A brief introduction to Runestone and the Runes Protocol

Author: Ash Li, Bitcoin Square

The total number of Runestones, 112,383 in total, has attracted widespread attention since its release. Its total transaction volume has exceeded an astonishing 1,400 bitcoins, and the average price has also risen. Since then, more and more airdrops have been issued, making Runestone more popular, giving people a feeling of being a golden shovel. So what kind of project is Runestone? What is its relationship with the Runes protocol? This article will explore the Runes protocol and ecology in depth, and look forward to the future ecology.

1. Overview of Bitcoin Inscription Ecology

Background

From the sudden wealth effect of $ORDI that began in March last year, to the rise of the first wave of inscriptions in May, to the second wave of inscriptions in November-December, everyone is discussing what to play today and what to play tomorrow. Back to the blockchain itself, what is the Bitcoin inscription that is typed every day, what is the Ordinals protocol, and various protocols ending with "20" are emerging one after another. What are BRC-20, ARC-20, SRC-20, etc., what are the connections and differences, and why is there a Runes protocol suddenly? Let's continue to explore the colorful Bitcoin ecological protocols with these questions today.

Protocol Introduction

Ordinals Protocol

First released by Casey (@rodarmor) in December 2022, the protocol allows data to be engraved on the smallest unit of Bitcoin, including text, pictures, audio, video and other data information, and the Bitcoin inscription we have been talking about is a piece of metadata engraved (Inscribe) on Satoshis by using the Ordinals protocol, which is what we often call NFT on Bitcoin. For detailed information, please refer to the previous article introducing the Ordinals protocol: After reading this article, your understanding of the ordinals inscription will exceed 99, which introduces it in more detail.

BRC-20 Protocol

The BRC-20 protocol was launched on March 8, 2023 by anonymous developer @domodata. It is a protocol based on the Ordinals protocol just introduced. The protocol implements the functions of deploying, minting and transferring tokens by writing the name and quantity of the token in Satoshi in a specific JSON format. On the second day of its release, more than 30,000 inscriptions were minted, of which the number of text types was close to 27,000. Modeled after the Ethereum ERC-20 token standard, the BRC-20 name is equivalent to a token issuance protocol based on the Ordinals protocol. The first token of the BRC-20 protocol is named $ORDI, which also rose dramatically in the first and second waves of inscriptions. Recently, @domodata and @L1Fxyz, the group they founded, proposed a new proposal: to upgrade at block height 837090, support self-issuance mode, 5-character token names, and a method for destroying BRC-20 assets. The original link is https://l1f.discourse.group/t/brc-20-proposal-for-issuance-and-burn-enhancements-brc20-ip-1/621%. ARC-20 is a colored coin model. Unlike the Ordinals protocol, each ARC-20 token must be supported by a satoshi, rather than being distinguished by sorting like BRC-20. The information is engraved into the transaction script, the balance is represented by the number of sats in UTXO, the transfer function is completely handled by the Bitcoin mainnet, and the relevant changes of the token can be intuitively reflected on the chain. At the same time, Artomicals uses command operations to make each ARC-20 token the first "output" of the transaction to avoid being spent as miner fees. When the wallets did not support the protocol at the beginning, the phenomenon of burning assets appeared.

SRC-20 Protocol

SRC-20 uses the BTC STAMPS protocol, not the Ordinals protocol. We can also see from the address when inscribing and transferring money that SRC-20 still uses the Bitcoin address starting with "bc1q" instead of the address starting with "bc1p" that we usually use. The main difference between Stamps and Ordinals is the difference in architecture. The Stamps protocol stores metadata in the multi-signature UTXO, while the Ordinals protocol stores metadata in the SegWit part of the Bitcoin transaction.

2. Runes Protocol

Timeline Background

On May 8, 2023, the core developers of BTC published a document claiming that the BRC-20 protocol caused too much garbage and frequent transactions, causing the BTC network to be blocked, and the BTC community should take action to stop it; on September 1, Casey publicly opposed the BRC20 protocol and hoped to stop minting BRC-20. On September 26, 2023, Casey Rodarmor redeveloped a protocol called Runes as a replacement for BRC-20. The protocol is a UTXO-based alternative token protocol that enables Bitcoin users to have a good experience. Casey believes that after the improvement, the runes that can reduce the phenomenon of creating a large number of junk UTXOs are better, lighter and simpler asset issuance schemes than the previous experimental BRC-20 protocol. At least, the current popularity of BRC-20 has created a large number of "junk" UTXOs.

