What Are Bitcoin Runes? Runes Protocol on Bitcoin Explained
Bitcoin Runes is a protocol that allows users to create and transfer fungible tokens on the Bitcoin blockchain.
Blockchains such as Ethereum and Solana make it fairly easy to create fungible tokens thanks to their extensive smart contracts capabilities. Some examples of such tokens are Uniswap’s UNI token (on Ethereum) or Jupiter’s JUP token (on Solana).
While Bitcoin does have some scripting capabilities, it is much more limited than dedicated smart contract blockchains like Ethereum. Thankfully, there are a lot of talented developers in the Bitcoin ecosystem that are capable of squeezing as much functionality as possible from Bitcoin’s limited scripting functionality and introduce features that were previously thought not feasible on Bitcoin.
The Bitcoin Runes protocol is an example of such ingenuity. The protocol was developed by Casey Rodarmor and launched on April 20, 2024, coinciding with the fourth Bitcoin halving.
What are Runes on Bitcoin? Bitcoin Runes explained
To be clear, Bitcoin Runes are not the first protocol to enable the creation of fungible tokens on Bitcoin – the BRC-20 token or ARC-20 token standards provide this functionality and were released earlier.
However, Bitcoin Runes creator Casey Rodarmor sought to make a more efficient way of creating fungible tokens on the Bitcoin blockchain. The Runes protocol minimizes the load on the Bitcoin blockchain by reducing the amount of data needed for transactions.
Compared to the BRC-20 and ARC-20 standards, the Bitcoin Runes protocol uses a fundamentally different design, which relies on Bitcoin’s UTXO architecture and the OP_RETURN opcode.
UTXO (Unspent Transaction Outputs) are units of BTC that are tied to specific Bitcoin addresses. They represent unspent BTC that can serve as inputs in new transactions. In the Bitcoin Runes protocol, each UTXO can contain varying amounts or types of Runes, which streamlines the management of tokens.
Meanwhile, the OP_RETURN opcode makes it possible for extra information to be attached to Bitcoin transaction. The Bitcoin Runes protocol uses OP_RETURN to store key token data on the Bitcoin blockchain. This includes data such as the token’s name and ID.
The act of creating a Bitcoin Rune is referred to as “etching”. When a Bitcoin Rune is etched, its properties are immutably set on the Bitcoin blockchain. After a rune is etched, nobody can change these properties – not even the person who created the token.
When it comes to Bitcoin Runes, it’s important to understand the difference between etching and minting. Etching is the act of creating a rune and defining its properties. Users who want to obtain the rune can then mint it according to the parameters specified in the rune. For practical purposes, minting a rune is similar to participating in a token sale.
Runes are created, minted, and transferred via “runestones”. A runestone is a Bitcoin Runes protocol message embedded in a Bitcoin transaction output.
An example of a Bitcoin Rune on a Rune explorer.
Now, let’s quickly explain the different properties a Bitcoin Rune can have.
Names
No two Bitcoin Runes can have the same name. A Bitcoin Rune’s name can only contain letters from A-Z and cannot contain numbers. The maximum number of letters a Bitcoin Rune name can contain is 26.
For better readability, the character • can be used as a spacer. These spacers don’t contribute to a name’s uniqueness – as far as the protocol is concerned, COINCODEX AND COIN•CODEX are the same.
Supply and divisibility
The supply of a Bitcoin Rune is defined by a 128-bit unsigned integer, which means the maximum possible supply of a Bitcoin Rune is 340282366920938463463374607431768211455.
Every rune has a “divisibility” property, which defines how many decimals it can have. A Bitcoin rune can have up to 38 decimals.
Other properties
Here are some of the other properties a Bitcoin Rune can have:
Symbol: The symbol is the currency symbol associated with a rune, and is defined by a single Unicode code point (for example $). If a rune doesn’t have a defined symbol, the ¤ sign should be used by default.
Premine: The etcher of a Rune has the ability to give an allocation of units to themselves. This is referred to as a premine.
Cap: The cap refers to the maximum number of mints a rune can have.
Amount: The amount property specifies the amount of new units that are created with each mint.
Runes also have other properties such as the start and end heights, as well as the start and end offsets.
FAQs
Now, let’s quickly address some of the most common questions users have about Bitcoin Runes.
When did Bitcoin Runes launch?
The Bitcoin Runes protocol launched on April 20, 2024 at block height #840,000. This coincided with the fourth Bitcoin halving.
Which Bitcoin wallets support Runes?
There are several Bitcoin wallets that support Runes. Here are three of the most popular options:
Xverse
Unisat
Leather
Why are Bitcoin Runes names so weird?
Many Bitcoin Runes have seemingly strange names such as LOBO•THE•WOLF•PUP or DOG•GO•TO•THE•MOON. The reason for this is that the Bitcoin Runes protocol uses the • symbol for spacing and names of runes can only contain letter from A-Z.
What is the difference between Runes and BRC-20?
Although both the Runes and BRC-20 protocols enable the creation of fungible tokens on the Bitcoin blockchain, there are important differences between the two. Here is a quick breakdown of how they compare:
Bitcoin Runes
BRC-20
Launch date
April 2024
March 2023
Creator
Casey Rodarmor
Domo
Design
UTXO-based
Ordinals-based
Data storage
Data is stored using OP_RETURN
Data is inscribed on satoshis
Minting
Open and closed mints, premining is possible
Open mints only
The bottom line
The Bitcoin Runes protocol is one of the latest innovations that are giving new functionality to the Bitcoin blockchain. Although Runes are currently primarily being used to mint meme tokens on the Bitcoin blockchain, the ability to create custom tokens that inherit the security of the Bitcoin network could certainly open up some fascinating use cases.
If you want to learn more about fascinating new use cases for Bitcoin, make sure to check out our article explaining Bitcoin ordinals.
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