The Rune Protocol – What You Need to Know

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Strap in and hold tight, cause we’re about to take the first train directly to Nerd Town.

You’ve probably heard of Ordinals (we’ve written about it a bunch of times).

Ordinals uses the token standard, BRC-20 which just sounds like a bunch of letters and numbers – and it is – but they’re important letters and numbers because they meant that data could be hosted on the Bitcoin network (which many refer to as ‘BTC NFTs’).

Now there’s a new player in town, and they go by the name of ‘Rune.’

To explain how Runes can be more efficient than the BRC-20 standard, we need to explain ‘Unspent Transaction Outputs’ (UTXO’s).

Imagine Seb wanted to send Chevy 5.10 BTC.

Chevy may first ask: “5.1 BTC?? Did you rob a bank Seb??”

After clarifying that he didn’t rob a bank, but he did receive an inheritance, Seb would transfer 5.2BTC because in Seb’s wallet there was 5BTC and 0.2BTC (see the header pic or watch this video for a better understanding).

The ‘change’ Seb receives (0.1BTC minus any fees) would become the UTXO.

And after you’ve done a few trades, you’ll start to get a whooole lot of UTXO’s, each increasing the cost of a transaction, and increasing congestion on the Bitcoin network when being used for trades.

The team behind Runes has come up with a way to solve for that by essentially letting people combine UTXO’s and using a Rune of the exact value looking to be traded instead.

It’s complicated stuff, and we’ll definitely be writing about this again to further explain the use cases for Runes (like the ability to issue fungible tokens like security tokens, stablecoins, and governance tokens, on the Bitcoin blockchain.

For now, we hope you survived, and are ready to get back to the day.

All aboard! 🫡