Founder of Bitcoin Ordinals Proposes Alternative Solution to Replace BRC-20
Casey Rodarmor, the founder of Bitcoin Ordinals, has put forth a proposal to introduce a new Non-Fungible Token (NFT) protocol on the Bitcoin network. This protocol, called “Runes,” aims to replace the existing BRC-20 (Bitcoin Request for Comment 20) token standard.
BRC-20, which emerged in March, was anonymously created by a developer known only as “Domo.” Within just two months, the BRC-20 market capitalization exceeded $1 billion, with tokens like PEPE and ORDI gaining prominence as notable examples of BRC-20 tokens built on the Bitcoin blockchain.
While BRC-20 allows for the creation and transfer of fungible tokens through the Ordinals protocol on Bitcoin, Casey Rodarmor has highlighted a significant issue with these tokens. He points out that BRC-20 tokens contribute to spamming the Bitcoin network with unprocessed transaction output data (UTXO).
New terrible idea just dropped: Runes.
A worse-is-better fungible token protocol for Bitcoin.https://t.co/TPVrUvWxm8
— Casey (@rodarmor) September 25, 2023
Rodarmor’s proposal is a response to the increasing demand for fungible tokens in the cryptocurrency market. He acknowledges that while fungible tokens have faced criticism and skepticism, they continue to thrive, much like casinos that persist despite their controversies. He suggests that creating a well-designed fungible token protocol for Bitcoin could potentially bring substantial benefits, including increased transaction fee revenue, greater developer engagement, and a larger user base for Bitcoin. Moreover, such a protocol could promote responsible UTXO management, reducing the undesirable UTXO proliferation observed with protocols like BRC-20.
When evaluating existing fungible token protocols for Bitcoin, several critical factors come into play:
- Complexity: The simplicity and ease of implementation of a protocol.
- User Experience: How the protocol affects the user experience, considering factors such as complexity and the need for off-chain data.
- State Model: Whether the protocol is UTXO-based and how it minimizes the UTXO set.
- Native Token: Whether a native token is required for protocol operations.
Comparing existing fungible token protocols for Bitcoin, BRC-20 is noted for its complexity and non-UTXO-based nature, which requires the use of ordinal theory for some operations. RGB, Counterparty, Omni Layer, and Taproot Assets each have their own nuances and limitations.
Rodarmor introduces “Runes” as a potential solution to these complexities. This UTXO-based fungible token protocol aims to provide a good user experience and minimize on-chain overhead while promoting responsible UTXO management. Here are some key features of the “Runes” protocol:
- Rune balances are associated with UTXOs, which can hold any amount of runes.
- Transactions containing protocol messages are identified by an output with an OP_RETURN followed by the uppercase letter “R.”
- Assignments of runes are made via encoded sequences of integers, representing (ID, OUTPUT, AMOUNT) tuples.
- Delta encoding is used for ID to avoid repeating the full rune ID.
- “AMOUNT 0” is used to represent all remaining runes.
- Unassigned runes are assigned to the first non-OP_RETURN output.
- Issuance transactions are identified by a second data push in the protocol message.
- Issuance allows the creation of a specified amount of runes, with SYMBOL and DECIMALS attributes.
- SYMBOL represents a base 26-encoded human-readable symbol, akin to ordinal number sat names, and DECIMALS determines the decimal point precision.
Rodarmor acknowledges the complexities and uncertainties surrounding the introduction of “Runes” or any new fungible token protocol for Bitcoin. He questions whether such protocols are necessary and highlights their potential benefits and drawbacks. Ultimately, Rodarmor’s proposal presents a streamlined, UTXO-based approach that aligns with Bitcoin’s native model and offers a potential avenue for increased user and developer engagement within the Bitcoin ecosystem.
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