Runes Protocol, the new Bitcoin protocol that seeks to compete with BRC-20 tokens

Casey Rodarmor introduces Runes Protocol, a new protocol that seeks to compete with BRC-20 tokens on the Bitcoin network.

Casey Rodarmor, the eccentric creator of the Bitcoin Ordinals protocol, has announced the launch of a new protocol called “Runes Protocol”, with which it intends to take another evolutionary step in the creation of fungible tokens in Bitcoin. To achieve this, Rodarmor seeks to overcome known drawbacks within the protocol BRC-20, thus exceeding the possibilities that it offers to developers who use it. Among these drawbacks to overcome, Rodarmor highlights:

1. Complexity: Developing applications with BRC-20 is very complex and this has been an element that slows down its adoption.
2. User Experience: The user experience provided by BRC-20 is limited, mainly due to the difficulty in developing them and the interactive limitations of these tokens. This causes BRC-20 to have a negative effect on user experience.
3. Working model: Bitcoin uses the UTXO model and so building on this model is natural. While BRC-20 uses UTXO, other token proposals on Bitcoin (such as Taproot) do not use this model and are more complex.
4. Native Token: Runes seeks to keep BTC as a native token, something that other tokenization models in Bitcoin (Stacks, RSK, OmniLayer, RGB or Taproot) do not use.

From Rodarmor's perspective, this makes BRC-20 and other known Bitcoin tokenization methods inefficient, complex, expensive, and vulnerable to scams and hacks. That's why they have put forward this proposal to create Runes to address all these issues.

Runes Protocol, creating tokens on Bitcoin made easier

Thus, Runes Protocol is a fungible token protocol for Bitcoin, and it is designed to be an alternative to BRC-20, Taproot Assets, RGB, Counterparty, Omni Layer and other off-chain tokenization options for Bitcoin (RSK and Stacks). To achieve this functionality, Runes Protocol makes use of all the possibilities of Bitcoin Script, and to be more precise, of the opcode, OP_RETURN.

The idea behind Runes Protocol is to tie the record of all transactions to Bitcoin’s UTXO system. So for example, a token issuance transaction using Runes specifies the supply, token symbol, and number of decimal places, assigning that supply to a specific UTXO. Any amount of Rune tokens can be in a UTXO, regardless of their size. In this way, UTXOs are only used to keep track of balances. A transfer function then uses that UTXO, splitting it into multiple new UTXOs of arbitrary size, containing different amounts of Runes, to send records to other people.

For example, if a UTXO with ten thousand satoshis (arbitrary) is used, it can have a million Runes. Thus, two friends can be sent 100k Runes each. To do this, the corresponding amounts to be sent are entered and those Runes are assigned in the OP_RETURN content of the Bitcoin transaction. Thus, we have a UTXO (Output) and three UTXOs come out, two with 100k Runes each for my friends and the other with 800k Runes for me (the change).

This scheme is much simpler to use for generating tokens than, for example, the well-known colored coins. But at the same time, it allows to overcome the weaknesses of Ordinas and Colored Coins, without abandoning the Bitcoin standard. In fact, a few changes to Bitcoin, more specifically, to OP_RETURN, would be needed to enable this feature and unleash its full potential.

Main features of Runes Protocol

Rodarmor indicates that this system offers us interesting features such as:

1. Efficiency: Since Runes' operation is a native Bitcoin protocol and uses the UTXO and OP_RETURN capabilities for its operation.
2. Security: Runes tokens are protected by the Bitcoin network, which is the most secure blockchain in the world.
3. Flexibility: Runes is designed to be compatible with a wide range of applications.
4. Lower transaction fees: Runes transaction fees are much lower than BRC-20. This makes Runes more affordable for users.
5. Faster transactions: Runes transactions are faster than BRC-20 transactions. In fact, due to its OP_RETURN nature, it might be possible to use Runes Protocol in conjunction with Lightning Network.

A work in progress

Rodarmor indicates that all of this is in development. On his personal blog, Rodarmor talks about Runes and its possibilities, but it is all an idea, one that has already caught the attention of many developers. And actually, it is understandable, because compared to Ordinals, Runes Protocol is much less invasive, more practical and extensible, something that certainly catches the attention of those who have dedicated themselves to the development of ideas such as Ordinals or BRC-20.

Whether Runes will be successful in the competition with BRC-20 remains to be seen. However, Rodarmor’s involvement in the project is a sign that it is worth taking seriously. Rodarmor is a respected Bitcoin developer with a track record of success. Its Ordinals protocol has been very popular and has helped increase interest in Bitcoin NFTs. If Runes is successful, it could have a major impact on the Bitcoin ecosystem. It could make Bitcoin a more attractive platform for a wide range of new applications on top of Bitcoin.

Continue reading: Ordinals exceed 25 million on the Bitcoin network