Runes vs BRC20: Is This The Future of Bitcoin?

Will Runes effectively address the shortcomings of Ordinals?

Back in the day, Bitcoin was primarily known as a simple cryptocurrency. However, times have changed. Recently, the Bitcoin network has embraced more complex functionalities with the advent of BRC20 tokens and Ordinals.

As things took off, people made a lot of money. For example, investing $100 in ORDI in December 2023 could have yielded $423 in less than 3 months!

As you can imagine, BRC20 tokens have drawn considerable attention, which, in turn, has sparked intense debate within the Bitcoin community. Critics have raised concerns that these innovations could clog the network, leading to higher transaction fees and slower processing times. The crux of the debate centers around finding a balance between expanding Bitcoin's capabilities and maintaining its efficiency and scalability.

Today, we’ll cover:

  • The Rise of Ordinals

  • Community response towards Ordinals

  • What are Runes?

  • Actionables and Opportunities

The Rise of Ordinals

Ordinals have been an instant hit. The total number of ordinals minted over time has already crossed 60 million.

This evolution, spurred by the Taproot upgrade, has introduced a layer of programmability and uniqueness to Bitcoin that was previously associated with platforms like Ethereum. 

So, before we go any further, let’s understand what Taproot is and how it works. 

Taproot: The Gateway to Innovation

The journey towards BRC20 tokens and ordinals began with activating the Taproot upgrade in November 2021. Taproot is designed to enhance Bitcoin's scalability, privacy, and security. In essence, it makes Bitcoin transactions faster and allows for the creation of complex contracts in a simpler and more efficient way. 

Taproot consists of three main upgrades:

  • Schnorr Signatures (BIP340): This feature allows multiple transactions to be signed with just one signature.

  • Taproot (BIP341): Focuses on making Bitcoin transactions smaller and faster by only showing essential information. This also adds an extra layer of privacy by making complex transactions appear simple.

  • Tapscript (BIP342): Makes the Bitcoin programming language more flexible, allowing for easier future improvements.

Ordinals and BRC20

Ordinals bring the idea of non-fungible tokens (NFTs) to the Bitcoin blockchain. Introduced by developer Casey Rodarmor in early 2023, ordinals allow for the inscription of digital content, such as images, text, or code, onto individual satoshis—the smallest unit of Bitcoin. This inscription process transforms these satoshis into unique digital assets, each with its own identity and content. Ordinals have opened up new avenues for creativity and digital ownership on Bitcoin, from art and collectibles to unique digital experiences.

Parallel to the development of ordinals, BRC20 tokens represent an effort to integrate fungible token functionality into the Bitcoin ecosystem. Inspired by Ethereum's popular ERC20 token standard, BRC20 tokens are designed to allow users to create, exchange, and transfer tokens on the Bitcoin blockchain. This development aims to leverage the security and reliability of Bitcoin while expanding its utility to include tokenized assets, decentralized finance (DeFi) applications, and more.

Here are the top 5 BRC20 tokens ranked by market cap:

The introduction of BRC20 tokens and Ordinals significantly shifted the “Bitcoin narrative.” No longer seen as just a digital currency, Bitcoin is now emerging as a platform for a wide range of decentralized applications and digital assets. 

Community Responses and Debates

Community reaction to BRC20 tokens and ordinals hasn't been without controversy. Concerns have been raised about their impact on the Bitcoin network, particularly regarding blockchain bloat and potential spam. Critics argue that these new applications could lead to congestion, increasing transaction fees, and slowing the network. Critics worry these new functionalities could strain the network and distract from its core mission.

In fact, some, like Bitcoin core dev Luke Dashir, have even called Ordinals and “Inscriptions” a “flaw” in Bitcoin’s design.

In response to these challenges, Casey Rodarmor proposed Runes, a protocol designed to offer a more efficient alternative to BRC20 tokens. Runes aim to minimize the blockchain footprint and manage UTXOs (Unspent Transaction Outputs) more responsibly, addressing the inefficiencies associated with the BRC20 standard.

What Are Runes?

If understanding Runes and the Bitcoin ecosystem seems confusing, don't worry. This aspect of the crypto ecosystem can indeed be challenging to grasp. Many users are accustomed to Ethereum, other EVM chains, and Solana. The user experience and level of knowledge required to profit from the Bitcoin ecosystem are more in-depth and complex, but that's why we're here! We'll make sure you stay ahead of the curve every step of the way.

The Potential of Runes

Runes protocol, spearheaded by Casey Rodamor esteemed creator of ordinals, aims to supplant existing token standards such as brc-20s with a more streamlined and efficient alternative.

Noteworthy for its potential for lucrative opportunities and strategic launch timing coinciding with the halving event, Runes has attracted significant attention. With Ethereum tokens valued at approximately $100B, excluding ETH, and ordinals around $2B, the fungible token market presents vast untapped potential. 

As the Runes protocol debuts, early investors stand to benefit from its projected substantial market value within its inaugural week. Despite the subdued anticipation preceding its launch, astute investors are encouraged to explore this promising opportunity before wider adoption and subsequent market fervor ensue.

