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Runes, Casey Rodarmor's protocol for “sh!tcoins” on Bitcoin, is set to go live at the halving

Bitcoin's next four-year halving is imminent and is expected to take place on Friday or early Saturday. But a large number of the 15-year-old blockchain's developers and users are turning their attention to an event expected to take place immediately after the halving: the launch of Casey Rodarmor's Runes Protocol.

Rodarmor's big project release last year – the Ordinals protocol for creating NFT-like “inscriptions” on Bitcoin – brought a fresh spirit of playfulness and development power to the notoriously conservative blockchain ecosystem, while also bringing total revenue to crypto miners of $256 million -Dollar. (The popularity of the transactions caused tricky problems like network congestion and rising user fees, among other issues.)

The Runes Protocol, which allows users to spin tons of tokens on Bitcoin commonly found on other blockchains like Ethereum and Solana, could build on the success of Ordinals. But the launch of Rodarmor's new platform could also fundamentally expand the boundaries of what has previously been considered acceptable in Bitcoin culture, where all digital tokens other than the native cryptocurrency Bitcoin have long been considered taboo.

Ordinal numbers allowed pieces of data known as “inscriptions” to be attached to satoshis, the smallest BTC denomination, effectively enabling the minting and trading of non-fungible tokens (NFTs) on Bitcoin, an activity previously only possible on others Blockchains were available. Soon after, another developer, Domo, introduced “BRC-20” – a standard for creating fungible or tradable tokens, another feature previously absent from Bitcoin.

Rodarmor itself has described Runes as a more efficient way to create new tokens on Bitcoin, writing in a post on X on April 1 that the protocol was “designed for Degens and Memecoins.”

“I’m creating a place for people to create sh!tcoins,” Rodarmor said on an episode of his “Hell Money” podcast in February.

The question is whether they will take off like the Ordinals did.

Rodarmor describes Runes as a protocol and token standard that can address some of BRC-20's shortcomings.

BRC-20 allows users to transfer only one type of token with an inscription to a destination. However, Runes allow users to distribute various tokens in a single transaction that transfer any number of runes from inputs to outputs.

According to Rodarmor, Runes offers users more simplicity and security than the current BRC-20 standard.

“Transferring a BRC-20 token requires three transactions due to the way inscriptions work. You need two transcriptions to create the inscriptions and one to transmit the resulting inscription to the recipient,” Rodarmor told CoinDesk in an interview.

“The other drawback is the complexity. BRC-20 is essentially a superset of ordinal inscriptions. When writing a BRC-20 index, you must include an ordinal index and then add the logic for the BRC-20 on top of that.”

In comparison, Runes is a standalone protocol with no dependencies on Ordinals, Rodarmor said.

It should also be more efficient. With the exception of creating a rune, which is done through a two-inscription process, everything else requires a transaction.

“The transactions are very small and the transfers are very efficient,” he added.

The first rune, technically “Rune 0,” was labeled “UNCOMMON•GOODS” by Rodarmor, he said.

“There is an open coinage that begins with the halving and ends with the next halving,” Rodarmor said. “It is indivisible, so the unit cannot be divided into subunits, and each Mint transaction receives one unit.”

There is no real technical reason why Runes has to start right at the halving.

It's just “thematically cool,” Rodarmor said.

However, he argues that there are trends that will affect Runes after the halving.

The halving – Bitcoin's fourth in its 15-year history, a core feature of Satoshi Nakamoto's original programming – will reduce miners' reward for adding new blocks to Bitcoin by 50%, from 6.25 BTC to 3.125 BTC.

Bitcoin's security depends on the difficulty of the network or the number of hashes required to add a new block. If the hash rate were to drop because the block reward was cut by 50%, the network would, among other things, be less secure because it would be easier to add new blocks.

“Halving planning is a very aggressive schedule,” Rodarmor said. “I wouldn’t advocate any change, but if I were designing Bitcoin from scratch, I probably wouldn’t have chosen such a rapid decline.”

The halving may make the network's security more dependent on transaction fees – the small amounts of Bitcoin paid to miners to validate a transaction by including it in the latest block.

The halving of block rewards would then have to be offset by an increase in the BTC price, incentivizing more mining activity and thereby increasing the hash rate. However, if this does not happen, the fees would have to be increased instead.

“We already frequently see blocks where the fee is higher than the block subsidy, and this will become more common over time with each halving,” Rodarmor said.

Runes could therefore play a role in generating demand sources for block space and help drive up fees, which could become more important in securing the network.

This view is by no means universal in the Bitcoin community. Ordinals proved controversial among some developers because they caused network congestion and led to a spike in fees, a charge that Runes could also face – if it proves successful.

Runes builds on Ordinals by using UTXOs – unspent transaction outputs, a key element of Bitcoin inventor Satoshi Nakamoto's network design – to generate transactions. UTXO is the name given to the amount of crypto remaining after a transaction, similar to the money remaining after completing a cash purchase.

The new protocol expands the UTXO concept with the ability to hold a balance in any number of Runes tokens. A single Rune can contain 10 units of Rune A, 100 units of Rune B, and 1,000 units of Rune C, etc., destroying any UTXOs not spent by a transaction.

Users would therefore send a series of runes to different inputs, which would be transferred to an OP_RETURN for burning. Unless they mark it with a “runestone,” a pointer that indicates an alternative output, making them no longer spendable and therefore ignored by Bitcoin Core, the network’s software. A runestone could be used to create a new rune, known as “etching,” or to imprint or transfer existing runes.

Rodarmor summarizes Runes as a “simple OP_RETURN-based protocol” represented in around 2,000 lines of code.

“The inscriptions have doubled the size of the UTXO set in the last year alone and most of them are forever useless,” he wrote.

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