May 5, 2024

Runes Protocol vs. BRC-20

Bitcoin Runes and BRC-20 are both token standards on the Bitcoin blockchain, but they have some key differences:

Underlying Mechanism:
- Bitcoin Runes leverages the underlying UTXO (Unspent Transaction Output) mechanism of Bitcoin to prioritize efficiency³⁵.
- It encourages conscientious token production and aims to reduce blockchain bloat³.
- On the other hand, BRC-20 relies on Ordinal Theory, which can be less efficient and cause network congestion³.
Token Creation:
- Runes streamline token creation by utilizing the OP_RETURN field, simplifying the process compared to BRC-20s, which require new inscriptions for every token transfer⁴.
- Runes also provides greater flexibility in token creation, supporting features such as open mint, fair distribution, and single address minting⁴.
Compatibility:
- The Runes protocol issues and tracks tokens using UTXO, which is also the native model of Bitcoin used in tracking transactions on the network⁵.
- This is in contrast to BRC-20, which adopts the account model and is not compatible with Bitcoin’s standard, hence requiring the use of centralized indexers⁵.
Development:
- Runes was released following the fourth Bitcoin halving, which took place on April 20, 2024².
- The launch of Runes sent Bitcoin transaction fees soaring to new heights on the day of launch².
- The creator of Runes, Casey Rodarmor, also created the Ordinals protocol that lets users create NFT-like inscriptions on the Bitcoin blockchain².

In summary, while both Bitcoin Runes and BRC-20 contribute to the evolution of tokenization on the Bitcoin blockchain, they differ in their underlying mechanisms, token creation processes, and compatibility with Bitcoin’s standard. These differences could potentially influence their use cases and adoption in the Bitcoin ecosystem.

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