Bitcoin Ordinals and the Runes Protocol: A Fad or the Future?

Bitcoin Ordinals and the Runes Protocol have had a great run within the past few months, having contributed to a spike in activity on the Bitcoin blockchain.

Despite the initial fanfare surrounding Bitcoin Ordinals and Runes, a closer examination of their growth trajectories reveals a trend that could potentially classify these innovations as a passing fad. While Ordinals enjoyed a great run in 2023, with daily trading volumes of Ordinal-based NFTs remaining high for the better part of the year, the growth curve took a sharp turn in 2024.

After averaging over 10,000 Ordinal inscriptions per day during the peak period, the number of inscriptions nosedived to an average of 1,000 per day in 2024. This drastic decline in activity is a far cry from the peak periods when Ordinal inscriptions accounted for up to 80% of the total activity on Bitcoin’s blockchain.

On the other hand, the Runes protocol, which was designed to introduce a standard for issuing fungible tokens on the Bitcoin blockchain, also experienced a rapid rise and fall in popularity. After generating a record of $135 million in fees within the first week of launching, which pushed up Bitcoin’s 7-day average transaction fee from $4.11 to a high of $12.17, Runes-related transactions currently account for a mere 4.1% of the total transactions on Bitcoin.

This trend analysis, coupled with the minimal impact of Ordinals and Runes on Bitcoin’s price action, could classify the two innovations as the latest crypto fad. However, it is important to note that both innovations are still in their early stages of development and could yet experience a revival in the future.

After launching in April 2024, coinciding with the latest Bitcoin halving, the Runes protocol generated a record of $135 million in fees within the first week alone. During this period, Runes-related transactions made up close to 80% of the activity on Bitcoin’s blockchain.

On the other hand, Ordinals have been around for a little longer. The Ordinals protocol debuted in January 2023, and with barely a year in existence, the daily trading volumes of this Bitcoin-based NFTs were hovering above $20 million for the most part of 2023. Today, there are over 67 million ordinal inscriptions on the Bitcoin blockchain while 6,868 BTC has been collected in fees from this nascent digital asset class.

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