How can the Rune Protocol drive market speculation again, apart from inscriptions?
The recent surge of interest in the Ordinals protocol has sparked a wave of debates and controversies. To address these concerns, the developers of Ordinals have proposed the Runes protocol, offering speculators a better and safer token investment option. However, this has also led to the emergence of several derivative projects, further fueling the speculative atmosphere.
Background of the Runes Protocol: Chaos in the BRC-20 Ecosystem
The BRC-20 protocol, introduced by Bitcoin developer Casey Rodarmor in 2022, brought the frenzy of token speculation to the Bitcoin network. Subsequently, a demo utilizing this protocol led to the launch of the BRC-20 protocol, which has now become the dominant protocol in terms of trading volume, with a total market value of $3.5 billion and a daily trading volume exceeding $1.4 billion, according to CoinGecko data.
However, the BRC-20 protocol has generated a significant amount of junk UTXOs, causing congestion on the Bitcoin network. This situation has become so severe that Bitcoin core developer Luke Dashjr has threatened to ban the BRC-20 and Ordinals protocols. Casey has expressed his opposition to the BRC-20 protocol multiple times due to these issues.
Insufficient Infrastructure of the BRC-20 Protocol
As the data of the runes is not recorded in the Bitcoin UTXO ledger, existing BRC-20 tokens rely on off-chain indexers to establish a separate database to determine the order of rune transactions and ownership changes. This has resulted in various problems, such as discrepancies in the versions of the indexes, which may easily lead to double-spending issues, the inability to seamlessly integrate with other Bitcoin network functionalities, and the problem of centralization of indexers, destabilizing the industry. However, for speculators, these issues are secondary.
Casey’s New Vision for the Runes Protocol
Although Casey does not encourage the creation of BRC-20 tokens, the speculative atmosphere in the market remains unaffected. Therefore, Casey decided to propose a compromise solution – designing a better, simpler, and more secure token protocol for the Bitcoin network.
Last September, Casey announced the development of a protocol called Runes, which serves as an alternative to BRC-20, ARC-20, and Stamps. Unlike the Ordinals protocol, which stores data in segregated witness data, the Runes protocol stores data in the native OP_RETURN of the Bitcoin network.
Built on top of the native Bitcoin network UTXOs, the Runes protocol is more easily integrated with other Bitcoin infrastructure in the future without the need to reinvent the wheel, such as the Lightning Network. This enhances protocol security and reduces the generation of junk UTXOs.
Although Casey proposed the concept of runes, he expressed his aversion to the speculative market atmosphere surrounding homogeneous tokens. Therefore, he has not actually implemented the project or indicated whether he will promote it in the future. However, many people have recognized the opportunity to profit from the market, leading to the emergence of several projects utilizing the concept of runes.
Rune Alpha, an independent project unrelated to Casey’s proposed Runes protocol, was officially launched in December 2023. It provides blockchain browser services for tokens issued based on the Runes protocol and issued the first token on the protocol – COOK.
In October last year, community developers introduced an improved version of the Runes protocol called the Pipe protocol, which adds minting functionality to enhance basic token issuance and exchange functions.
Whether it’s the recent BRC-20, ARC-20, SRC-20, or Runes protocol-related projects, they are all developing in a chaotic and speculative environment. For most participants, token value is evaluated based on narratives rather than actual impact, leading to a significant increase in similar derivative speculative projects.
The concept of runes has yet to be implemented in an actual project, but instead, more speculative projects have emerged. Casey’s concerns and vision seem to have fueled market sentiment.
BRC-20, Ordinals, Runes.
