Rune Craze Returns: DOG Leads the Track Development

At the beginning of 2023, the BRC-20 standard based on the Ordinals protocol sparked a wave of hype around building and speculating on Bitcoin assets, driving attention and capital inflow into BTC Layer 2, DeFi, and other ecological infrastructures, which had a positive impact on the long-term development of the BTC ecosystem. However, the speculation around BRC-20 also led to congestion and data redundancy on the Bitcoin network. In response, Casey Rodarmor, the founder of the Ordinals protocol, proposed the Runes protocol in September 2023, aiming to create an alternative token protocol based on BTC UTXO, referred to as the "rune protocol."

The Runes protocol was officially launched on April 20 of this year during the Bitcoin halving. At the time of its launch, the enthusiasm for the first batch of rune minting pushed the Gas fees on the BTC network above 1000 sats, a level of excitement unprecedented. However, market attention quickly shifted to other sectors. Over the past month, DOG has risen from a bottom sideways price to a new high, driving a wave of increase and new interest in the rune assets.

1. Rune Overview

1. How runes work

The Runes protocol issues and tracks tokens using Bitcoin's native UTXO model, which is more native and decentralized. The rune balance is held directly by UTXOs, and a single UTXO can accommodate an arbitrary number of runes. This mechanism is more efficient and reduces on-chain space usage.

Specifically, the data for Runes is stored in the OP_RETURN field, which is an opcode for Bitcoin transactions that allows for the storage of 80 bytes of data in the transaction output. Transactions use the OP_RETURN marker in the protocol message, followed by a data push of the uppercase letter R. Issuance or transfer transactions are specified and allocated to UTXO in subsequent data pushes. Invalid protocol messages will result in the destruction of runes.

2. Rune and BRC-20 Comparison

Compared to BRC-20, the Runes protocol has several important features:

(1) Runes are designed for replaceable tokens, based on the native BTC architecture, not relying on off-chain data and requiring only a single minting, making it simpler and more efficient. BRC-20, on the other hand, is based on the Ordinals protocol, which is more suitable for constructing non-fungible tokens, relying on off-chain indexing and requiring two mintings, making it overall more complex.

(2) Runes data is stored in an 80-byte OP_RETURN field, while BRC-20 uses witness data, which can occupy up to 4MB. In contrast, tokens built on Runes are more compatible, occupy less space, and reduce blockchain bloat.

(3) The Runes protocol is based on the UTXO model, which can be integrated with the native BTC architecture and inherits its security. In the future, it will have stronger scalability and be perfectly compatible with the development paths of the BTC ecosystem, such as the Lightning Network and BTC L2.

3. The meaning of rune

(1) further created a BTC asset issuance method that can break the circle. Since BRC-20 introduced inscription assets, this new asset form has brought more attention and funds into the BTC ecosystem. The meme craze in 2023 with SOL and on the Base chain confirms that memes cannot be ignored when it comes to attracting funds to the respective chain. The Runes protocol has created a dedicated, fungible, and more suitable token standard for speculative activities in BTC.

(2) This asset issuance method is simpler, more efficient, and more compatible than before. The issuance of the Runes protocol is based on the Bitcoin native UTXO architecture, requiring no reliance on third parties and off-chain data, occupying less space, reducing network congestion, and will seamlessly be compatible with various upgrades and ecosystem solutions of the BTC network in the future.

(3) The popularity of this asset can further address the security budget issue of Bitcoin. Trading in runes can contribute more transaction fees to the network, especially after the halving, providing a new source of income for miners as block rewards decrease, which positively impacts the security and sustainability of the network.

2. Track Data Overview

From the BTC network data, in terms of transaction volume and transaction share, rune currently accounts for about 20% of the total network. When the rune protocol was first launched, trading was very active, reaching a peak share of 81.3%, and then quickly entered a cooling period. Currently, the share of rune in the network is about 10-40%, which can be used to observe the current market heat of rune.

Comparing runes and BRC-20, currently runes have become the most active L1 asset outside of BTC transactions, with a ratio of about 4:1 between the two. The highest proportion of runes occurred during the halving launch, at about 99%, and the lowest was around 55%. Currently, the trading heat of runes has surpassed that of BRC-20 tokens.

In terms of fee contribution, the current native Bitcoin transaction fees account for 70-80%, rune accounts for 10-20%, and Ordinals and BRC-20 together account for about 10%, with rune reaching a maximum proportion of 70% on halving day. Currently, the speculation of rune has broadened the income sources for BTC network miners and has the highest proportion among new assets.

If we regard runes and BRC20 as memes, the market value of meme coins on the Bitcoin chain is the lowest compared to other chains, accounting for less than 0.1% of the chain. In horizontal comparison, the leading meme coins on the ETH and SOL chains account for more than 3% of their respective market values. As BTC is the chain with the highest consensus, market value, and mainstream capital attention, there is momentum for the market value of meme coins to further expand. In vertical comparison, the overall trading volume and contribution fees of runes have surpassed BRC-20, but the leading rune coins still lag behind the leading BRC-20 coins. If they can be listed on a first-tier exchange, they have the potential to surpass ORDI.

