Is Bitcoin Finally Ready for Fungible Tokens? Bitcoin Runes Explained

Bitcoin Runes Technical Foundation

How the Runes Protocol Works

Runes allows multiple tokens in a single UTXO for efficiency over address-based/off-chain protocols. Transactions have a special `OP_RETURN` structure with token supply, ID, and UTXO output, ensuring clarity. 

Token supply defines UTXO token capacity; ID is the numeric identifier. Transfers split UTXOs with varying Rune amounts. The focus is simplicity, user experience, and avoiding unnecessary UTXOs/off-chain data.

Runes vs. BRC-20 Tokens

While BRC-20's market cap reached $1B in 2 months, it faced "adverse UTXO proliferation" criticism. Runes offer a more efficient, elegant solution than BRC-20, addressing network congestion and indexer inconsistencies. 

Runes minimize "junk" UTXOs for better management/smaller footprint, unlike BRC-20's potential congestion/inefficient tokenization. Runes' UTXO-based state model minimizes off-chain data needs, unlike BRC-20's complex interactions/potential native token reliance.

Getting Started with Bitcoin Runes

Preparing for Runes: Wallets and Bitcoin Essentials

Before engaging with Runes, you'll need to acquire Bitcoin to cover transaction fees. Be prepared to grab it at the best reasonable cost, including gas fees. You can check the network fee in real time at mempool.space.

You'll need to use supported platforms for minting, etching, and trading Runes. Here are some popular options:

1. Wallets

• UniSat Wallet
• XVerse Wallet
• Ordinals Wallet
• Magic Eden Wallet
• OKX Wallet
• Magic Eden Wallet

2. Explorers & Data

• Rune Alpha: Exploration, etching, minting, and marketplace
• RunesTerminal: Exploration, minting, and launchpad services
• SatScreener: Information on Runes (mint/supply, price, market cap)
• RuneMine: Portfolio setup, Multisig, Indexer, Runes data
• BTCToolPro: Charts for Runes tokens, minting, etching
• RunesMarketCap: Details on market cap, listings, and projects
• Runedata: List of Runes, price, holders, transactions
• OKLink: List of Runes, price, holders, transactions
• Gate.io: List of Runes, price, holders, sales, where to buy

3. Marketplaces

• Unisat
• OKX
• Ordinals Wallet

4. Etching/Minting Platforms

• Rune Alpha 
• RunesTerminal
• BTCToolPro
• Luminex
• Bitcoin Rune
• Scrypt 

Note: Always do your own research (DYOR) before using any platform or service.

The Process of Etching, Minting, and Transferring Runes

Etching

Etching creates a Rune and sets its properties, which cannot be changed after the process. Here's an example using Luminex:

1. Head over to the Rune minting section.
2. Switch to the 'Etch' tab.
3. Input the desired parameters (similar to deploying tokens on EVM chains, right?).
4. Click the 'i' symbol next to each section for explanations and guides if needed.
5. Choose your desired fee (check mempool.space before proceeding) and hit 'Submit Etch'.

Minting

Minting is the process of creating new Rune tokens and adding them to the existing supply. Once the mint limit (set by the etcher) is reached, no more new tokens can be minted, and only the existing ones can be in circulation. Here's an example using UniSat:

1. Visit the UniSat website and navigate to the Runes section.
2. Select the specific Rune you want to mint.
3. Input the number of Runes you want to mint or use the slider for batch minting.
4. Confirm the transaction after ensuring the minting details are accurate.
5. After the transaction is confirmed on the blockchain, refer to the following formula to calculate the current total supply of the minted Rune: `Supply = Premine + (Amount * Minted) - Cap`.

Beware: Network fees are extremely high now (as you can see in the example), so watch out and avoid FOMO.

Trading

To trade Runes, follow these general steps:

1. Navigate to the trade section or exchange interface and connect your wallet.
2. Select the Runes you want to trade from the available options.
3. Specify the quantity of Runes you desire to trade.
4. Review and confirm the trade details, such as price and transaction fees.
5. Execute the trade to complete the transaction.

Always ensure to review all trade details and consider market conditions before executing a trade.

If you use OKX, they just announced support for zero-fee trading on mobile two days ago.

Runes in Practice

The Runes protocol opens up exciting opportunities for the Bitcoin ecosystem. The chief expectation is that Runes will power the Bitcoin decentralized finance (DeFi) ecosystem in the near future. This could lead to the creation of Bitcoin-based meme coins, as well as the emergence of wrapped tokens representing cryptocurrencies from other blockchains on the Bitcoin network.

As the Bitcoin L2 and DeFi sectors advance, we may even witness the rise of Bitcoin-native tokens powering decentralized applications (dApps). The simplicity of the Runes token creation process allows developers to build innovative dApps, contributing to the growth and diversification of the Bitcoin token landscape.

Moreover, the Runes protocol fosters increased engagement within the Bitcoin community, offering a gateway to a broader audience and facilitating a larger volume of tokens, which can attract more participants and developers to the ecosystem. Community resources like launchpads, lending platforms, and developer tools provide avenues for users and developers to actively participate in the Runes ecosystem, promoting collaboration, innovation, and adoption within the Bitcoin network.

Conclusion

Bitcoin Runes is a new and efficient way to create fungible tokens directly on the Bitcoin blockchain. It aims to solve limitations of existing token protocols and usher in a new era for DeFi and dApps on Bitcoin. However, proceed with caution - gas fees are getting crazy, and so are the number of not-gonna-make-it projects.