On the day of the Bitcoin halving, a new form of data called Runes was introduced, which is embedded directly into Bitcoin transactions. Runes differ from traditional financial transfers by including additional information within transactions.
Bitcoin Runes operate through a process called “transaction augmentation,” allowing users to embed various types of data into transaction outputs. This sets them apart from other Bitcoin innovations like Ordinals and BRC-20 tokens. Ordinals encode data into individual satoshis, making them ideal for representing digital artifacts on the blockchain, while BRC-20 tokens are used for issuing and managing tokens on Bitcoin’s sidechains.
The Runes protocol utilizes Unspent Transaction Outputs (UTXOs), where data is assigned to a UTXO through an OP_RETURN function. This allows data to be added to transactions without cluttering the network.
The launch of Runes on the halving day aimed to capitalize on the event’s attention in the market. The impact of Runes on the Bitcoin network was significant, as they dominated transactions in the days following the launch.
Despite initial excitement, the share of Runes in transactions and fees has decreased, indicating a more gradual integration of Runes into regular transaction patterns. The long-term effects of Runes on the Bitcoin network are still uncertain, with some celebrating the innovation they bring while others raising concerns about network congestion and increased fees.
While there may be more volatility in fees in the future, it remains to be seen whether Runes will become a staple in Bitcoin transactions or remain a niche market within the ecosystem. The market will need time to adjust to the presence of Runes and evaluate their impact on the network.
