Bitcoin’s next quadrennial halving is imminent – it will likely take place on Friday or early Saturday. But many of the developers and users of the 15-year-old blockchain 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 released last year – the Ordinals protocol for creating NFT-like “inscriptions” on Bitcoin – brought a new spirit of play and development vigor to the notoriously conservative blockchain ecosystem, while showering crypto miners with a cumulative revenue of $256 million. (The popularity of transactions has led to thorny problems such as network congestion and soaring user fees, among the tradeoffs.)
The Runes protocol, which will allow users to create piles of tokens on top of Bitcoin like those commonly seen on other blockchains like Ethereum and Solana, could build on the success of Ordinals. But the arrival of Rodarmor’s new platform could also fundamentally push the boundaries of what was previously considered acceptable in Bitcoin culture, where all digital tokens other than the native cryptocurrency Bitcoin have long been considered taboo .
Ordinals made it possible to attach pieces of data called “inscriptions” to satoshis, the smallest denomination of BTC – thus making it possible to mint and trade non-fungible tokens (NFTs) on Bitcoin, an activity that was previously unavailable than on other blockchains. Shortly after, another developer, Domo, unveiled “BRC-20” – a standard for creating fungible or tradable tokens, another feature that did not previously exist on Bitcoin.
Rodarmor himself described Runes as a more efficient method of creating new tokens atop Bitcoin, writing in a in a post on X on April 1st that the protocol was “built for degens and memecoins.”
“I’m creating a place for people to create sh!tcoins,” Rodarmor said in February in an episode of his podcast, Hell Money.
The question is whether they will take off, as the Ordinals did.
Rodarmor describes Runes as a protocol and token standard that can address some of the shortcomings of BRC-20.
With BRC-20, users can only transfer one type of token to a single destination with a single registration. Runes, however, will allow users to distribute different tokens in a single transaction that transfer any number of runes from inputs to outputs.
Rodarmor claims that Runes will offer users greater simplicity and security than the current BRC-20 standard.
“Transferring a BRC-20 token requires three transactions due to how inscriptions work. You need two transcripts to create the inscriptions and one to transfer the resulting inscription to the recipient,” Rodarmor told CoinDesk in an interview.
“The other drawback is complexity. BRC-20 is essentially a superset of ordinals entries, where if you write a BRC-20 index, you have to include an ordinals index and then add the logic of the BRC-20 on top of that.
Runes, in comparison, are a standalone protocol with no reliance on ordinals, Rodarmor said.
It is also designed to be more efficient. With the exception of creating a rune, which is done through a two-inscription process, everything else requires a single transaction.
“The transactions are very small and the transfers are very efficient,” he added.
There is no real technical reason why Runes should be cast upon halving.
It’s just “thematically cool,” Rodarmor said.
However, he claims that there are post-halving trends that the Runes will influence.
The halving – Bitcoin’s fourth in its 15-year history, a key feature of Satoshi Nakamoto’s original programming – will see miners’ reward for adding new blocks to Bitcoin reduced by 50%, from 6, 25 BTC to 3.125 BTC.
The security of Bitcoin is related to the difficulty of the network, or the number of hashes required to add a new block. If the hash rate drops because the block reward was reduced by 50%, among other potential reasons, the network would be less secure because it would be easier to add new blocks.
“The halving schedule is a very aggressive schedule,” Rodarmor said. “I wouldn’t advocate changing it, but if I had to design Bitcoin from scratch, I probably wouldn’t have chosen such a rapid decomposition.”
Due to the halving, network security could become more reliant on transaction fees – the small amounts of bitcoin paid to miners for validating a transaction by including it in the last block.
The halving of block rewards should then be offset by an increase in the price of BTC, encouraging more mining activity and thus increasing the hash rate. If this did not happen, the fees would instead have to increase.
“We already frequently see blocks where the fee is higher than the block grant, and this will become more common over time with each halving,” Rodarmor said.
Runes could therefore play a role in generating sources of demand for block space, helping to drive up fees that could become more important for securing the network.
This view is by no means universal in the Bitcoin community. Ordinals have proven controversial among some developers for causing congestion on the network and leading to higher fees, an accusation Runes could also face – if it proves effective.
Runes leverages ordinals by using UTXOs – unspent transaction outputs, a key part of Bitcoin creator Satoshi Nakamoto’s network design – to generate transactions. UTXO is the term for amounts of crypto left after a transaction, similar to currency left after making a cash purchase.
The new protocol extends the UTXO concept with the ability to maintain 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, and so on, with any UTXO not spent by a transaction being destroyed.
Users would therefore send a bunch of Runes on different entries, which will be transferred to an OP_RETURN to be engraved. Unless they mark it with a “runestone”, a pointer that specifies an alternative exit, rendering them unusable and therefore ignored by Bitcoin Core, the network’s software. A runestone can be used to create a new rune, known as an “engraving”, or to create or transfer existing runes.
Rodarmor summarizes Runes as a “simple OP_RETURN-based protocol,” presented through approximately 2,000 lines of code.
“Registrations have doubled the size of the UTXO set over the past year and the majority of them are forever useless,” he wrote.
