26 Sep 2023
Runes, a New Bitcoin Innovation
The inventor of Bitcoin Ordinals is proposing a new Bitcoin-based fungible token protocol as a potential alternative to the BRC-20 token standard.
Runes (website) are a newly proposed fungible token protocol for Bitcoin, aiming to offer a simple and efficient solution in the realm of fungible tokens. The idea behind Runes is to provide a protocol that doesn't rely on off-chain data and seamlessly integrates with Bitcoin's native UTXO model. The protocol's design allows for the creation and transfer of tokens, referred to as "runes", within the Bitcoin network.
At the heart of Runes is the concept of UTXOs holding rune balances. A UTXO can contain any amount of any number of runes. The protocol distinguishes itself by allowing for the inclusion of "orphan" blocks, which are typically discarded in traditional blockchains, into the chain. This ensures faster block rates without compromising security. Transactions containing a protocol message are identified by an output whose script pubkey contains an OP_RETURN followed by a data push of the ASCII uppercase letter R. The protocol message then consists of all subsequent data pushes.
The protocol supports both transfer and issuance transactions. Transfer transactions allow for the assignment of runes to specific outputs, with the possibility of burning runes by assigning them to the OP_RETURN output containing the protocol message. Issuance transactions, on the other hand, enable the creation of new runes. These new runes are identified by a human-readable symbol and can have a specified number of decimal places for display purposes.
Despite its simplicity, the Runes protocol does raise some concerns. The world of fungible tokens is often criticized for being filled with scams. While Runes aims to provide a more straightforward and efficient solution, it's worth considering weather introducing another fungible token is beneficial.
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Runes and BRC-20 token are both fungible tokens on the Bitcoin network, each with its distinct features and considerations. While Runes was recently introduced as a concept, BRC-20 has already established its presence with a range of functionalities and support.
One of the primary concerns in the crypto community is UTXO bloat. The sharp increase in UTXO bloat was observed with the introduction of BRC-20, causing the blockchain to be overfilled. Runes, however, presents a solution that results in less UTXO bloat and even encourages more consolidation over time. Both protocols adopt the UTXO model for transfers. However, while BRC-20 incorporates an account-based model for certain functions like 'deploying', 'minting', and 'transfer activations', Runes remains purely UTXO-based. This makes Runes more aligned with Bitcoin's original functionality.
In terms of functionality, both standards support PSBTs. Runes, being fully UTXO-based, offers enhanced interoperability with Bitcoin, making it more compatible with systems like Lightning. However, distributing tokens to a large number of addresses remains a challenge for both standards due to the UTXO requirements.
Data storage is another area of difference. BRC-20 utilizes witness data within the order envelope, while Runes employs the op_return. The op_return approach, although more elegant, faces limitations due to its size restriction, potentially limiting the number of recipients in a single transaction. Both standards rely on off-chain indexers for full balances and state of the protocol, with Runes having a slight edge due to its independence from the Ordinals protocol.
BRC-20 currently has a more established infrastructure, multiple indexers, wallet support, and more. In contrast, Runes is still in its conceptual stage. When comparing similar protocols, Runes aligns more with STET and Atomicals, offering a pure UTXO model for fungible tokens. BRC-20, on the other hand, resembles TAP or ORC-CASH, blending UTXO and account models.
The creator of Runes perspective on Runes is mixed. While he sees potential value in a safer alternative to BRC-20, he acknowledges that Runes is still in its infancy. He has expressed no personal intent to develop it further but is open to feedback and possibly drafting a more formal specification. He believes Runes might offer a slightly better approach to implementing tokens on Bitcoin compared to other alternatives but emphasizes its experimental nature.
The introduction of Runes as a fungible token protocol for Bitcoin adds another layer of complexity and potential to this dynamic field. Runes, with its emphasis on simplicity, efficiency, and seamless integration with Bitcoin's UTXO model, presents a solution for those looking for a streamlined token protocol. The comparison with BRC-20 highlights the journey Runes has ahead. BRC-20, with its extensive infrastructure and functionalities, serves as a benchmark for what Runes might aspire to achieve.
The creator has mixed feelings about Runes. He acknowledges the potential advantages of Runes over other protocols, he also emphasizes its experimental nature. While the idea is fresh it seems like Runes is aiming to address the issues associated with BRC-20 by utilizing UTXOs to hold rune balances, potentially offering a more scalable and secure alternative.
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