Runes: Everything you need to know

Runes Definition

Runes are a fungible token standard on Bitcoin. The Runes protocol stores transaction data on Bitcoin L1 in a data field called the op_return. Any Bitcoin transaction type (p2tr, p2wsh, etc) can use the op_return to store data.

The Runes protocol is very simple. You can:

1. Deploy tokens: Create a new token to be minted/traded on Bitcoin L1.
2. Mint tokens: Users can issue Bitcoin transactions to mint previously deployed tokens.
3. Batch transfer tokens: You can craft a transaction to send multiple runes to multiple people at the same time.
4. Batch airdrop tokens: You can craft a transaction to airdrop a Rune to multiple people at the same time.

Runes Pros and Cons

Runes is a 100% UTXO based protocol. This has pros and cons:

Pros:

1. Easier to integrate into Lightning or other Bitcoin based systems
2. Does not cause UTXO bloat like BRC-20
3. Is a simple, elegant, efficient fungible token standard. Basically as good as they come.

Cons:

1. If you malform a Runes transaction, it makes a Cenotaph and burns your Runes balance
2. You have to manage UTXOs appropriately to manage your Runes
3. You can only mint 1 Rune per transaction. No batch minting in a single transaction.

Benefits and Traction

The benefit of Runes as a fungible token standard on Bitcoin is you can issue tokens, mint tokens, and trade tokens directly on Bitcoin L1. The trade-off is you rely on a centralized indexer (off-chain) to index all of the Runes protocol message stored on chain, and to do the necessary compute and manage state for the protocol.

Even though Runes was just recently released, multiple Runes tokens have already been listed on Centralized Exchanges, and multiple projects are already in the 100s of millions to billions of dollars range in market cap.

Bridging Runes to ICP

Bridging Runes to ICP is a perfect match. You get (1) native asset issuance on Bitcoin, (2) tokens can always be bridged back to Bitcoin if desired, and (3) you take advantage of the programmability, flexibility, and low cost nature of ICP. Runes on ICP will act just like a normal ICRC token (fungible token standard on ICP) with the ability to move back to Bitcoin whenever you want.