Runes: Revolution in Token Standardization on Bitcoin

April 20, 2024, became a turning point for Bitcoin. Coinciding with the network’s fourth halving, the Runes protocol was introduced — an innovative solution for creating fungible digital assets. Developed by Casey Rodarmour (, the author of the Ordinals protocol ), this standard opens a new chapter in the evolution of the leading cryptocurrency, enabling Bitcoin to compete with other blockchains in asset tokenization and decentralized applications.

Why is Runes more than just a new token standard?

Runes doesn’t just add functionality to Bitcoin. It represents a fundamental shift in how the network handles digital assets while maintaining its core principles of security and decentralization.

Key innovation: Instead of complex multi-layer solutions, Runes employs a minimalist approach by embedding token data directly into Bitcoin transactions. This means each Runes token lives and breathes with the network itself, without requiring parallel infrastructure or complicated transfers between systems.

The protocol’s launch immediately demonstrated its demand: Bitcoin transaction fees soared to $170, reflecting a massive influx of activity. This was not just a technical debut — it was a market interest explosion.

How exactly do Runes work?

Understanding Runes mechanics requires knowledge of its architectural foundations. The protocol is built on two key elements of Bitcoin: UTXO model and OP_RETURN outputs.

UTXO: The Foundation of Runes

The UTXO (Unspent Transaction Output) model is at Bitcoin’s core. Instead of a traditional account system that stores user balances, Bitcoin uses outputs. Each transaction creates new outputs that can be spent later. Runes is embedded into this system seamlessly, without requiring modifications.

When you create a Runes token (the process is called “etching”), you define its characteristics: name, divisibility, maximum supply. This information is encoded in a special message — Runestone — and stored in the transaction output.

OP_RETURN: Minimal intrusion

The standard BRC-20 requires recording large amounts of data on the blockchain, increasing its size and congesting the network. Runes solves this elegantly: by using an OP_RETURN output (which can contain up to 80 bytes of arbitrary data), the protocol minimizes space consumption.

This is critical. The less data in the blockchain, the faster the network operates, the lower the transaction fees, and the more scalable it becomes.

Operations: From creation to transfer

Token creation: the developer sets parameters (name, symbol, max amount) and sends a transaction with a Runestone. This moment is recorded in the blockchain forever.

Minting: tokens are issued according to rules set during creation. Some Runes tokens have daily minting limits, others have unlimited issuance. This provides design flexibility.

Transfer: sending tokens to another user is also encoded in a Bitcoin transaction, with the system automatically tracking balances via UTXO.

Practical application: Which projects are already using Runes?

The first weeks after Runes launch showed the market was ready. Several flagship projects appeared:

Runestone

Runestone is not just a token; it’s a bridge between the old Bitcoin era and the new. The project covers over 112,000 Ordinals assets, which were distributed free of charge among holders during the protocol’s first year. Those who received Runestone were included in an airdrop program: the first three airdrops will be distributed after the official Runes launch.

It was a brilliant strategy: creating an early community of advocates to organically promote the protocol.

RSIC•GENESIS•RUNE

A less known but equally impressive project. RSIC•GENESIS•RUNE accumulated a market cap of over $325 million in just a few weeks. This proves that the market is eager for new ways to create assets on Bitcoin.

Meme coins and community

Where the barrier to entry is low, meme coins are born. Runes made token creation accessible, and the community quickly took advantage of this opportunity. From Rune Pups to Runevo — the ecosystem is filled with community-managed projects.

Runes in the context of other standards: Comparison

Runes does not exist in a vacuum. Other token standards revolve around Bitcoin. How do they compare?

BRC-20: The pioneer burdened with popularity

BRC-20 was the first major token standard on Bitcoin. It uses the Ordinals inscription mechanism, engraving data directly into satoshis. Elegant but inefficient: each inscription takes extra space in the blockchain.

Result? When BRC-20 gained popularity, Bitcoin fees skyrocketed. Runes addresses this issue by minimizing data, making it more scalable.