Runes Implementation

The balance of Runes tokens is directly included in the UTXO. If a transaction contains an output, and the script pubkey of the output contains an  OP_RETURN , followed by a data output representing the ASCII capital letter R, then the transaction contains a protocol message. Runes entered into transactions with invalid protocol messages will be burned, which allows future upgrades to change the way runes are allocated or created, avoiding the previous old client from incorrectly allocating the balance of runes.

Transfer

The first data output in the protocol message is decoded into an integer sequence, which will contain 3 types of information: ID, OUTPUT, and AMOUNT. ID specifies which Runes token is being transferred. Each token is assigned an ID when it is created, and ID starts at 1, and the earlier it is created, the smaller the value. OUTPUT determines which output is assigned. AMOUNT indicates the amount of the transfer.

Create

If there is a second data output after the protocol message, the transaction is a Runes token creation transaction. This part of the data output will be decoded into two integers SYMBOL and DECIMALS. If there are more integers, it is invalid. SYMBOL is equivalent to the BRC-20 Ticker, which is the token name. It supports up to 26 characters, and the only characters available are A-Z. DECIMALS: Precision, which determines how many decimal places the Runes token can support. If SYMBOL has not been used, the Runes token will be assigned an ID value. The first "rune" token created will have an ID value of 1. The three names BITCOIN, BTC, and XBT are disabled, and the Runes protocol still does not support the creation of tokens with the same name.

Comparison with other protocols

Casey compared the Runes protocol with other existing Bitcoin inscription protocols in the following four aspects in his blog:

• Complexity: How complex is the protocol? Is it easy to implement? Is it easy to be widely adopted?

• User Experience: Are there any implementation details that will negatively impact the user experience? Especially for protocols that rely on off-chain data.

• State Model: UTXO-based protocols are a more natural fit for Bitcoin and minimize it by avoiding the creation of "junk" UTXOs.

• Native Tokens: Native Tokens required for protocol operation are cumbersome and naturally less likely to be widely adopted.

Compare to Bitcoin's existing token protocols:

• BRC-20: Not based on UTXO and quite complex because it requires the use of the Ordinals protocol for certain operations.

• RGB: Very complex, relies on off-chain data, has been developed for a long time without being adopted.

• Counterparty: Has native tokens required for certain operations, not based on UTXO.

• Omni Layer: Has native tokens required for certain operations, not based on UTXO.

• Taproot Assets: A bit complex, relies on off-chain data.

According to Casey, the Runes protocol is a better and simpler option for creating fungible tokens on the Bitcoin network. In contrast, the BRC-20 token standard is the first experimental protocol for creating fungible tokens on the Bitcoin network. However, the protocol resulted in a large number of UTXOs and caused network congestion. Unlike other Bitcoin token standards, Runes does not rely on off-chain data to operate. Instead, a UTXO-based model is adopted, and UTXO is used to track the balance of Runes. Each transfer transaction will be split into different UTXOs, and each UTXO holds a different number of Runes.

Technical Features

UTXO Model

First, the Runes protocol has excellent compatibility and scalability, and can seamlessly connect with Bitcoin's UTXO model and second-layer protocols based on it, such as the Lightning Network and CKB. Compared to other homogeneous token protocols such as BRC-20, Runes significantly improves operational efficiency and user experience through simplified transaction processes and token balance management directly bound to UTXO.

Token issuance

Runes provides greater flexibility in token issuance, allowing token names from 1 to 28 characters in length, and adopts a variety of innovative issuance mechanisms, including but not limited to fixed total issuance and public inscription issuance, and even considers more expressive issuance methods. Among them, the fixed total method is more centralized, and the issuer directly inscribes all Runes and then distributes them; while the public inscription method is based on specific parameter settings, such as block height or timestamp, and the number of assets inscribed by users within a specified time determines the final total amount of the Runes.

In terms of UTXO management, Runes avoids the complexity and security risks that may be brought by the witness part of the transaction through the use of the OP_RETURN script, reduces the generation of unnecessary UTXO, and thus improves the overall health and efficiency of the network. The design concept of the Runes protocol is to reduce the "footprint" on the chain, encourage the optimization of UTXO use, and make it seamlessly integrated with the Bitcoin infrastructure. Promote the development and innovation of the Bitcoin ecosystem in a more concise and intuitive way.

