Runes: Revolution in Token Management on Bitcoin or Just Another Hype?

On April 20, 2024, when the Bitcoin network experienced its long-awaited fourth halving of block rewards, another significant event took place — the launch of the Runes protocol. This new mechanism for creating interchangeable assets promises to rethink how tokens are handled on the most secure blockchain network in the world, while preserving Bitcoin’s fundamental principles.

Understanding Runes: A New Approach to Tokenization

Runes is not just another standard for issuing tokens. Created by Casey Rodarmor (, the author of the Ordinals protocol ), this mechanism represents a fundamentally different approach to organizing interchangeable assets on Bitcoin. Unlike earlier solutions that required complex structures and significant resource consumption, Runes uses an economical method, making the process of creating and managing assets simpler and more accessible for developers.

The key innovative solution here is the use of the UTXO model and the OP_RETURN output. The system stores data about token operations, occupying only up to 80 bytes of information, which minimizes blockchain load and prevents overload.

Why was Runes launched during the halving?

The synchronization of the launch with Bitcoin’s fourth halving was no coincidence. This event attracts maximum attention from the crypto community due to the reduction in block rewards. Runes developers leveraged this heightened interest to introduce a technological improvement that extends Bitcoin’s utility.

The immediate result was a spike in transaction fees in the network, rising to $170 before stabilizing at lower levels. This clearly demonstrated both the growing interest in the new protocol and its practical impact on the network’s economy.

How the Runes mechanism works

The system operates through integration with the existing Bitcoin architecture:

Use of UTXO and OP_RETURN: Instead of traditional accounts, Runes relies on the UTXO ( Unspent Transaction Output ) model, where each transaction is tracked as an unspent output. The special OP_RETURN output allows embedding token information without affecting the spendability of funds, preventing blockchain clutter.

Creation and issuance process: Creating a new token (“etching”) involves defining its parameters — name, divisibility, maximum supply. This information is encoded into a structure called a Runestone, which is stored on-chain. Minting (“minting”) and transferring tokens are performed via built-in commands in Bitcoin transactions.

Tracking and security: The UTXO model provides transparent tracking of all balances and prevents double-spending of tokens, since each asset is tied to a specific unspent output.

Reducing data volume potentially enables faster and cheaper transactions, especially when integrated with second-layer solutions like the Lightning Network.

Practical applications: from meme assets to serious projects

Runes has opened the door for various project categories. The most notable use cases are meme tokens — assets that originated as fun initiatives but often reach significant capitalization and attract attention from both retail investors and professionals.

Examples of successful projects:

Runestone is a collection of over 112,000 Ordinals assets, distributed for free among collectors meeting certain criteria. Holders gained the right to multiple airdrops of tokens after the protocol’s official launch.

RSIC•GENESIS•RUNE quickly gained popularity, reaching a market capitalization of over $325 million, demonstrating the potential of simple mechanisms to attract investor interest.

Comparison of standards: Runes vs BRC-20 vs SRC-20 vs ARC-20

The Bitcoin token ecosystem includes several competing standards, each with its own features:

Data storage:

• Runes uses UTXO + OP_RETURN, providing efficient and flexible management without constant changes to the blockchain structure.
• BRC-20 employs Ordinals inscriptions, embedding data into individual satoshis as part of proof, which can increase network load.
• SRC-20 also relies on UTXO but requires immutable record storage.
• ARC-20 links each token to a satoshi via the Atomicals protocol, ensuring persistent recording.

Scalability and flexibility: Runes excels by minimizing data and not depending on additional tokens for operations. BRC-20 is limited by the absence of smart contracts. SRC-20 may face scaling issues due to immutability. ARC-20 offers decentralized issuance, suitable for projects with specific requirements.

Popularity and use cases: BRC-20 gained early mover advantage and broad support. Runes is rapidly gaining ground due to efficiency. SRC-20 remains niche. ARC-20 is the newest standard, offering features for authentication and long-term data storage.

How Runes differs from Bitcoin Ordinals

Although both protocols use Bitcoin to create digital assets, they operate differently. Ordinals embed data directly into individual satoshis, effectively creating digital objects with their own identity. Runes focuses on managing interchangeable assets via the OP_RETURN output, not tied to specific Bitcoin units. This makes Runes more suitable for standard tokens, while Ordinals are better for NFTs and unique objects.

Getting started with Runes

To enter the Runes ecosystem, follow these steps:

1. Learn the basics: Understand how the UTXO model and OP_RETURN enable protocol functionality, and why this solution is more efficient than competing approaches.

2. Choose a compatible wallet: Ensure your Bitcoin wallet supports Runes operations. ME Wallet and some other solutions already provide the necessary functionality.

3. Acquire Bitcoin: Secure some BTC to pay for creation and transfer fees. This can be done on various platforms, including major exchanges.

4. Study the creation process: Familiarize yourself with the stages — from “etching” ( setting parameters for a new token ), through “minting” ( issuing ), to transferring between addresses, each step requiring understanding of specific Runestone commands.

5. Follow developments: Updates and new features are announced on social media and official channels of the project.

Challenges and limitations of Runes

Despite its innovation, the protocol faces serious obstacles:

Integration with infrastructure: Bitcoin’s network has historically been optimized for simple monetary transactions. Extending functionality requires updating many nodes and wallets, which progresses slower than developing new solutions.

Uncertain scalability: While Runes is more economical than other standards, its behavior under mass adoption remains untested. The final verdict on its impact on network performance can only come with time and practice.

Security needs verification: New protocols require thorough analysis for vulnerabilities. History shows that even minor flaws can lead to loss of funds.

Fees as a barrier: Increased network activity inevitably leads to fee spikes. After halving, fees reached $170 per transaction, making token creation and transfer inaccessible to mass users during peak activity.

The future of Runes: a look ahead

The protocol has received mixed reactions. Supporters see it as a way to expand Bitcoin’s utility, making it competitive with more functional blockchains. Skeptics fear complicating Bitcoin’s simple model and uncharted risks.

Development is focused on improving stability and security. As support in wallets and exchanges grows, deeper integration into main infrastructure can be expected.

The long-term outlook depends on two factors: whether developers can demonstrate scalability without sacrificing performance, and whether the Bitcoin community recognizes the need for expanded functionality. If both conditions are met, Runes could become the standard for tokenization on Bitcoin, attracting a new wave of projects and users.