Rune craze rises again, DOG leads the track

1. Introduction to the Rune Protocol

In early 2023, the Ordinals protocol and BRC-20 standard sparked a surge in the construction and speculation of Bitcoin assets, promoting the development of BTC Layer 2, DeFi, and other ecological infrastructure. However, the speculation around BRC-20 also led to network 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, aimed at building an alternative token protocol based on BTC UTXO.

The Runes protocol was officially launched on April 20 of this year during the Bitcoin halving. Initially, due to the popularity of the first batch of rune minting, the Gas fee on the BTC network surged above 1000 sats. Subsequently, market attention shifted to other tracks, but recently DOG has risen from its bottom to a new high, driving a wave of increase and new interest in the rune targets.

1. The operation mechanism of runes.

The Runes protocol utilizes Bitcoin's native UTXO model to issue and track tokens, making it more native and decentralized. The rune balance is directly held by UTXOs, and a single UTXO can hold any number of runes, which avoids the creation of "garbage" UTXOs, thereby improving efficiency and reducing on-chain space usage.

Specifically, the data of Runes is stored in the OP_RETURN field, which is an operation code for Bitcoin transactions that allows 80 bytes of data to be stored in a transaction output. Transactions use the OP_RETURN tag in the protocol message, followed by a data push with 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 the following characteristics:

(1) Runes are designed specifically for replaceable tokens, based on the native BTC architecture, relying on no off-chain data and requiring only a single minting, making it simpler and more efficient.

(2) Runes data is stored in the 80 bytes OP_RETURN field, taking up less space and reducing blockchain bloat.

(3) The Runes protocol is based on the UTXO model, integrating with the native BTC architecture and inheriting its security. In the future, it will better accommodate the development routes of the BTC ecosystem, such as the Lightning Network and BTC L2.

3. The significance of runes

( created a BTC asset issuance method that can break the circle, establishing a dedicated, alternative, and more suitable token standard for speculative activities for BTC.

) is simpler, more efficient, and more compatible than before. It does not rely on third parties and off-chain data, occupies less space, reduces network congestion, and can seamlessly integrate with various upgrades and ecological solutions of the BTC network in the future.

(3) can further address the security budget issue of Bitcoin. Rune trading contributes more transaction fees to the network, especially after the halving, providing miners with a new source of income, which helps maintain the security and sustainability of the network.

2. Track Data Overview

From the BTC network data, runes currently account for about 20% of the total network transaction volume. When the rune protocol was first launched, transactions were very hot, reaching a peak of 81.3%, and then quickly cooled down. Currently, the share of runes in the network is about 10-40%.

Compared to rune and BRC-20, rune has become the most actively traded L1 asset outside of BTC trades, with a ratio of about 4:1. The highest proportion of rune occurred during the halving launch, at around 99%, while the lowest was about 55%. Currently, the trading popularity of rune has surpassed that of BRC-20 tokens.

In terms of fee contribution, the current share of native Bitcoin transaction fees is 70-80%, rune accounts for 10-20%, and Ordinals combined with BRC-20 account for about 10%. On halving day, the share of rune reached as high as 70%. Currently, the speculation around runes has broadened the income sources for BTC network miners and has the highest share among new assets.

If we consider 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 that chain. In a horizontal comparison, the leading meme coins on the ETH and SOL chains each account for over 3% of their respective chain's market value. As BTC is the chain with the highest consensus, market value, and attention from mainstream funds, there is potential for an increase in the market value share of meme coins. In a vertical comparison, the overall performance of runes in terms of trading volume and contribution fees has surpassed BRC-20, but the leading runes still lag behind the leading coins of BRC-20. If they can be listed on a first-tier trading platform, they have the potential to surpass ORDI.

3. Rune Evaluation System and DOG Analysis

The evaluation of popular projects in runes can be analyzed from three stages and nine dimensions:

Early focus: distribution method, degree of decentralization, founders and storytelling Mid-term focus: transmission continuity, price continuity Maturity period focus: trading volume, market capitalization, chip structure, price stability

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

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

2. Degree of dispersion: Early stakeholders with high quality and a large number achieved rapid cold start and extensive dissemination among core users.

3. Founders and Narrative: Founder Leonidas is an OG of the BTC community and a co-founder of the cutting-edge Ordinals browser Ord.io, closely related to Ordinals founder Casey. The name of the rune stone links the Runes protocol launched on halving day and the Runestone encoding instructions within the protocol, making it highly topical and legitimate.

4. Communication Continuity: Founder Leo, as an OG of the BTC community, possesses strong communication power and resources, especially in the European and American communities, frequently promoting and continuously capturing the market's attention.

5. Price Continuity: The hype around rune stones and rune relay trading, with rune stone NFTs being preheated before the launch of the Runes protocol, shows a steady price increase. After the DOG airdrop, the price of rune stones fell, while the DOG hype took over, and the price began to rise after a month of market pricing and consolidation.

6. Trading Volume: Since its launch, DOG has consistently ranked first in trading volume, with a current daily trading volume exceeding $70 million, vastly outpacing all rune assets and reaching the trading volume level of major tokens.

7. Market Cap: After excluding ZZZ runes with very low trading volume and high unit prices, DOG's market cap has maintained the top market cap status throughout its issuance.

8. Chip structure: The number of on-chain holders of DOG has consistently remained above 70,000, ranking third in runes. However, the largest holding ratio of on-chain addresses is about 1.69%, and there has been continuous selling recently, with only 5 addresses holding more than 1%, indicating a relatively high degree of chip dispersion.

9. Price Stability: The price of DOG has risen steadily and strongly after consolidating from the bottom. After stabilizing at key points, it can further increase, and the buying power in terms of volume and price remains strong even during overall market corrections.

4. Summary

1. Rune is a protocol specifically designed for fungible tokens, technically simpler, more efficient, and more compatible compared to BRC-20. In terms of trading share and contribution to transaction fees, it has surpassed BRC-20 tokens, becoming a new asset form that must be taken seriously.

2. Runes currently mainly serve as meme coins to enhance attention and capital capture for the Bitcoin network, holding significant potential for continuous development, but data suggests that a full-scale explosion has not yet arrived, indicating further price discovery potential.

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