User Experience

The Runes protocol supports Simple Payment Verification (SPV) wallets, providing users with a lightweight transaction experience, which is not achieved by traditional BRC-20. It also provides developers with a more friendly and easy-to-access development environment by providing reference implementations and emphasizing compatibility with existing Bitcoin scripts and address types. Whether there are some details that have not been disclosed to the public or more innovative places, we can conduct further analysis after the official release of the Runes protocol.

III. Potential opportunities of Runes protocol

There are many Runes protocol projects in the market that have begun to warm up. Since the official Runes protocol has not been released yet, strictly speaking, there are no Runes runes now. Many are still released in the form of Bitcoin NFT. After the official version of the protocol is launched, it will be distributed through airdrops or 1:1 exchange into runes. The following are some of the early projects expected to use the Runes protocol.

RSIC

In simple terms, RSIC uses the pre-mining mechanism and can only be minted after the Runes protocol is launched. RSIC has four reward distribution methods, including fixed rewards, enhanced rewards, random rewards and halved rewards. In the issuance process, technologies such as parent-child inscriptions, Metaprotocol fields, and recursive inscriptions are used. This project is the one with the richest gameplay and the technology used is also very powerful, which increases the playability. Different RSICs have different rarities, which increases randomness. According to the mining mechanism, holding RSIC will mine Runes issued by the project in the future. After the Runes protocol is officially launched, the project will airdrop the Runes it issues to these pre-mined addresses according to the pre-mined quantity. Twitter user @wutaner created a RSIC_DATA table to calculate the mining amount. The link is as follows: https://docs.google.com/spreadsheets/d/1xlAS5-_XS5aCHSozkcF_SCW8M1Kl2SDeolLWEvK4Sgg/edit?pli=1#gid=308398888 https://docs.google.com/spreadsheets/d/1xlAS5-_XS5aCHSozkcF_SCW8M1Kl2SDeolLWEvK4Sgg/edit?pli=1#gid=308398888 Runestone After RSIC, the project that has attracted much attention is Runestone. It is a pre-mining form, which is led by the founder of Ord.io, @LeonidasNFT. Its airdrop rules are simple and transparent. At the height of 826600 blocks, three inscriptions need to be held in the Bitcoin wallet, but text and JSON inscriptions must be removed, such as BRC-20 inscriptions. The Rune Guardians has a total of 10,000, and different attributes will have different effects on mining. It is worth mentioning that this project will become a real PFP series when Bitcoin is halved. The gameplay of The Rune Guardians is similar to RSIC, airdropping Ordinals blue chip NFT holders, and the project party bears all gas costs.

Rune Alpha

Rune Alpha is an early practical project based on the Runes protocol. It released the experimental platform in advance. It initially provided a limited-time and unlimited casting method based on the block height range, and launched a trading market based on PSBTS technology for the first time. At the same time, RuneAlpha's Dragon One Token $COOK will be seamlessly migrated at a perfect ratio of 1:1 after the Runes protocol is launched. At the same time, the latest airdrop plan and the roadmap were announced, which included a lot of future construction directions for runes.

Unicross

$RUFI is the first rune token on @merlinlayer2, which can convert BRC-20 to runes at a ratio of 1:1. Unicross is committed to supporting Runes Asset minting and protocol indexing. The tokens are launched fairly, 25% of which are airdropped to Merlin chain users, and the rest are in the mint stage.

Participation methods

There are many other Runes concept projects at present. We have only selected some of the more popular projects. At the same time, the founder Casey also decided to deploy tokens No. 0-9 some time ago. The specific names are still being collected from the community. Moreover, when Runes was first launched, the length of all token names was 12 characters or more. The length of tokens within 12 characters will be gradually released, so that project parties in need can pay to have shorter tokens. So after the official launch, you can participate in the following ways:

1. Directly mint the first 10 tokens No. 0-9 deployed by Casey's team. Since Ordinals currently has a relatively complete infrastructure and many proxy tools, those who have the conditions can also synchronize the Ordinals full node in advance to participate.

