Rune protocol leads a new trend, DOG becomes the track leader

1. Rune Protocol Overview

In September 2023, Casey Rodarmor, the founder of the Ordinals protocol, proposed the Runes protocol, aiming to build an alternative token protocol based on BTC UTXO. This protocol was officially launched on April 20 of this year during the Bitcoin halving, triggering a wave of excitement. Recently, DOG runes have seen a significant price increase from the bottom, once again attracting market attention to the rune track.

1. The operation mechanism of the rune

The Runes protocol issues and tracks tokens based on the native UTXO model of Bitcoin, offering higher native properties and decentralization. Runes balances are directly held by UTXOs, and a single UTXO can accommodate multiple runes, avoiding the creation of "junk" UTXOs, improving efficiency and reducing on-chain occupancy.

Specifically, the data of Runes is stored in the OP_RETURN field, which allows for the storage of 80 bytes of data in the transaction output. Transactions mark protocol messages with the OP_RETURN tag, followed by a data push of the 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. Comparison of rune and BRC-20

Compared to BRC-20, the Runes protocol has the following characteristics:

(1) Runes are designed for fungible tokens, based on the native BTC architecture, not relying on off-chain data and requiring only one minting, making it simpler and more efficient.

(2) Runes data is stored in the 80-byte OP_RETURN field, which occupies less space and reduces blockchain bloat.

(3) Runes protocol is based on the UTXO model, integrated with the native architecture of BTC and inheriting its security. In the future, it will better align with the development paths of the Lightning Network, BTC L2, and other ecosystems.

3. The meaning of runes

( has created a new way of issuing BTC assets, helping to attract more attention and funds into the BTC ecosystem.

) is simpler, more efficient, and compatible compared to previous methods, reducing network congestion and can seamlessly integrate with various upgrades and ecological solutions of the BTC network in the future.

(3) Rune trading contributes more transaction fees to the network, especially after the halving, providing miners with a new source of income, which is beneficial for maintaining network security and sustainability.

2. Track Data Overview

From the BTC network data, runes currently account for about 20% of the total transaction volume on the network. The proportion of runes in the network is about 10-40%, which can serve as an indicator to observe market heat.

Compared to BRC-20, Rune has now become the most active L1 asset outside of BTC transactions, with a ratio of approximately 4:1. The trading volume of Rune has surpassed that of BRC-20 tokens.

From the perspective of fee contribution, the current proportion of native Bitcoin transaction fees is 70-80%, runes account for 10-20%, and Ordinals and BRC-20 together account for about 10%. The speculation around runes has broadened the income sources for BTC network miners, making it the highest proportion among new assets.

If runes and BRC20 are regarded as meme coins, the market capitalization of meme coins on the Bitcoin chain is the lowest, accounting for less than 0.1% of that chain. In a horizontal comparison, the meme leaders on the ETH and SOL chains account for more than 3% of their respective market caps. As the chain with the highest consensus, market capitalization, and attention from mainstream funds, BTC has the potential for further expansion in its meme coin market capitalization. In a vertical comparison, the overall transaction volume and contribution fees of runes have already surpassed BRC-20, but the rune leader still lags behind the BRC-20 leader. If it can be listed on a top-tier exchange, it has the potential to surpass ORDI.

3. Rune Evaluation System and DOG Analysis

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

Early focus: distribution method, degree of decentralization, founders and storytelling Medium-term focus: continuity of dissemination, continuity of price Maturity period focus: trading volume, market capitalization, chip structure, 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 large scale.

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

3. Founders and Storytelling: The founder Leonidas is an OG of the BTC community and has a close relationship with the founder of Ordinals, Casey. The name of the rune stone links the Runes protocol launched on halving day and the Runestone encoding instructions in the protocol, which is highly topical and orthodox.

4. Continuity of Dissemination: Founder Leo, as an OG of the BTC community, has strong dissemination power and resources, continuously attracting market attention.

5. Price Continuity: The rune stone and the rune DOG relay speculation, with prices continuing to rise after market pricing and consolidation.

6. Trading Volume: Since its launch, DOG has always been the top asset in terms of trading volume, with a current daily trading volume exceeding $70 million, far surpassing other rune projects.

7. Market Cap: After excluding the ZZZ runes with very low trading volume and high unit price, DOG basically maintains its position as the leader in market cap.

8. Chip structure: The number of holders is large, the consensus is strong, but the concentration of chips is not high enough, which may be due to not being listed on a top trading platform.

9. Price Stability: After the bottom consolidation, DOG price has been steadily rising, continuing to surge after consolidating at key points, and the buying power remains strong even during the overall market correction.

4. Summary

1. Rune is a protocol designed specifically for fungible tokens, which is technically simpler, more efficient, and compatible than BRC-20. In terms of trading share ratio and transaction fee contribution, it has surpassed BRC-20 tokens, becoming a new asset form that cannot be ignored.

2. Runes currently mainly serve to enhance the attention and capital attraction of the Bitcoin network as meme coins, holding significance for sustainable development, but based on data, they have not yet fully exploded and still have further price discovery potential.

3. This article proposes a three-stage, nine-dimensional evaluation system for rune projects. Currently, DOG is in a leading position compared to other targets, but its chip structure is relatively scattered, and it may take some time to accumulate before landing on a first-tier trading platform.