3. Rune Assessment System and DOG Analysis

The evaluation of popular projects in runes can be analyzed from three stages and nine dimensions: early stage focuses on distribution methods, decentralization, founders and storytelling; mid-stage focuses on transmission continuity and price continuity; mature stage focuses on trading volume, market value, chip structure, and price stability.

Based on the above logic, the leader of the current rune track is DOG:

1. Distribution method: The distribution design progresses layer by layer and bears all on-chain costs, with a very large scale.

Before the Rune Protocol is launched in phases, the Rune Stone NFT will be released first for speculation. After the halving day when the Rune Protocol goes live, the first rune will be airdropped to Rune Stone holders. Both the airdrop of the Rune Stone and the airdrop of the first rune are completely free for the recipients, with funds raised by the community and the project party covering the on-chain issuance costs.

2. Degree of dispersion: Early stakeholders had high quality and a large number, achieving rapid cold start and widespread dissemination among core users.

The rune stone airdrop was given to more than 110,000 users who actively participated in the BTC inscription ecosystem, and the first rune DOG was airdropped to more than 70,000 steadfast rune stone holders.

3. Founders and Storytelling:

Founder Leonidas is an OG of the BTC community and also a co-founder of the cutting-edge Ordinals browser Ord.io, maintaining a close and frequent interaction with Ordinals founder Casey. The name of the rune stone links the Runes protocol, which launched on halving day, and the Runestone coding instructions within the protocol, making it highly topical and legitimate. In terms of the design of the rune stone, Leo found a sculptor for custom creation, which adds artistic value. The name of the first airdropped rune is DOG, the most viral meme figure in the crypto world, and it is issued in a new token form on the most consensus-driven Bitcoin network.

4. Continuity of Spread: Strong and Sustained Attention Attraction

Founder Leo, as an OG of the BTC community, possesses significant influence and resources, especially in the European and American communities, with frequent promotions. The number of tweets can reach up to about 100 per day, most of which contain detailed data and provocative content, continuously capturing the market's attention.

5. Price Continuity: Rune Stones and Rune Relay Speculation

The Rune Stone NFT was warmed up before the launch of the Runes protocol, with NFT prices steadily rising from March to April, reaching a maximum of 0.1166 BTC for one piece. After the first Rune DOG airdrop, the price of the Rune Stone dropped, while the Rune DOG took over the speculation, with prices climbing from mid-May after a month of market pricing and consolidation, rising from around 0.0025 to a peak of 0.0097, currently falling back to 0.0078. There will be two more airdrops for the Rune Stone, and depending on the price situation of the DOG, the price of the Rune Stone may rise again.

6. Trading Volume: The trading volume is significantly ahead of other runes, providing the best liquidity.

The overall liquidity of the rune sector is relatively poor, while DOG has been the top trading asset in terms of trading volume since its launch on the overall timeline. Currently, the trading volume is mainly concentrated on a certain trading platform, accounting for over 80%, followed by other exchanges and NFT trading platforms, with a current daily trading volume exceeding 70 million dollars, while the second-ranked trading volume, Runes x, is around 2 million dollars. DOG is significantly ahead of all rune assets and has reached the trading volume of mainstream tokens.

7. Market Cap: Overall, it ranks first in market capitalization.

After excluding ZZZ runes with very low trading volume and high unit prices, DOG's market capitalization has maintained the status of being the first in market cap throughout the entire period after its issuance.

8. Chip structure: The number of holders is large, but the chips are not concentrated enough.

The on-chain holders of DOG have steadily remained over 70,000, ranking third in runes. Due to the main liquidity being on centralized exchanges, the actual number of holders should still be in the first place, with a large number of holders and strong consensus. However, the largest proportion of tokens held by on-chain addresses is around 1.69%, and there has been continuous selling recently, with only 5 addresses holding over 1%. The fifth-ranked address is rapidly increasing its holdings, but the overall distribution of tokens is not concentrated enough, which may be the reason why, despite a clear leading position, it cannot enter the top-tier exchanges.

9. Price Stability: Price stability upward

The price of DOG has risen steadily and strongly after consolidating around the bottom of 0.002. After stabilizing at the points of 0.004 and 0.007, it can further surge, and the buying power remains strong in terms of volume and price even during the overall market correction.

Based on the evaluation system proposed in this article, it is possible to dynamically analyze the leading projects in the rune track and filter new minted assets.

4. Summary

1. Runes are protocols specifically designed for fungible tokens, technically simpler, more efficient, and more compatible than BRC-20. In terms of trading share proportion and transaction fee contribution, they have surpassed BRC-20 tokens, becoming a new asset form that must be taken seriously.

2. The current main role of runes is to serve as meme coins to enhance attention and capital capture for the Bitcoin network, having significance for sustainable development. However, based on the data, a full explosion has not yet arrived, indicating further price discovery potential.

3. This article proposes a three-phase, nine-dimensional evaluation system for the rune project. Currently, DOG is in a leading position compared to other targets, but its chip structure is relatively dispersed at this time, and it may require some time to accumulate before landing on a first-tier exchange.