Runes Features

  • Efficient UTXO-Based Model: Runes leverages Bitcoin's UTXO model for token management, minimizing network congestion and ensuring responsible UTXO management.

  • Streamlined Token Creation: Unlike the cumbersome BRC-20 standard, Runes simplifies token creation and management, facilitating seamless asset issuance directly on the Bitcoin blockchain.

  • Improved Usability: By eliminating reliance on off-chain data or native tokens, Runes enhances user experience and usability, making it more accessible to developers and users alike.

  • Enhanced Utility: Runes enables the issuance of various fungible tokens, expanding Bitcoin's utility and attracting a broader user base.

  • Increased Scalability: Lightning compatibility ensures near-instant and low-cost transactions, promoting scalability and mainstream adoption.

  • Revenue Growth for Miners: Runes generates additional transaction fees, providing a crucial revenue stream for Bitcoin miners amid diminishing block rewards.

  • RSIC Metaprotocol: Innovators are exploring novel applications like RSIC, combining Bitcoin Ordinals with yield farming to incentivize token holders and drive adoption.

  • Transformative Potential: As developers continue to explore its capabilities, Runes is poised to play a pivotal role in shaping the future of decentralized finance on the Bitcoin blockchain.

Now that we've covered the basics let's explore how you can benefit from these developments.

Actionables and Opportunities 

To benefit from the Runes upgrade, owning ordinals or specific brc-20 tokens is necessary for qualification post-upgrade. Unlike traditional airdrops, this process involves a cost and complexity, which acts as a gate for entry. 

However, this barrier to entry increases profitability compared to other airdrops, where widespread user participation dilutes potential rewards, coupled with this, protocols often implement stringent measures to filter out users, ensuring more concentrated rewards for participants.

First and foremost, you'll need a wallet to engage with apps on the Bitcoin ecosystem, enabling you to purchase ordinals and tokens.

Xverse Wallet

Xverse is a comprehensive Bitcoin web3 wallet that allows users to manage BTC and other tokens like STX and interact with decentralized applications. 

  • The Xverse wallet, a Chrome browser extension and mobile app, ensures users retain full control over their private keys and crypto-identity. 

  • To set up your wallet, download Xverse and choose to create a new wallet or restore an existing one using a seed phrase. 

  • Securely backup your wallet's recovery phrase, choose your preferred security mode, and fund your wallet by purchasing tokens or receiving assets. 

  • Customize your asset view, manage digital collectibles, and earn Bitcoin rewards through the Xverse Stacking pool. 

  • Lastly, connect to Bitcoin web3 decentralized applications for a seamless experience.

  • Download the wallet by clicking the button below.

Profiting From Runes

Now that you have your wallet set up and funded let’s head over to Magic Eden the most popular website for buying and trading Ordinals. 

  • To buy Bitcoin ordinals on Magic Eden, you first need to connect your wallet, such as Xverse.

  • Once connected, ensure you have both the ordinals address for receiving your digital artifacts and the Bitcoin address for payments and transaction fees. Prepare your wallet by approving a transaction, which may take some time to process on the Bitcoin blockchain. 

  • Once prepared, browse oridnals on Magic Eden and purchase the desired item. Note that transactions may take up to 7 minutes to be confirmed, and purchased Digital Artifacts will be locked from trading until the transaction is finalized.

Below are some of the most popular collections on Magic Eden. However, things can get a bit tricky here. Many of these collections, but not all, are planning to launch their own tokens following the Runes upgrade. To be eligible for these airdrops, you must purchase and hold specific NFTs before the halving event. Let's explore some of these collections.

  • RSIC: Considered a thought leader in the Runes space, RSIC was freely airdropped to early ordinal collectors, automatically activated upon purchase. It's believed that the RSIC team might be developing a full Runes DEX, offering potential rewards and incentives for holding post-halving.

  • Runestone: A community-driven initiative spearheaded by Leonidas, Runestone tokens were recently airdropped to addresses with at least three Ordinals. While tokenomics are still being finalized, each Runestone holder is expected to receive a certain number of Runestone memecoin tokens post-halving.

  • Rune Totems: Rune Totems offer maximum rewards when sent to the Bitcoin Genesis Address. However, this entails sacrificing the Totem to generate the most Runes, emphasizing a unique gameplay aspect within the collection.

  • Rune Guardians: Rune Guardians comprise three types with varying rarity: Keepers, Sentinels, and Guardians. Unlike RSICs, Rune Guardians are automatically activated upon receipt, with the rarity determining the amount of Runes earned post-halving.

These are just a few key collections that can prepare you for the Runes upgrade. Many others are out there, so consider this a starting point to dive in. Time is of the essence, as the halving event is fast approaching!

For those eager to dive into the world of Runes and explore their potential within the Bitcoin ecosystem, our guide offers a detailed, step-by-step walkthrough on interacting with Runes through the Xverse wallet.

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