What is the Bitcoin protocol “Runes”?
The Bitcoin halving, which took place successfully over the weekend (May 20th), can be considered one of the biggest events in the crypto world this year. The block rewards for miners will be reduced from 6.25 Bitcoin (BTC) to 3.125 Bitcoin.
In addition to the Bitcoin halving, the Bitcoin homogenous token protocol “Runes” also went live over the weekend, attracting market attention and causing a frenzy of Rune token minting, resulting in a significant increase in Bitcoin transaction fees.
Runes aims to solve the problem of slow and expensive transactions on the Bitcoin blockchain. It was launched by Casey Rodarmor, the founder of Ordinals, and provides a simpler and more efficient system than BRC-20.
Ordinals, launched in December 2022, allowed users to store images, audio, and other content on the Bitcoin blockchain, bringing about an unprecedented revolution and being referred to as the “second phase of Bitcoin.”
Shortly after the launch of Ordinals, users began utilizing the protocol to issue BRC-20 tokens, creating numerous applications and possibilities on the Bitcoin blockchain.
Further reading: Bitcoin NFTs: What’s the key protocol behind the surge in minting and transaction fees?
Since its launch, Ordinals assets have been transferred over $3 billion on the chain in just over a year. There have been nearly 600,000 related wallets and 2.5 million on-chain transactions, indicating significant interest from users.
However, while Ordinals and BRC-20 bring more interesting applications, they also make the already expensive and slow Bitcoin blockchain even more costly and sluggish.
If Ordinals can be seen as “Bitcoin 2.0,” then BRC-20 and Runes can be seen as the “2.1” and “2.2” versions of new applications on the Bitcoin chain.
Further reading: The surge in popularity of Bitcoin “inscriptions” – What are the reasons? You need to know these three projects and controversies.
What do people think of the increased Bitcoin transaction fees?
Runes protocol went live after the halving, attracting many investors to rush in and issue the first token, as well as snatch up the “best token names.” The influx of users caused a massive network congestion in Bitcoin and led to a significant increase in transaction fees.
According to mempool data, on April 20th, the average Bitcoin transaction fee was $127.97, seven times higher than the previous day’s average fee, setting a new record. The transaction fees for high priority transactions even surpassed 2,000 Sat (approximately $200) at one point.
Although the Bitcoin halving affected miners’ income, the Runes protocol caused a surge in transaction fees, resulting in a daily increase of $107.8 million in total revenue for Bitcoin miners (including block rewards and transaction fees), also setting a record.
Regarding the newly launched Runes protocol, the community’s opinion remains divided, just as it was during the launch of the Ordinals protocol. Some users believe that the Rune protocol not only allows for more interesting applications and asset classes on Bitcoin but can also sustain miner operations through transaction fees after the halving.
Traditional Bitcoin supporters, on the other hand, view these applications as mere “foolishness,” making the Bitcoin blockchain even more expensive and slow and tarnishing the classic image of Bitcoin.
Regardless, the launch of the Ordinals and Runes protocols marks the beginning of the second phase of Bitcoin and sets a historical milestone in the development of Bitcoin. With more and more exchanges starting to offer trading of Runes tokens, the future of development on the Bitcoin blockchain seems promising.
References: Coindesk, Cointelegraph