The bear market and its sideways movements don’t exactly sit well with those with a high-time preference; without price action, there is no dopamine hit to keep you on Twitter (X) or looking at blockchain data. If it gets any worse, you might have a justification to go outside and touch grass or pay attention to your real job.
To ensure degen traders have something to do, a new narrative or “innovation” must keep them glued to their screens. This usually fell to whatever was potting in the altcoin market, as boring old boomer coin wouldn’t be a place to build Ponzis on the fly and astroturf them through social media.
But 2022 has seen a change of heart, and the degens have begun to embrace Bitcoin. Recent developments in Ordinal theory, which allowed users to run a new protocol on top of Bitcoin and use the network to create serial numbers, tie them to satoshis and add file data into the blockchain, birthed a new NFT market.
Ordinals were later repurposed to creating tokens with an anonymous developer named “Domo,” launching the BRC-20 token standard, as the developer noted, was simply a crude experiment. However, that warning fell on deaf ears, and the use case quickly gained traction in the cryptocurrency world. Within two months, the BRC-20 market cap soared to $1 billion. While this sounds impressive, that market cap is based on extremely thinly traded on-chain markets and a few exchanges making markets for these tokens.
Notable tokens like PEPE and ORDI emerged as prominent players within this standard and attracted early “minters” to try and purchase an allocation to flip. Due to Bitcoin’s on-chain limitations, moving this metadata on-chain costs a pretty penny, driving up fees and flooding the mempool.
Quiet before the storm
Since the BRC-20 mania in early May, things have died down in comparison, but blocks remain filled with Ordinal trading, and traders seem to be willing to wait for confirmations. BRC-20, ORC-20, BRC-30, and SRC-20 token standards have all been launched and traded on-chain, showing a demand to trade shitcoins on Bitcoin.
But all these crude token standards have their own issues that make them clunky to use, manage, create, transfer and, of course, trade. This added complexity and friction means only a select few would opt to play in this market. Bitcoin Ordinals has lost a lot of ground, with marketplaces losing daily users; reports claim that losses are as high as 93% versus the peak.
Recently, the inventor of Bitcoin Ordinals has thrown his idea for a refined token standard on Bitcoin, known as “Runes.” This proposed protocol could address issues for issuing tokens in the Bitcoin ecosystem, offering a more efficient and streamlined approach to fungible tokens.
What are Bitcoin Runes?
Runes are a new token standard for the Bitcoin blockchain and should not be confused with RUNE, the token and ticker for altcoin Chain ThorChains native token.
Bitcoin runes are a new type of digital asset that can be inscribed on Bitcoin’s blockchain. Runes is a Bitcoin fungible token protocol that will compete with not only ordinal-based BRC-20 but also with Taproot Assets, RGB, Counterparty, and Omni Layer. What makes Runes unique is that the others either work off-chain or are address (account) based.
UTXOs hold Rune balances, and the UTXO can contain any amount of any number of runes. Rodarmor claims Runes would have a small on-chain footprint and encourage careful UTXO management.
Runes’ potential to promote responsible UTXO management, curbing the creation of undesirable “junk” UTXOs that currently clog the Bitcoin network, might be a positive, which allows for less network disruption by those trading these secondary assets.
Runes input to a transaction with an invalid protocol message are burned. This allows for future upgrades that change how runes are assigned or created from creating situations where old clients erroneously assign rune balances.
This is a distinct advantage over BRC-20s and allows for future applications such as users adding Runes into various multi-sig wallets and settling their balances to a diverse group of providers.
Some additional things to keep in mind about Bitcoin runes:
- Runes are still in their early stages of development, and there are a number of technical challenges that need to be addressed before they can be widely used.
- Runes would not be compatible with all Bitcoin wallets and exchanges. Be sure to check with your wallet provider before trying to send or receive runes.
- Runes are a speculative asset, and their value is subject to volatility.
Oh man, you’re rune’ing it
Perhaps the reason BRC-20 tokens were so clunky, costly, and inefficient to use was the reason their popularity dropped off so rapidly, and Runes solves these problems and makes it cheaper to issue, mint, migrate, transfer and trade tokens; it could proliferate scams on the Bitcoin network.
Only time will tell, but if we don’t see token issuance on Bitcoin from institutions like stablecoin issuers, then Runes like BRC-20 tokens will remain nothing more than a rug-pull protocol.
“Fungible tokens are 99.9% scams and memes. However, they don’t appear to be going away any time soon, similar to the way in which casinos don’t appear to be going away any time soon,” Rodamor stated.
Casey Rodarmor
The possible BRC-20 Migration
Ultimately, all these tokens are data embedded on-chain with a centralised issuer, and they can view this data through any lens they like, so we’ll see if the Runes standard will take over and replace BRC-20.
Although Runes is a stronger technological implementation of fungible tokens on Bitcoin, BRC-20 has developed strong network effects with holders and developers, particularly in Asia.
But that’s not to say issuers won’t allow users to “burn” their BRC-20 allocation for a new RUNE allocation if that’s where the market is headed.
The party has to get good before the cops arrive.
As Rodarmor put it, the post he published on his blog was just a draft of what he had in mind. An idea and a blog post do not mean a token standard, yet there could be many changes and reverts before something is formalised and issued on-chain.
However, the enthusiasm for a new narrative that will allow people to issue new useless tokens, create “pump and dumps”, and drive trading volume for apps and wallets will likely see Runes rushed to market.
Trevor Owens expressed keen interest in the concept and made an intriguing offer: $100,000 from the Bitcoin Frontier Fund for developers capable of constructing a functional Rune application.
This offer shows a willingness to explore the proposals and get new tokens to market to dump on retail as soon as is humanly possible. The attraction for issuing tokens on Bitcoin seems to be centred around the “cost” to mint and “cost” to move, providing the basis of a premium, the idea you’re settling on the most secure network, and access to Bitcoin liquidity while creating easier Bitcoin affinity scams.
Do your own research.
If you want to learn more about Runes, use this article as a jumping-off point and don’t trust what we say as the final say. Take the time to research, check out their official resources below or review other articles and videos tackling the topic.
