❓What are Runes?

Runes are a protocol for issuing fungible tokens on the Bitcoin network. They are designed to operate natively within Bitcoin’s UTXO (Unspent Transaction Output) model, which helps manage token balances more efficiently and reduce on-chain footprint compared to other token standards like BRC-20.

Key Features of Runes:

1. UTXO-Based Structure: Runes use Bitcoin’s UTXO model to manage token balances, minimizing unnecessary data and reducing blockchain bloat.

2. Simplified Token Management: Unlike protocols that add extensive data to each transaction, Runes use the OP_RETURN function for data storage, making them simpler and more efficient.

3. Direct Blockchain Interaction: Runes integrate directly with the Bitcoin blockchain, avoiding the need for wrapped tokens or off-chain relayers.

4. Scalability: The protocol's unique tokenization method helps alleviate scalability issues and reduces network congestion.

5. Cross-Chain Compatibility: Runes can interact with other blockchains through protocols like Omnity, enabling seamless interoperability and expanding use cases.

Impact on Bitcoin:

• Enhanced Scalability: By reducing the amount of data stored on-chain, Runes help enhance Bitcoin’s scalability.

• Improved Efficiency: The direct management of tokens within Bitcoin's UTXO model allows for more efficient transactions.

• Wider Use Cases: Runes enable the issuance of various types of tokens, including stablecoins and governance tokens, which can be used in decentralized finance (DeFi) applications.

In summary, Runes represent a significant advancement in the tokenization capabilities of the Bitcoin network, providing a more efficient and scalable method for managing and transferring fungible tokens.