Rune popularity returns, DOG leads the track development

1. Overview of Rune

At the beginning of 2023, the BRC-20 standard launched by the Ordinals protocol sparked a wave of BTC asset construction and speculation, promoting attention and capital influx into BTC layer two, DeFi, and other ecological infrastructure. To address the network congestion issues brought by BRC-20, Casey Rodarmor, the creator of the Ordinals protocol, proposed the Runes protocol in September 2023, aiming to build a protocol for fungible tokens based on BTC UTXO.

The Runes protocol was officially launched on April 20 during the Bitcoin halving. Initially, the first batch of rune minting drove the BTC network Gas fee above 1000 sats, but the excitement quickly shifted to other tracks. Recently, DOG has risen from its bottom price to a new high, driving a wave of increases and new attention towards rune targets.

1. rune operation mechanism

The Runes protocol issues and tracks tokens using the native Bitcoin UTXO model, making it more native and decentralized. The rune balance is directly held by UTXOs, and a single UTXO can accommodate an arbitrary number of runes, which avoids the creation of "garbage" UTXOs, improving efficiency and reducing on-chain space usage.

Runes data is stored in the OP_RETURN field, allowing for the storage of 80 bytes of data in the transaction output. Transactions use the OP_RETURN tag in the protocol message, followed by a data push of the uppercase letter R. Issuance or transfer transactions are specified and assigned to UTXO in subsequent data pushes. Invalid protocol messages will result in the runes being burned.

2. Rune and BRC-20 Comparison

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

(1) Runes are designed specifically for fungible tokens, based on the native BTC architecture, independent of off-chain data, and require only a single minting, making it simpler and more efficient.

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

(3) The Runes protocol is based on the UTXO model, integrates with the native BTC architecture and inherits its security, featuring stronger scalability, and perfectly compatible with ecological development routes such as the Lightning Network and BTC L2.

3. The meaning of rune

( created a breakthrough method for BTC asset issuance, establishing a dedicated, interchangeable token standard more suitable for speculative activities.

)2( The asset issuance method is simpler, more efficient, and compatible, not relying on third parties and off-chain data, occupying less space and reducing network congestion.

) helps solve the Bitcoin security budget issue, contributing more transaction fees to the network, especially providing a new source of income for miners after the halving.

2. Overview of Track Data

From the BTC network data, runes currently account for about 20% of the total network transaction volume. When the rune protocol was first launched, the transaction share reached a peak of 81.3%, and then it quickly declined, currently fluctuating between 10-40%.

Compared to runes and BRC-20, 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 was around 99% during the halving launch, while the lowest was about 55%. The current trading heat has surpassed that of BRC-20 tokens.

In terms of fee contribution, currently the native Bitcoin transaction fees account for 70-80%, rune accounts for 10-20%, and Ordinals plus BRC-20 together account for about 10%. On halving day, the proportion of rune reached as high as 70%. The speculation on rune has expanded the sources of income for BTC network miners, making it the highest proportion in new assets.

In horizontal comparison with other chains, the market capitalization of meme coins on the BTC chain accounts for less than 0.1%, far lower than the 3% or more on the ETH and SOL chains. As the chain with the highest consensus, market capitalization, and mainstream capital attention, there is room for further expansion of the market capitalization of meme coins on BTC. In vertical comparison, the overall trading volume and contribution fees of rune have surpassed BRC-20, but there is still a gap between the leading rune and the leading BRC-20. If it can be listed on a top-tier exchange, it is expected to surpass ORDI.

3. Rune Evaluation System and DOG Analysis

The evaluation of popular rune projects can be conducted from three stages and nine dimensions: early stage focuses on distribution methods, degree of decentralization, founders and storytelling; mid-stage focuses on continuity of dissemination and price; mature stage focuses on trading volume, market capitalization, chip structure, and price stability.

The current analysis of the leading DOG in the rune track is as follows:

1. Distribution method: phased release, first launching rune stone NFTs for speculation, and airdropping the first rune after the halving day of the rune protocol goes live. The project party bears all on-chain costs, which is a large scale.

2. Degree of decentralization: Airdropped to over 110,000 users who have actively participated in the BTC rune ecosystem, achieving rapid cold start and extensive dissemination among core users.

3. Founder and Story: The founder Leonidas is an OG in the BTC community, the rune stone has strong artistic design, and the name DOG has good communicability.

4. Continuity of Promotion: The founder frequently promotes and continuously captures market attention.

5. Price Continuity: Rune Stones and Rune DOG are being hyped in succession, with prices continuously rising after market pricing and consolidation.

6. Trading Volume: Significantly ahead of other runes, with a daily trading volume exceeding 70 million USD, the best liquidity.

7. Market Cap: After excluding high-priced runes with low trading volume, it basically maintains the first position in market cap throughout the time.

8. Chip structure: A large number of holders but insufficient concentration of chips may affect the process of being listed on top-tier exchanges.

9. Price Stability: After the bottom consolidation is completed, the price steadily rises, and the buying power is strong.

4. Summary

1. The rune protocol is technically simpler, more efficient, and compatible than BRC-20, having surpassed BRC-20 in terms of trading share and fee contribution, becoming an important new form of asset.

2. Runes primarily serve to enhance the attention and capital capture of the Bitcoin network as a meme coin, which has sustained development significance, but has not yet fully exploded and still has price discovery space.

3. This article proposes a three-phase, nine-dimensional evaluation system for the rune project. DOG is currently in a leading position in the track, but the chip structure is dispersed, and it may take time to accumulate before landing on a first-tier exchange.