68% of runes are red. Is this really an upgrade for Bitcoin?

Bitcoin halving events are usually single token shows. But this year it took the spotlight by sharing the debut of Runes, a highly anticipated new fungible token protocol.

The launch of Runes was accompanied by massive hype about the potential of memecoins on the protocol and, to a lesser extent, new features on the Bitcoin network that could capitalize on the growing interest in DeFi.

Despite initial enthusiasm, Runes has received significant criticism for its role in driving up Bitcoin’s transaction fees and its failure to generate profits for most investors.

On the day of the halving, Bitcoin fees soared to an all-time high, giving miners a generous revenue boost despite a 50% cut in their pay for block rewards. This flurry of activity has not translated to investors’ benefit, as the top 50 runes by number of holders as of April 29 have declined by an average of 30%, according to OKX data. Two-thirds of them (34 out of 50) are in deficit.

Advocates argue that discounting Loon is premature, as developers envision a future where the protocol evolves to provide more practical utility and promote improved trading experiences and broader adoption within the Bitcoin ecosystem.

“I’ve been there when other protocols launched, and they all flopped in the first few days,” Quary, the pseudonymous founder of Bitcoin marketplace Magisat, told the Magazine.

“There is no reason not to be optimistic (about Loon) in the medium to long term.”

New Use Cases for Bitcoin Revealed

According to Benjamin Charbit, a genesis member of the decentralized Bitcoin protocol Opal and CEO of metaverse company Darewise Entertainment, the hype surrounding Rune has been “unquestionably” enormous.

A big part of the excitement surrounding Runes comes from the memecoin’s potential ability to bring new retail users into the Bitcoin ecosystem.

Loon can expand the capabilities of the Bitcoin blockchain by allowing users to tokenize a variety of real-world assets, including real estate, stocks, commodities, and other cryptocurrencies such as stablecoins.

This feature opens up new possibilities for DeFi applications and other use cases within the Bitcoin ecosystem.

“Today’s Runes interface is likely not the final version, and the prospect of improved, user-friendly applications and services is just around the corner,” says Charbit.

But while there may be more practical plans for Loon in the future other than becoming a cutting-edge cryptocurrency casino, Memecoin is mainly what it is today.

According to data from Rune Alpha, as of April 29, there were over 349,000 Rune holders. This accounts for nearly half of the active addresses on the network tracked by on-chain data company IntoTheBlock.

Lucas Outumuro, head of research at IntoTheBlock. Point out Bitcoin’s new addresses fall to their lowest level in two years.

After the halving, new addresses decreased to approximately 267,000. Aside from a few spikes, it has remained more or less in that range, suggesting that veteran users and degens rather than retail investors still dominate the activity.

Evangelist Mike Chavez, also known as “Goodthings” assert In a recent X Spaces session hosted by Cointelegraph, it was stated that Runes’ initial infrastructure is “better than any other fungible token standard in crypto history.”

As Chavez points out, Runes has been accessible from applications like cryptocurrency wallet Xverse from day one.

“With the launch of Runes, we’ve seen a significant increase in new users,” Ken Liao, CEO of Xverse, told the Magazine.

“The BRC-20 token also proved that people want memecoins on Bitcoin,” he says.

BRC-20 Tokens and Runes

Although launched a little over a year ago, BRC-20 was Bitcoin’s fungible token standard before Runes.

BRC-20 has a complex structure that uses Ordinal, Bitcoin’s non-fungible token, which requires users to bundle their BRC-20 into an NFT-like asset in order to make transactions. It was a bit silly, so Ordinals creator Casey Rodarmor came up with Runes as an improvement.

Runes provides a more efficient approach to creating fungible tokens on the Bitcoin blockchain while solving the mess of unspent transaction outputs (UTXOs) that plagued BRC-20 tokens. Find unspent UTXOs, initiate transactions, and give these digital remnants a new purpose.

