Rune protocol leads a new round of Bitcoin ecological innovation

In early 2023, the Ordinals protocol and the BRC-20 standard sparked a wave of construction around Bitcoin assets, promoting the development of BTC Layer 2 and DeFi ecosystem infrastructure. However, the hype surrounding BRC-20 also led to issues such as network congestion and data redundancy. In response, Casey Rodarmor, the founder of the Ordinals protocol, proposed the Runes( rune) protocol in September 2023, aiming to build a fungible token system based on BTC UTXO.

The Runes protocol was officially launched on April 20th of this year during the Bitcoin halving. Initially, the minting craze pushed the BTC network Gas fees above 1000 sats, but soon the market's focus shifted to other areas. Recently, DOG has surged significantly from its bottom price to a new high, driving a new round of increases and attention for rune targets.

Rune Protocol Mechanism

The Runes protocol issues and tracks tokens using Bitcoin's native UTXO model, making it more decentralized. The rune balance is directly held by UTXOs, and a single UTXO can hold an arbitrary number of runes, eliminating "garbage" UTXOs, which improves efficiency and reduces on-chain occupancy.

Specifically, Runes data is stored in the OP_RETURN field, which allows for the storage of 80 bytes of data in a transaction output. Transactions use the OP_RETURN tag in the protocol message, followed by a data push of the uppercase letter R. Issuance or transfer transactions are specified and assigned to UTXO in subsequent data pushes. Invalid protocol messages will result in runes being destroyed.

rune vs BRC-20

Compared to BRC-20, the Runes protocol has the following features:

1. Runes are designed for fungible tokens, based on the native BTC architecture, without relying on off-chain data and requiring only a single minting, making it simpler and more efficient.

2. Runes data is stored in the 80-byte OP_RETURN field, which takes up less space and reduces blockchain bloat.

3. Runes are based on the UTXO model, integrated with the native BTC architecture and inherit its security. In the future, they can be perfectly compatible with ecological development routes such as the Lightning Network and BTC L2.

The Meaning of Rune

1. Created a new asset issuance method for BTC, which helps attract more attention and funds into the BTC ecosystem.

2. Simpler, more efficient, and compatible than previous methods. In the future, it can seamlessly integrate various upgrades and ecosystem solutions of the BTC network.

3. Rune trading can contribute more transaction fees to the network, especially after the halving, providing miners with a new source of income, which is beneficial for maintaining network security and sustainability.

Rune Market Data Overview

From the BTC network data, runes currently account for about 20% of the total transaction volume on the network. When the rune protocol was first launched, the transaction share reached a peak of 81.3%, and has since declined. Currently, the share of runes in the network is about 10-40%.

Compared to runes and BRC-20, runes have become the most active L1 asset outside of BTC trading, with a ratio of about 4:1. The trading popularity of runes has surpassed that of BRC-20 tokens.

In terms of fee contribution, the current native Bitcoin transaction fees account for 70-80%, runes account for 10-20%, and Ordinals and BRC-20 combined account for about 10%. Runes provide a new important source of income for BTC network miners.

In horizontal comparison with other public chains, the market value share of meme coins on the BTC chain is less than 0.1%, far lower than the 3% or more on chains like ETH and SOL. Considering the market value scale of BTC and the attention of mainstream funds, there is further room for the market value share of its meme coins to increase.

DOG: The Leader of the Rune Track

DOG is the leading project in the current rune track, with the following advantages:

1. The distribution method is designed reasonably, and the project party bears all on-chain costs.

2. The early user base is large, achieving rapid cold start and user propagation.

3. The founder Leonidas is an OG in the BTC community, and the project has both topicality and artistry.

4. Continuously attract market attention, with strong dissemination power.

5. Rune stones and DOG are being hyped up in succession, and the price trend is good.

6. The trading volume far exceeds other runes, with the best liquidity.

7. Market cap firmly holds the first place in the rune track.

8. The number of holders is large, but the degree of chip dispersion is high.

9. The price is steadily rising, and the buying power is strong.

Summary

1. The rune protocol is technically superior to BRC-20 and has become an important new asset form in the BTC network.

2. Rune as a meme coin has enhanced the appeal of the BTC network, but there is still room for further development.

3. DOG is currently the leading project in the rune track, but the dispersed chip structure may affect its progress in being listed on top-tier exchanges.