Bits

The biggest update since ordinals is coming to BTC at the halvening ... RUNES. I listened to 30 hours of the Ordinals Coding Club and this is what runes are and what's coming in the future: Runes are a new fungible token protocol on Bitcoin that uses an indexer based model similar to ordinals to establish social consensus around balances: - Etched within a single UTXO (name, total supply and other properties) - Uses a 6 block commit reveal scheme to prevent miners from front running and registering their own rune when mining the block. Runes can be viewed as a successor to BRC-20 with several key improvements: The names of runes are unique unlike ERC-20s, so you can't create a rune with the same name that someone else has already created: - Rune names shorter than 13 characters will be gradually released over a 4 year period after the runes launch to prevent immediate grabbing of the shortest names - Every 4 months, names that are 1 character shorter will become available New units of a rune can be minted by spending the UTXO containing the rune, the total supply increases and the newly minted units are sent to a new output. Runes can be transferred by spending the UTXO that contain them. Runestones are the "precompiles" for runes that are instructions that facilitate how runes move from inputs to outputs. Runestones are stored in the OP_RETURN and the first runestones direct transfers To extend the rune protocol in the future, runestones are tagged with even and odd integers with backwards compatibility. One thing to be really careful with when runes launch is that if you see an EVEN tagged runestone, the rune theory will treat the input runes as having no location and effectively burn those runes, what Casey calls a "Cenotaph" Now onto what Casey is thinking about in the future: There can be recursive endpoints for inscriptions that tell you about rune balances, so you can make inscriptions that interact with runes. Let's say you wanted to make a pokemon inscription, you could power up the pokemon depending on how much of the pokemon rune you had in the output. This provide runes and inscriptions a similar type of design space to DN404s on Ethereum. In the near term Rune trading will happen in a more off-exchange type of manner but Casey had an interesting idea for light-pools which would be off chain pools of liquidity for trading runes that could use peer to peer networks separate from the Bitcoin mempool. Users could connect directly to a light pool node and do atomic swaps of runes for BTC. This would look similar to Cowswap and Seaport intent based trading architectures that enable atomic swaps without relying on exchanges to custody the assets. Follow for a series of posts over the next month leading into the halvening where I'll publish my notes on what's being built in the BTC ecosystem