The Rune Protocol will be launched as the Bitcoin halving approaches. Will it pose a threat to BRC-20's dominance?

As the highly anticipated Bitcoin halving approaches, a new native digital goods protocol is set to make its mark on the cryptocurrency space. The Runes protocol, developed by Ordinal Theory founder Casey Rodarmor, has attracted attention by introducing a new standard for Bitcoin’s fungible tokens.

A recent report from cryptocurrency analysis company Delphi Digital revealed the potential of the Runes protocol to subvert the field of cryptocurrency standardization and threaten to challenge the dominance of BRC-20.

A glimpse into the Runes protocol

Unlike its predecessor, Runes is not a token, but a framework that enables the creation of fungible coins on the Bitcoin network. Tokens created using the Runes protocol (called "runes") are fungible, meaning each Runes is interchangeable.

According to the research firm, the token standard offers several unique features that set it apart from existing token standards.

The Runes protocol utilizes Bitcoin’s UTXOs (Unspent Transaction Outputs) to store Bitcoin and Runes balances. This method allows users to instantly create and trade Runes within the Bitcoin ecosystem.

The Runes Protocol aims to increase transparency and security by transferring trust from the indexer level back to the Bitcoin blockchain.

It is worth noting that the Runes ecosystem adopts a unique fair release mechanism. The first is called UNCOMMON GOODS (Runes 0) and will be open for minting from the upcoming halving event to the next halving event.

The Runes protocol stipulates that the first runes (called UNCOMMON GOODS, or Runes 00) will begin at the upcoming Bitcoin halving event and will remain open for minting until the next halving event occurs.

In addition, the Runes ecosystem has specific requirements for the naming of tokens: initially, token names must contain at least 13 characters. Over time, this number of characters will be gradually reduced until all names can be use.

The battle for token standards

With a market size of over $1.5 billion, BRC-20 dominates the tokenization space. However, the emergence of Runes has sparked speculation about its potential to replace the BRC-20. Delphi Digital’s report highlights the key differences between the two token standards, with Runes offering potential advantages.

Comparative differences between Bitcoin Runes and BRC-20 | Source: Delphi Digital

Potential BRC-20 upgrade

While the Runes protocol provides significant benefits, it also has some limitations. The report notes that the current state of infrastructure development presents challenges in realizing the full potential of Runes compatibility.

Additionally, the introduction of the Cenotaph model to allow for protocol upgrades raised concerns about the potential loss of Runes due to "malformed Runes stones".

As the Runes protocol gains traction, rumors have surfaced about potential updates to the BRC-20 standard, including the ability for the BRC-20 indexer to compute Ethereum Virtual Machine (EVM) smart contract code.

Delphi Digital noted that this development could resolve some of the design issues faced by BRC-20, intensifying competition between the two token standards.

Overall, with the upcoming launch of the Runes protocol, the cryptocurrency community is eagerly anticipating the disruption it may bring to the tokenization space.

Delphi Digital's report highlights Runes' unique attributes and advantages, positioning it as a strong contender in the race to challenge BRC-20's dominance.

Daily chart shows ORDI price trending downward | Source: ORDI/USD on TradingView.com

Currently, the leading BRC-20 token Ordinal (ORDI) is trading at $42.62 on the cryptocurrency market. However, its value has plummeted by more than 32% in the past month.

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