“Lune is an attractive option for investors who are looking for an efficient token solution but do not understand or do not want to deal with the complexities of creating assets such as NFTs required by BRC-20,” said Jonathan Thomas, CEO of decentralized finance platform Blueberry. said. The protocol is told to the magazine.

Thomas added, “As runes become more widely used, more users will join if they discover an alternative that allows easier access to the Bitcoin network by generating tokens, as with degen.”

Should Bitcoin miners celebrate the surge in fee income?

Bitcoin’s proof-of-work consensus mechanism ensures that miners solve complex algorithmic problems to verify transactions and are rewarded with Bitcoin.

The recent halving reduced mining rewards from 6.25 Bitcoin to 3.125 Bitcoin. This means a pay cut for miners, which usually results in some miners turning off their machines.

However, in complete reversal of the usual order, Bitcoin miners started making more money on the day of the halving. Miners had their best weekend since the halving, taking in $107 million on April 20 alone. Over 75% of that came from trading fees thanks to Rodarmor’s Runes and Ordinals (including searches for “Epic Sats”).

“Bitcoin fees have fallen since Loon was first launched, but they are still two to three times higher than the previous week,” Outumuro told Magazine.

“Miners can expect to see more transaction fee revenue from runes, but this is likely to be very cyclical,” he says. “When the market is risk-on, returns will be much higher than during risk-off periods.”

Quarry added that most of the fee spikes will come from minting runes rather than trading them.

He points to Z•Z•Z•Z•Z•FEHU•Z•Z•Z•Z•Z, the first rune created since the Genesis rune (UNCOMMON•GOODS), as one of the main culprits driving the huge fees. That was halved, processing 1.1 million mints.

“Trading activity may increase fees, but I don’t think it will increase significantly,” he said. “This is because most of the heavy lifting is transferred to centralized exchanges where little or no on-chain activity actually occurs,” he says.

Ordinals explorer Ord.io co-founder Leonidas’ Runes project DOG•GO•TO•THE•MOON began trading on the Gate.io exchange after less than a week of existence.

As more decentralized exchanges for runes are expected to emerge, not all trading activity will occur off-chain.

Bitcoin Runes may be more than just a memecoin.

The early iterations of Rune were largely, if not entirely, fueled by memecoin experiments, but that’s not necessarily the end game.

According to Franklin TempletonRunes, an investment firm that manages $1.6 trillion in assets, positions Bitcoin to bridge the gap with Ethereum and Solana’s fungible token markets.

Runes improve the BRC-20 approach by reducing UTXO accumulation.

These excesses can clog the network and increase fees, but Runes simplifies the process, allowing the blockchain to run more smoothly.

“This helps prevent excessive data generation that could potentially bloat the blockchain. This method also allows a single transaction to involve multiple token transfers, which of course will reduce the total number of transactions and data nodes that need to be processed,” says Blueberry Protocol’s Thomas.

DeFi, which provides numerous financial services on-chain, requires efficient and fungible token standards.

As the largest chain in DeFi with a total value pegged at over $54 billion, Ethereum’s popular decentralized services include a decentralized exchange and a lending platform. These use cases are facilitated by fungible tokens such as stablecoins.

“Rune remains a pivotal trendsetter,” said Charbit. “This is especially true as more memecoins and new projects inject utility into the Rune token,” Charbit said, adding that Opal is ready to add utility such as governance and in-game currency mechanisms to the token.

According to Xverse’s Liao, only “very basic infrastructure” is active at the moment, so casual users may not yet feel the potential of Runes.

“However, the underlying protocol has improvements that could lead to a much better experience in trading and other applications in the future,” says Liao.

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Yoon Yohan

Yohan Yoon is a multimedia journalist covering blockchain since 2017. He contributed as an editor to Forkast, a media outlet specializing in cryptocurrency, and covered Asian technology stories as an assistant reporter for Bloomberg BNA and Forbes. He spends his free time cooking and experimenting with new recipes.