What is the Runes protocol?

What is the Runes protocol?

The Runes Protocol brings an innovative approach to tokenization within the Bitcoin ecosystem, complementing traditional protocols such as BRC-20, Taproot assets, RGB, Counterparty, and Omni Layer. Unlike other protocols, Runes adopts a unique Unspent Transaction Output (UTXO) model, making it distinctive within the Bitcoin network. This model is a fundamental concept in Bitcoin, representing the amount of digital currency available for spending, and is crucial for decentralized tracking of ownership and transactions.

The uniqueness of the Runes Protocol lies in its ability to store any amount of runes within a single UTXO, unlike the restrictions imposed by other token protocols. In the Bitcoin network, this UTXO-based approach provides users with a smoother and more integrated experience, while enhancing the functionality of the blockchain and offering pathways for the issuance and management of new assets. This extension represents not only a technological advancement but also a step towards broader applications of Bitcoin.

The background of the Runes Protocol launch.

The Runes Protocol was founded by the renowned Casey Rodarmor, known for his groundbreaking Ordinals protocol. The concept behind Runes is to create a protocol aimed at introducing transaction fees to incentivize developers and users to utilize Bitcoin. A key aspect of this is designing a protocol with a low on-chain footprint to promote responsible control over UTXOs, theoretically addressing issues such as UTXO accumulation caused by protocols like BRC-20. The Runes Protocol is built on a UTXO-based system that aligns with the structure of Bitcoin, avoiding the creation of any unnecessary UTXOs, thus streamlining the entire process without the need for running servers.

Runes is envisioned as a fundamental UTXO-based approach to handling basic homogeneous tokens, aiming to provide a better user experience on Bitcoin. Its simplicity, reliance on on-chain data, absence of native tokens, and compatibility with Bitcoin's UTXO model set it apart from other protocols such as BRC-20, RGB, Counterparty, Omni Layer, and Taproot Assets. This design is intended to attract users and developers to utilize Bitcoin, potentially fostering its broader adoption.

The difference between the Runes protocol and other Bitcoin protocols.

Differences between Runes and BRC-20:

  1. Data Processing and Performance Impact: The Runes Protocol simplifies transaction steps and avoids generating excessive UTXOs (Unspent Transaction Outputs), effectively reducing the data burden on Bitcoin nodes.

The BRC-20 protocol may generate a large amount of redundant data because each token operation requires initiating specific transactions on the Bitcoin chain, which increases the size of the UTXO set and has a certain impact on the performance of the Bitcoin network.

  1. Design Architecture and Functional Scalability: The Runes Protocol is designed based on UTXO, allowing it to complement other UTXO-based functional extension layers, enabling smart contracts and other advanced features. BRC-20 is relatively limited in compatibility and scalability, with weaker integration capabilities with other functional extension layers.

Differences between Runes and BRC-20:

  1. Simplicity and Efficiency:

Reduced Transaction Count: Runes requires only one transaction to deploy, mint, and claim tokens, while BRC-20 requires two or three transactions. Runes does not generate redundant UTXOs.

Improved Transfer Efficiency: Runes supports simultaneous transfers to multiple recipients and multiple Runes token types, while BRC-20 only supports one recipient and one token type per transaction.

  1. Compatibility and Scalability:

Compatibility with UTXO-based Layer 2 Protocols: Runes' design based on UTXO enables better compatibility with Bitcoin Layer 2 protocols such as the Lightning Network and CKB, achieved through "UTXO Isomorphic Binding."

Support for Simplified Payment Verification (SPV): Users can manage and use Runes tokens with SPV wallets, enjoying a lightweight, simple, and fast transaction experience, which is not possible with BRC-20.

Support for Soft Fork Upgrades: In comparison, Runes has stronger scalability and can be upgraded through soft forks, whereas BRC-20 lacks this feature.

Runes Token Issuance (Etch) Rules

The issuance process of Runes tokens is called "Etch." Each Runes token name is unique and can consist of uppercase letters A-Z and the "•" symbol.

To balance the issuance pace of Runes and prevent popular and short-named Runes from being quickly occupied in the early stages, the Runes protocol requires a minimum name length of 13 letters for the first four months after launch, such as "PEPE•IS•AWESOME."

Afterward, approximately every four months, the minimum length of names decreases by one letter until the next halving event, at which point Runes containing only single characters can be created (totaling 26).

· Runes issuance employs a Commit-Reveal mechanism to prevent miners from knowing the Runes names in advance and rushing ahead.

· The units of Runes tokens can be traditional currency symbols, such as $, or any Unicode emoji. This design makes Runes tokens more interesting and personalized, for example, "100 PEPE•IS•AWESOME".

Runes protocol launch time announcement

Casey announced the launch time of the Runes protocol on the mainnet at the Taipei Blockchain Week event, which is scheduled to be released at Bitcoin block height 840,000, coinciding with the fourth Bitcoin halving. The time is expected to be in late April.

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