Bitcoin Ordinals' creator proposes "Runes," an alternative to BRC-20 tokens

September 26, 2023 08:06 PM AEST | By Investing
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Casey Rodarmor, the inventor of Bitcoin Ordinals, recently proposed a new Bitcoin-based fungible token protocol named "Runes." The proposal aims to address the issues associated with the BRC-20 token standard, particularly its impact on the Bitcoin network. Despite the potential benefits of Runes, its future remains uncertain.

The BRC-20 standard was introduced in March by an anonymous developer known as “Domo.” Within two months, the BRC-20 market cap hit $1 billion, with PEPE and ORDI being among the most notable tokens created on Bitcoin using this standard. However, concerns have been raised about the proliferation of "junk" unspent transaction outputs (UTXOs) that these tokens generate on the Bitcoin network.

UTXOs represent the amount of cryptocurrency remaining in a wallet after a transaction has been completed. This balance is then used in subsequent transactions and is stored in the UTXO database. Bitcoin's UTXO model ensures transparency and auditability by preventing double-spending. Yet, Rodarmor argued that BRC-20 tokens lead to an undesirable increase in UTXOs, cluttering the Bitcoin network.

On Monday, Rodarmor proposed "Runes" as a UTXO-based alternative to the BRC-20 standard. He argued that UTXO-based protocols align more naturally with Bitcoin's infrastructure and promote UTXO set minimization by avoiding the creation of unnecessary UTXOs. "If this protocol had a small on-chain footprint and encouraged responsible UTXO management, it might serve as harm reduction compared to existing protocols," Rodarmor said.

While acknowledging issues with other fungible token protocols on Bitcoin such as Really Good for Bitcoin, Counterparty, and Omni Layer, Rodarmor expressed optimism about the potential of a well-designed protocol. Despite admitting that a vast majority of fungible tokens are filled with scams and memes, he believes that the right fungible token protocol could attract significant transaction fee revenue, developer attention, and a broader user base to Bitcoin.

However, the future of Runes remains uncertain. During a recent Twitter Spaces conversation with The Ordinals Show co-host Trevor Owens, Rodarmor revealed that he came up with the idea for Runes just the previous week and was unsure if he would pursue it further. Despite this uncertainty, the proposal has garnered attention. Following their conversation, Owens proposed a $100,000 incentive from the Bitcoin Frontier Fund for developers capable of creating a functional Rune application.

While the future of Runes remains to be seen, its potential to address issues associated with the BRC-20 standard has certainly sparked interest in the cryptocurrency community.

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