A lot of talk came out about Bitcoin Runes just after the bitcoin halving as transactions fees on Bitcoin exploded shortly after because of them. However there seems to be a lot of confusion or just not knowing of what Bitcoin runes really are.

In this article I'm going to go over what Bitcoin runes are and how they are created, what they are and what impact it could have for Bitcoin.

I believe many of us are pretty familiar now to what bitcoin ordinals are. You can think of Runes as much of the same. But let's break it down more.

The Ordinals Start

Ordinals for bitcoin was not developed but instead discovered. Bitcoin is UTXO based. What that mines is UTXOs can be thought of as change left over from previous bitcoin transactions. These are "unspent" and can be moved to another wallet via "transaction outputs". 1 BTC goes in 1 BTC comes out. First in, First out order otherwise known as a FIFO order.

This gives bitcoin and the blockchain it's on a unique case that Ethereum and other blockchains don't have. The ability to track each sat and locate it.

These Sats are what ordinals look for. For some examples...

• The first bit in a block is considered "uncommon"
• Every two weeks the bitcoin difficulty is adjusted to adapt to the mining power the first sat for that block is considered "rare"
• Halving event the first sat is considered "Epic"
• Now a Legendary sat happens when there's a difficultly adjustment and a halving event at the same time which happens every 24 years.

There's other events that can be tracked by stats as well. Things like when pizza was ordered with bitcoin makes this a unique and popular sat.

What people do is inscribe data into a single satoshi for these bits. This caused major issues in terms of transaction costs and people start to inscribe data to these satoshis in droves.

This then lead to a bitcoin update where recursive inscriptions. It combines these inscriptions together lowering the fees and data needed to inscribe.

So What's the big deal?

With Ethereum and NFTS the NFTs are actully just URLs and not actully on the blockchain itself. Instead it's just a reference point of that asset as to where and what it should be. If the company, url or website etc get removed or out of business the NFT no longer exists.

Now with Bitcoin it's different and people are starting to wake up to it a bit. In fact music artists such as GhostFace Killah are patterning up with these inscriptions to mint the music to the bitcoin blockchain. This means when you inscribe this data it is ALWAYS there no matter what happens. Well unless the Bitcoin blockchain ever comes fully crashing down to nothing and no longer exists. But you can start to see the real value there and the part of that which people often where upset about their data not really living on the blockchain at all. Ordinals fixed that.

Moving On To Runes

Runes is a new introduction to bitcoin in which started right after the halving event on April 19th 2024.

Runes work in somewhat the same way but it called Etching. With Etching no two runes can ever be called the same thing.

What many feel this will usher in for the next 4 years on Bitcoin is what we saw on Ethereum when layer 2 tokens started. A lot of Sh*tcoins and honestly there is no shortage of. This is going to start to cause what I believe we are seeing already. People picking and choosing what blockchains make it and don't. It's no longer a build it and it will do fine because there are limited options. No your blockchain needs to have some real value behind it and a reason people want to use it.

Posted Using InLeo Alpha