How does the Runes protocol change the rules of Bitcoin's token game

On April 20, 2024, as Bitcoin approaches its fourth halving, a new revolutionary technology has emerged—the Runes protocol. This is not just another upgrade on the Bitcoin network but a redefinition of the fungible token standard. In simple terms, Runes makes creating tokens on Bitcoin easier, more efficient, and cheaper.

What exactly is Runes? Why does Bitcoin need it?

Imagine that creating a token on Bitcoin once required complex technical skills and significant network resources. Runes changes all that. Created by Casey Rodarmor (also the designer of the Ordinals protocol), Runes is a brand-new fungible token standard that leverages Bitcoin’s unique UTXO architecture to provide an elegant solution.

Unlike previous token standards, Runes does not cause network congestion or astronomical transaction fees. It uses OP_RETURN outputs to store data (up to 80 bytes), meaning it places minimal burden on the Bitcoin blockchain. Its launch during the fourth halving is no coincidence—this upgrade enables Bitcoin not only to transfer value but also to support complex token ecosystems without compromising its security and decentralization principles.

What happened after the halving? The data speaks for itself

On the day of the halving, Bitcoin’s transaction fees soared to $170. What does this indicate? Since the launch of Runes, user enthusiasm for creating and trading tokens has reached an unprecedented high. Although fees later decreased, this wave of activity proves the market’s strong desire for a new token standard.

On-chain data shows that since Runes’ release, new minting/deployment activities have continued to increase. This indicates that developers and projects are taking this new standard seriously.

The technical magic of Runes: simple yet elegant

Perfect application of the UTXO model

Bitcoin’s UTXO (Unspent Transaction Output) model was originally considered unsuitable for complex operations. Runes breaks this perception. The protocol works as follows:

Clever use of OP_RETURN: Each transaction involving Runes includes an OP_RETURN output that stores all necessary information for token operations—token ID, amount, transaction details. These data do not occupy the UTXO set, thus not affecting Bitcoin’s spendability.

Runestone messages: When creating a new token, the protocol uses Runestone (a special protocol message) to record token attributes—name, divisibility, total supply, etc. These messages are securely embedded in transactions, forming a permanent, verifiable record.

Preventing double-spending: By integrating with the UTXO model, Runes automatically prevents double-spending of tokens. Each token transfer is as secure as a Bitcoin transaction.

Why is this better than BRC-20?

BRC-20 uses the Ordinals protocol to embed data into individual satoshis, leading to network congestion and high fees. Runes differs:

• Lighter: Uses less data, imposing less load on the network
• Faster: Shorter confirmation times, especially outside peak periods
• Cheaper: More reasonable base transaction fees, relatively manageable even during busy times
• More flexible: Does not rely on the Ordinals protocol, operates independently

Meanwhile, standards like SRC-20 and ARC-20 have their own features, but Runes’ simplicity and native integration with Bitcoin’s architecture make it the most promising choice.

Practical applications of Runes: what has already happened

Explosive growth of early projects

Runestone is a flagship project within the Runes ecosystem. It distributed over 112,000 Ordinals assets to eligible collectors. Holders are promised up to three token airdrops.

RSIC•GENESIS•RUNE demonstrates the explosive value of Runes’ launch—this project quickly reached a market cap of over $325 million. Similar memecoins like Rune Pups and Runevo have also gained widespread attention in the community.

Memecoins are especially popular on Runes because creating them is now much simpler. Any innovative developer can launch a community-driven project without deep technical expertise or large capital investment.

How to start using Runes

Step 1: Get the right tools

You need a Bitcoin wallet that supports Runes. ME Wallet and other modern wallets have added Runes support. Make sure your wallet understands the UTXO model and OP_RETURN outputs.

Step 2: Prepare Bitcoin

Whether creating tokens or purchasing, you need Bitcoin to pay transaction fees. With Bitcoin around $87K, even small transactions are feasible.

Step 3: Understand the workflow

• Minting: Issue tokens according to preset parameters
• Engraving: Create new tokens and set their attributes
• Transfer: Send tokens to others

Each operation is completed via Bitcoin transactions, ensuring security and transparency.

Step 4: Stay updated

Follow the latest developments in the Runes community—Twitter, official channels, and developer forums. The protocol is still evolving, with new features and improvements continuously being introduced.

Challenges facing Runes

Network load and scalability

Although Runes is more efficient than BRC-20, as user adoption grows, it must prove it can handle large-scale transactions without degrading Bitcoin network performance. This remains a long-term challenge.

Transaction fee volatility

The peak fee of $170 after the halving shows that demand surges can still make Bitcoin transactions expensive. The success of Runes might lead to fees rising again, especially during bull markets. Only integration with second-layer solutions like the Lightning Network can fundamentally address this issue.

Wallet and node support

For Runes to truly become mainstream, major Bitcoin clients and wallet providers need full support. Currently, support is still limited.

Security awareness

Runes is new. The community is still testing its boundaries and searching for potential vulnerabilities. While the protocol is well-designed, unforeseen issues may arise in real-world use.

The future of Runes: Bitcoin needs to evolve

When Runes was launched, reactions in the Bitcoin community were mixed. Supporters saw an opportunity for Bitcoin to compete with Ethereum and other smart contract platforms. Skeptics worried that complexity might undermine Bitcoin’s simplicity and security.

But the trend is clear: developers are experimenting, users are participating, and projects are launching. Over time, we can expect:

• Improved wallet integration: More user-friendly interfaces making Runes operations as simple as regular Bitcoin transactions
• Diversification of use cases: From memecoins to real asset tokenization, Runes’ applications will expand
• Ecosystem maturation: Development tools, standards, and best security practices will be established
• Deep integration with second-layer solutions: Lightning Network and other scalability solutions may be deeply integrated with Runes

Why pay attention to Runes now

If you think Bitcoin is only for storing value or transferring funds, Runes will change your perspective. It proves that Bitcoin can support richer applications while maintaining its core principles.

For developers, Runes is a whole new stage. For investors, it opens new opportunities. For ordinary users, it makes participating in Bitcoin innovation much easier.

On that day in April 2024, when Bitcoin completed its fourth halving, the Runes protocol quietly changed the game. Now, the real innovation is just beginning.