What is Runes and how to use this Bitcoin protocol?

What is the Runes protocol?

Since the start of 2023, a practice has been talked about a lot in the world of cryptocurrencies: on-chain registrations.

Listings on a blockchain such as Bitcoin offer the ability to store data immutably, including images, text files, audio clips, GIFs or even light video games, by embedding them in blocks on the chain. This allows for the creation of unique collectible assets.

Launched on the Bitcoin blockchain with the Ordinals protocol, created by Casey Rodarmor, the registrations quickly spread to other blockchains, notably those in the Ethereum ecosystem.

In October 2023, Rodarmor introduced the Runes protocol allowing the creation and exchange of fungible tokens, like the Ordinals protocol and its BRC-20. According to him, this new protocol is more efficient and more flexible than its previous creation.

👉 To go further – What is Ordinals, the protocol that allows data to be recorded on Bitcoin?

The Runes protocol was launched during block number 840,000, that of the 4th halving of Bitcoin. This timing motivated many investors to generate their Runes in the first blocks following the halving, in the hope of adding value to their assets created just after this event.

In summary, the Runes protocol is characterized as being:

• Simplewith only about 500 lines of code;
• Compactoccupying relatively little space in the blockchain;
• Stretchableallowing updates via softforks;
• Atomicallowing multiple transfers of Runes in a single on-chain transaction;
• Based on UTXOsfunctioning similarly to Bitcoin transfers on the blockchain;
• Compatible with Lightning Networkthe second layer of Bitcoin infrastructure, allowing near-instantaneous transactions at reduced fees.

Like Ethereum Name Service (ENS), an address standard on the Ethereum blockchain, the Runes protocol does not allow the creation of an infinite number of assets. Indeed, Rune names are unique and can contain a maximum of 28 characters, including any letter from A to Z.

Moreover, it is impossible to name an asset with less than 13 characters when launching the protocol. Over a period of 4 years, the minimum number of characters required will be reduced by 1 every 4 months, leaving the possibility of creating short names to future users.

Although Runes seem to open the door to new use cases on the Bitcoin blockchain, it is important to point out that a few months after the launch of the BRC-20 tokens, interest in it has declined sharply.

Initially perceived as revolutionary by many users, the protocol Runes quickly limited its use to collecting unique assets due to its technical complexity.

Considered by many, including their creator, as “memecoins” (tokens created from jokes and without technological fundamentals) it is still difficult to predict whether other use cases, beyond collection, will one day be created and adopted for Runes.

Finally, the most controversial issue within the Bitcoin community is the impact of the protocol on blockchain congestion. Ordinals and BRC-20 tokens had already largely saturated the network and, despite greater efficiency, the Runes protocol produced the same effect.

Indeed, in block number 840,005, the lowest transaction fee per transaction was around $200, accumulating a total of 29.8 BTC, or $1.9 million. In this block, more than 90% of transactions were associated with the Runes protocol.

The Runes protocol, like Ordinals and BRC-20, facilitates the creation of digital assets on Bitcoin. It is important to remember that although they offer many investment opportunities, the assets of these protocols are often based on short-lived trends that eventually run out of steam, leading to the loss of funds for investors who arrived last.

What's better about Runes than BRC-20s?

If you already know the BRC-20, you probably already understand the advantages offered by the Runes. For beginners, here is how this new protocol stands out:

• Runes can be transferred in 1 transactioncompared to 2 to 3 for BRC-20, simplifying use and reducing the need to pay transaction fees;
• Unlike the BRC-20, Runes have a reference implementationwhich makes it easier to create a specific wallet and block explorer similar to Etherscan for Ethereum;
• The Runes protocol is more flexible and can be updatedthis is not the case for the BRC-20;
• Runes are not based on Ordinal theorymaking its implementation simpler and more accessible;
• BRC-20s were limited to 4 character nameswhile the names of the Runes can be more complex, long and varied;
• Operating on the principle of UTXO, Runes benefit from the robustness of Bitcoin, while the BRC-20s are more vulnerable to certain attacks.

For example, a user's BRC-20 balances can be blocked by a third party who sends them unsolicited transfer entriesa vulnerability absent in the Runes.

Wallets compatible with Runes

To start interacting with the Runes protocol, it is necessary to have a wallet. 2 main options are available to you: the Xverse wallet and the Unisat Wallet.

These 2 non-custodial wallets offer a friendly and easy-to-use interface. They are compatible with the Bitcoin blockchain, but also with the Ordinals, BRC-20, and Runes protocols. Xverse has the added benefit of being compatible with the Stacks (STX) sidechain.

Available as a mobile application and browser extension, These wallets provide a Rabby Wallet-like user experience for the Ethereum ecosystem.

Where to buy and resell your Runes?

The most accessible platform for exchanging Runes is undoubtedly OKX. In addition to their centralized exchange platform, the company offers a marketplace dedicated to registrations.

Like OpenSea with non-fungible tokens (NFT) on Ethereum, OKX Listings Marketplace allows trading of Ordinals, BRC-20s, as well as Runes since their launch.

To trade on this market, you will need to have a wallet such as the Xverse wallet mentioned earlier, or the OKX Walletthe exchange's non-custodial wallet.

How to navigate more efficiently with the Runes protocol?

A tool widely used by Ethereum users to track their transactions and be informed of activities on the blockchain is Etherscan. This site provides a detailed view of all past and pending transactions.

For the Runes protocol, the situation is quite similar. Several tools initially created for the Ordinals protocol now allow you to visualize Runes transactions, among the most used are Ord.io and Ordiscan.

In addition, a new tool, the Runes Terminal, was launched in parallel with the Runes protocol. Although not all of its features are yet available, ultimately, this platform will:

• View Runes Transactions on a dedicated scanner;
• Offer an interface specially designed for the creation of Runes ;
• To provide a book bringing together all the documentation on the protocol ;
• Finance new projects developed on the protocol thanks to a Launchpad.

By leveraging the information available on the previously mentioned platforms, it will be easier to navigate and identify projects that can create the best community around their assets.

First attracted by the lure of gain, I am now trapped deep into the rabbit hole. With no way out, I just have to share my knowledge and convey the passion I have for the world of blockchain. I am also the creator of Adopt a Block, an educational site dedicated to Bitcoin.

Marius Farashi Tasooji

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