2. Holding the NFT or other certificates of the pre-mining projects mentioned above, after the project party deploys the corresponding tokens on the Runes protocol, you can directly obtain the corresponding airdrop or 1:1 exchange tokens.

Fourth, Runestone Project Introduction

Among the recent Rune protocol-related projects, the most talked-about one should be Runestone. On March 9 this year, a 3.97MB Ordinals inscription Runestone, the largest to date, was successfully auctioned for 8 BTC. Its creator @LeonidasNFT (Ordinals OG is also the founder of Ord.io) said that all proceeds from the auction, along with the 2.25 bitcoins previously raised through Twitter, will be used to pay for the miner fees of the Runestone airdrop program, which will be airdropped to more than 112,383 bitcoin addresses. This can be called one of the largest Ordinals airdrop projects in history, and it also makes the Bitcoin community around the world look forward to the upcoming Runes protocol.

When Leonidas first proposed the idea of ​​this airdrop, Casey also commented on the tweet to discuss how to reduce Gas consumption. Its name also comes from a tweet by Casey, who said that he was developing a feature called Runestone under the Runes protocol. The buffs that belong to the meme attribute and the soft support of the founder are stacked up.

Another important factor that made the Runestone project popular is that it mined the largest block on the Bitcoin blockchain, thanks to its cooperation with @ordinalsbot and @MarathonDH . That is, the Runestone auctioned for 8 BTC mentioned above has left its mark on Block 832947: the largest Bitcoin block ever, the largest Bitcoin transaction ever, and the largest Ordinals inscription ever. The proceeds from the auction are used to pay for the airdrop mining fees, which also reflects the Runestone project's commitment to the entire community. One of the important reasons why the inscription ecosystem can develop so rapidly is fairness. Runestone has superimposed the feature of "fairness" since the airdrop. The narrative features of "airdrop" + "fairness" + "Runes" can also be seen in the FOMO sentiment of the secondary market. At the same time, unlike previous inscriptions, Runestone has a consensus among users in the Chinese and Western communities, while the previous BRC-20 inscriptions were more played in the Chinese-speaking area. Leonidas also tweeted in Chinese: "Runestone has become a bridge between the East and the West, which is really remarkable. I noticed the Eastern Runestone. The efforts and contributions of the community. Although I only know English, it does not prevent me from seeing your contributions. Without the joint efforts of the East and the West, Runestone's achievements today would never have been achieved."

Currently, more than a dozen projects have airdropped to Runestone holders. Runestone is likely to be the golden shovel of the new round of rune ecology. Twitter user @0xquqi made a very comprehensive table to record the summary information of Rune Stone airdrops. The link is as follows: href="https://docs.google.com/spreadsheets/d/1F27vFEzlJsJtvuaOpgX5YyXEOwfhDDvf4KOSA5m0_5M/edit#gid=0%E3%80%82%E6%8F%90%E9%86%92%E5%A4%A7%E5%AE%B6%EF%BC%9A%E4%BC%98%E8%B4%A8%E7%9A%84%E9%A1%B9%E7%9B%AE%E9%83%BD%E6%98%AF%E4%BC%9A%E7%9B%B4%E6%8E%A5%E5%8F%91%E7%A9%BA%E6%8A%95%EF %BC%8C%E9%93%BE%E6%8E%A5%E9%92%B1%E5%8C%85%E6%88%96%E8%80%85%E9%9C%80%E8%A6%81%E6%8E%88%E6%9D%83%E7%AD%BE%E5%90%8D%E7%9A%84%E8%A6%81%E4%BB%94%E7%BB%86%E7%94%84%E5%88%AB%E3%80%82">https://docs.google.com/spreadsheets/d/1F27vFEzlJsJtvuaOpgX5YyXEOwfhDDvf4KOSA5m0_5M/edit#gid=0. Reminder: High-quality projects will directly send airdrops, and those that link wallets or require authorized signatures should be carefully identified.

V. Future Outlook

Both Runestone and other Rune protocol projects have attracted widespread attention in China and the West recently. They not only demonstrate the new technical potential of Ordinals, but also reflect the expectations of the entire market for this rune protocol. Will the Bitcoin halving and the launch of the new protocol start a new round of Bitcoin ecological sector rotation? Can the third wave of inscriptions that everyone has been looking forward to also arrive smoothly with the help of runes? Let us all wait and see!