SRC-20: Immutability as an advantage

SRC-20 is similar to Runes in using UTXO, but differs in philosophy: data recorded in SRC-20 is immutable. This can be an advantage for certain use cases (for example, for documents that must never change), but reduces flexibility.

ARC-20: Atomicity as a solution

ARC-20 operates based on the Atomicals protocol, linking each token to a specific satoshi. This ensures persistent data recording but requires more resources to manage individual satoshis.

Final comparison

Technical challenges: What slows Runes?

Despite its innovation, Runes faces several real issues.

Wallet and node compatibility

Bitcoin nodes and wallets were designed for simple transactions. Supporting Runes requires software updates. This creates fragmentation: not all wallets support Runes, not all nodes understand the new standard. This slows adoption.

Scalability concerns

While Runes minimizes data volume, scalability remains an open question. What if thousands of projects start issuing tokens? Can the Bitcoin network handle such load?

Fees: The inconvenient truth

After Runes launch, Bitcoin fees were volatile. Peaks reached $170, then dropped. One thing is clear: the popularity of new token standards indeed congests the network. Ordinary users might simply not afford to send Bitcoin when fees are sky-high.

Security: Uncharted territory

Runes is a young protocol. There’s no long history of how it performs under pressure. Are vulnerabilities possible? Could attackers exploit the Runestone mechanism? Time will tell.

Where to start? Practical steps

If you want to work with Runes:

Step 1: Education — Learn how UTXO and OP_RETURN work in Bitcoin. Runes is not complicated but requires understanding basics.

Step 2: Choose a wallet — Not all wallets support Runes. ME Wallet and a few others provide the necessary functionality. Make sure your chosen wallet syncs with the UTXO model.

Step 3: Accumulate Bitcoin — You’ll need BTC for fees. Even a small amount. Buy, transfer to your wallet.

Step 4: Experiment — Try sending tokens, creating your own, participating in airdrops. Experience is the best teacher.

Step 5: Follow developments — The Runes ecosystem changes rapidly. Twitter, official channels, communities — all are sources of information about new opportunities and risks.

The dilemma: Ordinals vs. Runes

Bitcoin Ordinals and Runes — both creations of Casey Rodarmour — are quite different approaches.

Ordinals engraves data directly into satoshis, creating NFTs and digital artifacts. It’s like signing a painting and hanging it in a museum. Unique but requires space.

Runes uses a more efficient method — OP_RETURN. It’s like recording ownership in a registry that you own certain tokens. Less space, more functionality.

Conclusion? Ordinals are good for collectibles. Runes is better suited for functional, interchangeable assets.

The future: Optimism and skepticism

The Bitcoin community is divided. Some see Runes as the future that will turn Bitcoin into a competitor to Ethereum. Others worry that complicating the simple blockchain will destroy its essence.

Optimistic scenario

Runes becomes a standard. Developers launch complex financial instruments, stablecoins, utility tokens. Lightning Network integrates with Runes, enabling fast and cheap transactions. Bitcoin transforms into a universal platform without losing security.

Skeptical scenario

Fees remain high. Nodes do not update quickly enough. Network fragmentation becomes a problem. Runes remains a niche standard used by enthusiasts but not mainstream.

The reality is probably somewhere in between. Runes will find application in certain segments (meme coins, collectible assets, utility tokens), but won’t turn Bitcoin upside down.

Conclusion: A new era for Bitcoin has begun

The launch of Runes on April 20, 2024, marked the beginning of a new era. Bitcoin is no longer just digital gold — it’s becoming a platform for digital assets. The protocol demonstrates that functionality can be expanded on Bitcoin without violating its fundamental principles.

Runes is more efficient, scalable, and flexible than BRC-20. The ecosystem is already filling with projects. Initial data shows growing interest. Yes, questions remain — compatibility, security, long-term scalability.

But one thing is clear: Bitcoin is evolving, and Runes is one of the most interesting indicators of this development.