Franklin Fund team released a research report on Runes on Twitter. Titled “Runes: Bitcoin’s New Homogeneous Token Standard,” the report introduces what Runes are and their origins to its clients, highlighting their potential, especially with the upcoming Bitcoin halving event.
(This article does not constitute investment advice)
This article is compiled and translated by Chain News. For any questions, please refer to the original article.
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Table of Contents
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Bitcoin’s Non-Fungible Token Standard: Ordinals
The Highly Anticipated Bitcoin Homogeneous Token Standard: Runes
Runes Market Cap Still Relatively Small Compared to Other Ecosystem Tokens
Investment Risks of Runes: Opportunities and Risks
The report points out that NFTs initially gained popularity on Ethereum with the ERC-721 standard. However, there has not been a widely adopted NFT standard on the Bitcoin ecosystem until Casey Rodamor, a Bitcoin developer, developed the Ordinals protocol.
Assets using the Ordinals protocol record their data on the blockchain, and each smallest unit of Bitcoin (Sats) is assigned a unique identifier (ordinal). This is different from other NFT standards on other blockchains, which usually store some off-chain data on centralized servers.
Since the release of the Ordinals protocol by Casey in December 2022, the market value of Ordinals assets has grown significantly to about $2 billion as of April this year.
The rapid growth of Ordinals has prompted many developers to reconsider the potential of the Bitcoin blockchain. “If non-fungible tokens are possible, what about fungible tokens?”
Currently, the most notable fungible token project is the Runes protocol launched by Casey. The Runes protocol introduces a new token standard to the Bitcoin Layer 1 network, addressing the issues of existing standards such as the generation of garbage data and security concerns in BRC-20.
(BRC-20’s inadequate infrastructure and resulting security risks in Bitcoin)
BRC-20 is designed based on the account model, similar to Ethereum’s ERC-20. Therefore, the destruction and minting process of these tokens create a large amount of garbage UTXOs, leading to blockchain bloat and increased costs. Runes protocol has several key improvements in this regard. The most important one is the avoidance of creating useless UTXO data while being compatible with off-chain data and the Lightning Network, making it a more native “ERC-20” standard in the Bitcoin ecosystem.
Runes improves efficiency through its UTXO-based design. The main difference between BRC-20 and Runes is that the former uses existing protocols to meet the demand for fungible tokens on Bitcoin, while Runes is specifically designed as a fungible token standard for the Bitcoin ecosystem.
Casey scheduled the release of the Runes protocol on the same day as the Bitcoin halving event to commemorate the community’s vision for the Bitcoin ecosystem. It is expected to be a “name grabbing” battle.
The report points out that compared to Ethereum and Solana, the native token market of the Bitcoin ecosystem is relatively small, especially compared to the market value of BTC.
With the introduction of more efficient token standards like Runes, the Bitcoin ecosystem will gain an advantage and narrow the gap in fungible token market value compared to other blockchains. On the other hand, if exponential growth of DeFi on the Bitcoin ecosystem is to occur, a widely adopted fungible token standard is a prerequisite.
Recommended reading:
In addition to the article, how does the Runes protocol (Rune) drive market speculation again?
Reason for recommendation: This article provides a more in-depth introduction to the origin of Runes, driven by Casey’s dislike of BRC-20, and lists several well-known projects that are competing with Runes. It can be read in conjunction with this article for a comprehensive understanding.
As a professional investment fund like Franklin, they certainly do not forget to remind their clients of the investment risks. The risks of Runes include key loss, regulations, technical vulnerabilities, high volatility, intellectual property conflicts, etc. Investing in Runes involves both opportunities and risks.
(This article does not constitute investment advice)
BTC
Casey Rodarmor
Ordinals
Runes
Fungible tokens
Runes
Further reading
Considering the Governance Appropriateness of Bitcoin’s Improvement Proposal from Runes and BIP-119
Ordinals 0.17.0 version online: Strengthening the development functions of Runes and Fungible tokens.