The recent halving brought changes to the Bitcoin world. The most noticeable thing is the launch of the Runes protocol. The creators specifically timed the event to coincide with a decrease in the block reward. What is this project and why have runes become so popular?

Starting the protocol

Immediately after the halving, transaction fees on the Bitcoin network skyrocketed. Average transaction fee on April 20
reached record 128.45 dollars. It is clear that such an important event as halving could not but spur the hype around digital gold. However, there was another reason for the increase in commissions. The same launch of the Runes protocol from the creators of Bitcoin Ordinals.

On April 20, the day of the launch of Runes, the number of transactions in the Bitcoin network associated with this project reached 463,624. Despite the fact that the rest were only 163,180. That is, more than 70% of transactions on the blockchain occurred on Runes and it was with it that This is primarily due to the record growth in commissions.

Transactions with runes continued to dominate transactions with Bitcoin for several more days (the record – 81.3% of all transactions – was set on April 23), until April 25, when the number was approximately equal. Then Bitcoin regained its leadership, but the presence of runes on the network is still
remains quite noticeable.

What are Bitcoin Runes

Runes is a new protocol for creating fungible tokens (runes) on the Bitcoin blockchain, allowing the creation and spending of certain assets on the network. For example, it becomes possible to create your own memcoin, which can be minted, distributed in airdrops, and which users can exchange.

Like BRC-20 tokens, runes are completely dependent on the Bitcoin blockchain, but they are designed to fit more seamlessly into the Bitcoin ecosystem and be less likely to pollute the blockchain.

How Runes Work

A rune is essentially an add-on to a transaction in the Bitcoin network. The existence of a rune is possible thanks to two components of a Bitcoin transaction: UTXO and OP_RETURN.

Unspent Transaction Output (UTXO) is a certain amount of BTC that has not yet been spent by the user and which can be used for a new transfer.

The rune is bound to UTXO using functions OP_RETURN. This function allows you to record a small amount of data and link it to a transaction. Runes uses OP_RETURN to store data and transaction processing features. The data includes information about the token, including name, identifier, symbol, command for specific actions, and the like. Runes protocol messages stored in the OP_RETURN transaction are called
rune stones (Runestones).

Creating Runes

Rune creation process
consists of of two stages: etching and minting. Etching is a process in which the properties of a rune are prescribed, including:

  • Name: This must be between one and 28 characters long.

  • Divisibility: the number of units into which the rune can be divided.

  • Icon: currency symbol. Displayed after the amount of rune.

  • Premine: the parameter is responsible for the initial distribution of runes.

  • Conditions: This property describes the rules under which users will mint the rune.

  • Limit (Cap): maximum number of tokens.

  • Quantity: Defines a fixed number of runes created with each minting transaction.

  • Starting Height: The etcher uses this parameter to set the height of the blocks at which minting can begin.

  • End Height: The height of the blocks after which minting becomes
    impossiblem.

Thus, at the etching stage, the general architecture of the rune token is set. And the minting itself (the issue of rune token units) occurs according to the conditions prescribed during etching.

Further, when the emission is completed, the runes can be exchanged. This again requires OP_RETURN, where the terms of the transaction in runes are written in the form of an “edict”.

Why is all this necessary?

Judging by the list of current projects on the runes – there
are becoming widespread memcoins. In principle, this is quite natural: after all, Runes is a very arbitrary add-on to Bitcoin transactions, existing only because a small amount of information can be attached to them.

Even during the launch of Ordinals and BRC-20, the project faced criticism from the crypto community. First of all, with the idea that such abuse of OP_RETURN could lead to contamination of the Bitcoin blockchain. By and large, this is what happened. If we look at the first days after the halving, we see an unpleasant picture: transactions with runes flooded the blockchain, and commissions soared to previously unattainable heights. On the other hand, the situation is quickly corrected: transactions with runes every day
less and less.

In any case, the runes are unlikely to leave anyone in the crypto community indifferent: lovers of memcoins and supporters of blockchain experiments will welcome the protocol, while more conservative crypto enthusiasts will negatively evaluate the increased fees and “littering the blockchain of the first cryptocurrency.”

Conclusion

Runes is a rather controversial project with an uncertain future. Yes, after its launch on the Bitcoin network, Runes came into the spotlight amid the halving. However, the excitement seems to be gradually subsiding. Will serious projects appear on the runes? Will runes begin to be traded on all major exchanges? The question is more than open.

This material and the information contained herein do not constitute individual or other investment advice. The opinion of the editors may not coincide with the opinions of the author, analytical portals and experts.