New Bitcoin token standard Runes: start of an era?

New Bitcoin token standard Runes: start of an era?

Only a few days left until the launch of the new Bitcoin token standard Runes, and thus the beginning of a new era for Bitcoin? According to Franklin Templeton, Runes could unlock enormous potential for the Bitcoin ecosystem and finally make it competitive with Ethereum and Solana when it comes to fungible tokens. The Runes Protocol, developed by Casey Rodarmor, builds on the existing Ordinals protocol, which made it possible to create NFT-like “Inscriptions” based on the BRC-20 standard on the Bitcoin network, creating a new market on the Bitcoin blockchain. Rodarmor criticizes the BRC-20 standard as unsuitable for certain use cases and inefficient, which is why he developed the Runes standard to simplify the creation of fungible tokens.

Compared to the BRC-20 standard, Runes will also use Bitcoin and pay fees in Bitcoin to create new tokens, but with a UTXO model instead of the account-based model. According to Rodarmor, the UTXO model offers key advantages as it allows Runes to function completely on-chain and be compatible with Layer 2 solutions such as the Lighting Network for Bitcoin. The launch of the Runes protocol is scheduled to take place shortly after the Bitcoin halving, which is expected on April 20, 2024.

The launch of Runes will help Bitcoin close the gap with Ethereum and Solana in the fungible digital asset space, according to investment firm Franklin Templeton Digital Assets. Currently, the fungible token market for Bitcoin is still small compared to ETH and SOL, however, with the launch of Runes Bitcoin is expected to significantly increase the market size for fungible tokens. Investors are also seeing the advantages of Runes compared to BRC-20 tokens, leading to a strong sell-off in BRC-20 tokens as they prepare for the launch of Runes.

Franklin Templeton Digital Assets praises the launch of the Runes Protocol and highlights the improvements it will bring, including no junk UTXOs, no reliance on off-chain data, increased privacy, and compatibility with the Bitcoin Lightning Network. In addition to the Runes standard, the company also highlighted other developments such as Ordinals on the BTC network, which could lead to a “renaissance in BTC activity.” This positive innovation dynamic is primarily driven by Bitcoin NFTs, new fungible token standards such as BRC-20 and Runes, Bitcoin Layer 2s and other Bitcoin DeFi primitives. The Bitcoin network is expected to secure larger shares in the crypto DeFi sector in the future, which is expected to have over 1.2 billion users by 2025.