Analysis of Runes' new asset issuance standards: Can the development of BTC ecology enter the "Constant Era"?

Original author: Hao Tian

Original source: On-chain view

How to understand the innovative value of Runes and its potential subsequent market impact? In my opinion, Runes is a set of FT token issuance standards based on the Ordinals protocol, which will become the basis for the BTC network to build a huge ecosystem in the future. If the BRC20, ARC20, SRC20 and other standards before the halving are regarded as a "chaotic era", the Runes standard will promote the birth of a "constant era" of BTC ecological development? Next, let's talk about my understanding:

1) Ordinals is a protocol for issuing and transferring various crypto assets based on the BTC network through off-chain indexing. Ordinals was initially more suitable for NFT type assets, and the emergence of the Rune standard made up for its shortcomings in the issuance and management of FT fungible token assets, and truly helped it become a BTC-derived crypto asset issuance and management protocol.

2) After Ordinals, a series of derivative innovation standards such as BRC20, ARC20, and SRC20 were born, all of which revolve around the Script script space in UTXO, with the goal of issuing FT homogeneous assets in BTC.

As the first token standard, BRC20 realizes asset issuance by putting data in Witness Segregated Witness, and realizes asset management through the co-management between subsequent Ordinals and other multi-indexers; ARC20 is a derivative and improved token standard, which realizes the transfer management of derivative inscription assets based on the transfer characteristics of the chain UTXO itself, reducing the dependence on multiple indexers; SRC20 directly embeds the original data in the form of stamp codes into UTXO transactions, and can realize asset issuance and management without relying on third-party indexers。

The above three types of token issuance standards have their own advantages and disadvantages: although BRC20 has a strong early consensus, it will cause the UTXO collection to swell under the market Fomo sentiment, causing a lot of dust, which will harm the BTC network in the long run; ARC20 is deeply liked by the technical community because of the simplicity of its dyed coin transfer model and Bitwork's POW mining paradigm, but its reliance on Segregated Witness for data storage is not perfect, and the subsequent token split also encounters some troubles; although SRC20 can not rely on indexers, the problem of data storage to the BTC network to create dust has not been solved。

3) As you can see, this chaotic era of competition has lasted for a long time, and Ordinals founder @rodarmor Casey proposed a new standard for Runes to solve this chaos, with two innovations:

1. The OP_RETURN Bitcoin Script opcode has been introduced, which can mark and store arbitrary data related to non-payment, which solves the problem of UTXO dust at the source;

2. Adopting the asset transfer characteristics of ARC20 and other leading UTXO models, users can realize the transfer and management of inscription derivative assets by transferring UTXO.

OP_RETURN equivalent to the blob space applied on the Ethereum layer2, which can effectively record data but will not be operated by the full node, through the OP_RETURN token, the Ordinals protocol can manage and account according to the direction of the UTXO, which can well realize the asset split and avoid the problem of asset loss. For example, if Alice has 10 Rune tokens, she now needs to send 2 Rune tokens to Bob:

1. Alice initiates a regular transaction transfer on the chain and specifies Bob's address as the receiving address;

2. The wallet or asset management platform will follow up and initiate a OP_RETURN transaction and mark 2 to be transferred to Bob, and the remaining 8 will be transferred to Alice's change address (there are actually 2 transactions for the inscription transfer);

(This is the reason why ARC20's existing assets are burned, if the user does not specify the change address, the default assets will "disappear" with the UTXO and be transferred to the miner)

3. The Ordinals protocol index data discovery OP_RETURN recorded a request to transfer 2 tokens, giving Bob's address +2 and Alice's new address +8 to complete the asset split and transfer management.

4) It is not difficult to see that the Runes standard adopts the strengths of others and fundamentally solves the problem of UTXO inflation that has been criticized, and the key is that the Runes standard and the Ordinals protocol can realize the unification of FT and NFT asset issuance, so that the Ordinals protocol further consolidates the foundation.

In layman's terms, the Runes standard is actually a set of FT token standards attached to the Ordinals protocol, and its combination with Ordinals will output a healthy and basic asset issuance and management method to the BTC market. Runes abandons the defect of BRC20's over-reliance on indexers, and makes more use of the transfer ability of UTXOs to assist tokens, and then realizes an asset issuance method close to BTC native.

It has the advantages that other standards have, and it does not have the defects that other standards cannot solve. Unless you have to question whether the Ordinals protocol is trustworthy, Ordinals+Rune must be the "perfect" issuance paradigm for BTC derivatives at present.

5) The combination of Runes and Ordinals will have an impact on token issuance standards such as BRC20, ARC20, and SRC20 in the short term, after all, it has advantages in terms of comprehensive consensus + technical advantages + long-term stability, and other standards will be directly sucked out of blood and suck away a lot of attention and supporters.

However, this is by no means a complete replacement, and if you pay attention to the ARC20, it still does not rule out the possibility of its amazing development in the future. In my opinion, Ordinals can be regarded as an indexer, or as a layer2 index chain, which is somewhat in competition with the CKB chain with homogeneous binding characteristics@NervosNetwork Although the consensus of the Ordinals protocol is strong, it is impossible to prevent the birth and development of other protocols that stand side by side. (If you are still based on Ordinals but still try to get rid of Runes to engage in "standard" differentiated innovation, it is better to save it.)

6) The emergence of the Runes standard, we were surprised to find that the market gameplay has changed, such as sky-high gas fees and Premine mechanisms, as well as a series of gameplay such as Runestone and RISC with NFT airdrops, making the entire BTC derivative asset market issuance more like the gameplay of the early NFT market.

Some people say that it changes the fundamentals of Fair Mint, and it is wrong that the token issuance standard is driven by the project side, has an open and transparent distribution mechanism, has the potential for follow-up empowerment and development, and has the foundation for the continuous growth of the community. If an asset issuance can only Fomo one wave, so that a wave of people can achieve a lot of wealth without any subsequent imagination space, its significance is also very limited.

more than

As mentioned at the beginning, I hope that the emergence of the Runes standard will open a "constant era" development situation for the development of the BTC ecosystem, and it seems that the start is not bad at present. It is also hoped that as a mainstream asset issuance paradigm, it can truly accelerate the BTC ecosystem from the stage of speculating asset issuance paradigm to a stage that empowers the development ecology of layer2.

Only the new effect of Runes' standard asset issuance and the continuous linkage between the subsequent BTC layer2 chain at the ecological operation level will be the beginning of the BTC ecological explosion.