Casey Rodarmor, the inventor of Bitcoin Ordinals, recently gave an idea of a new Bitcoin-based fungible token protocol named "Runes." The proposal aims to address the limitations of BRC-20 token, particularly its impact on the Bitcoin. Despite the potential benefits of Runes, its future remains uncertain.
BRC 20 ??
A new type of token called BRC-20 was created to address the limitations of in March 2023 by an anonymous developer named "domo". BRC-20 tokens quickly became popular, and the total market cap of all BRC-20 tokens reached $1 billion within two months. However, This presented a problem. Some people are worried that BRC-20 tokens are creating too much data on the Bitcoin blockchain which is called unspent transaction outputs (UTXOs)....
So what's with UTXOs???
UTXOs are the leftover cryptocurrency from past transactions. They are stored in a wallet and used to make new transactions. Bitcoin's UTXO model prevents double-spending and makes the network transparent and auditable. However, Rodarmor argued that BRC-20 tokens create too many UTXOs, which clutters the network and that UTXO-based protocols align more naturally with Bitcoin's infrastructure and promote UTXO set minimization by avoiding the creation of unnecessary UTXOs.
In his blog, Rodarmor also stated this to support his claim:
- BRC-20: Not UTXO-based and rather complex, since it requires use of ordinal theory for some operations.
- RGB: Very complicated, relies on off-chain data, has been in development for a long time with no adoption.
- Counterparty: Has a native token required for some operations, not UTXO-based.
- Omni Layer: Has a native token required for some operations, not UTXO-based.
- Taproot Assets: Somewhat complicated, relies on off-chain data.
Despite admitting that a vast majority of fungible tokens are filled with scams and memes, he believes that the right fungible token protocol could attract significant transaction fee revenue, developer attention, and a broader user base to Bitcoin.
However the future remains unclear as Roadarmor states that he has just come up with the idea and will think to pursue it. On the other hand, Owens has already proposed a $100K initiative to develop it.
The Runes
Runes is a fungible token protocol for Bitcoin, designed to be an alternative to BRC-20. Accordingly, it comes down to the fact that all of the others either work off-chain or are address (account) based.
Instead of linking the record of balances to wallet addresses, it puts the records in the UTXOs themselves. A new Rune starts with an issuance transaction, specifying the supply, symbol, and number of decimals, assigning that supply to a specific UTXO. Any amount of Rune tokens can be in a UTXO, no matter its size. The UTXOs are just used to keep track of balances. Then, a transfer function uses that UTXO, splitting it into multiple new UTXOs of arbitrary size, containing different amounts of Runes, to send records to other people.
The Ordinals Wallet team also experimented with Rune protocol’s design by deploying the first token, called RUNE, as the “first valid practical use of the concepts” outlined in the introduction by Rodarmor.
For full concept, please read the original blog by Rodarmor: https://rodarmor.com/blog/runes/
