies, NFTs are non-fungible, meaning they are unique and not interchangeable. BRC-20s are fungible tokens, meaning they are identical and interchangeable, similar to the different $1 bills in a wallet.
Bitcoin Runes is Rodarmor’s response to the BRC-20 protocol.
“Runes is like BRC-20 in that its goal is to allow new tokens to be traded on Bitcoin,” says John Mannino, chief compliance officer at sFOX, an institutional trading platform.
“But unlike BRC-20, Runes is supposed to be a more efficient implementation of token issuance.”
One of the key innovations of Bitcoin Runes is its use of an unspent transaction output (UTXO) model. Whereas other token standards typically rely on off-chain data, Runes’ UTXO model will be completely on-chain. Unlike BRC-20, Runes is a standalone protocol that does not depend on Ordinals.
Why does this all matter? According to Rodarmor himself, Bitcoin Runes will serve as a “venue for people creating sh*tcoins,” or highly volatile cryptocurrencies inspired by internet memes or social media trends.
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Bitcoin Runes Pros and Cons
Bitcoin Runes may be a direct challenge to BRC-20, but it is built to serve a different purpose than Bitcoin Ordinals.
Steven Dickens, vice president and practice lead at The Futurum Group, says both Bitcoin Runes and Bitcoin Ordinals have unique pros and cons, and neither project is inherently superior.
“Ordinals excel in the realm of digital collectibles and artistic expressions on Bitcoin, attracting users interested in the unique ownership of digital items. Runes, on the other hand, might be more appealing to those looking to leverage Bitcoin for more complex financial instruments or decentralized applications requiring fungible token capabilities,” Dickens says.
There are several key advantages to Bitcoin Runes starting with its UXTO protocol, which integrates well with the native Bitcoin architecture and is compatible with the Lightning Network. Runes is also a simpler and more efficient model than BRC-20 and other protocols that require off-chain data. In addition, Runes is a major shot in the arm for Bitcoin’s fee economy. Only nine blocks after the recent Bitcoin halving, Runes minters had already reportedly paid about $4.9 million in fees.
However, there are several key disadvantages to Bitcoin Runes. Because Runes are so new, the market value of early Runes coins has fluctuated dramatically. In addition, BRC-20 has a first-mover advantage in the space. For Runes to succeed, it must win over pre-existing BRC-20 developers and users.
How to Buy Bitcoin Runes Meme Coins
Unlike many stocks or leading cryptocurrencies that have ticker symbols of no more than four letters, Runes by design must have ticker symbols at least 13 characters long. As expected, many of the early Rune meme coins have humorous or vulgar tickers, while others are tributes to key players or other noteworthy historical references in the cryptocurrency world. For example, early popular Runes include tickers like SATOSHI–NAKAMOTO, MEME–ECONOMICS, Z–Z–Z–Z–Z–FEHU–Z–Z–Z–Z–Z and WANKO–MANKO–RUNES. In addition to new projects, some existing BRC-20 meme coins, such as PUPS, are expected to transition to the Runes protocol in coming weeks.
To begin trading Bitcoin Runes, users can:
— Choose a Bitcoin wallet application compatible with Runes, such as XVerse, Magic Eden or OKX Wallet.
— Move BTC to the wallet they’ve chosen to cover the cost of acquiring Runes and the transaction fees associated with trading.
— Connect to a Bitcoin Runes marketplace, such as UniSat, Magic Eden or OKX.
— Choose a Runes project to trade after examining the project’s trading volume, price history, fee structure and community.
Before trading any Bitcoin Runes meme coins, make sure you fully understand the risks involved. The cryptocurrency market as a whole is known for its extreme volatility and unpredictability, making cryptocurrency trading very difficult even for professional traders with years of experience. The lack of liquidity in the early Bitcoin Runes market will likely take that volatility to the next level. For example, it has been common for popular Runes prices on the UniSat market to fluctuate by 50% or more in a single day.
Finally, understand exactly what these meme coins are and, more specifically, what they aren’t. Meme coins are designed mostly as internet jokes and they aren’t tied to any underlying asset or purpose. Their value is derived from limited supply and investor demand, meaning the prices of meme coins that fall out of favor with the fickle and irreverent social media crypto-trading crowd could easily go to zero and never recover.
What’s Next for Bitcoin Runes?
It’s too early to tell at this point just how much of a success or failure the Bitcoin Runes project will ultimately be, although the early days of the protocol have been characterized by high transaction fees and less enthusiastic uptake than early adherents of the protocol expected.
That said, Clem Chambers, founder of Umbria Network, says the success of NFTs on the Ethereum network suggests Bitcoin Runes have tremendous potential.
“Bitcoin could create an NFT-like phenomenon with Runes, only four times bigger,” Chambers says.
As for comparisons to Ordinals, Chambers says Bitcoin Runes still has a lot to prove.
“It’s too soon to say whether Runes are better or worse or complementary. That’s half the excitement and fun.”
Early Bitcoin Runes investors will be watching closely in coming weeks to see just how many Bitcoin Runes projects are launched and how the prices of early Runes meme coins perform in the market.
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Bitcoin Runes 101: Meme Coins Come to Bitcoin originally appeared on usnews.com
