Rune protocol leads a new wave, DOG becomes the industry focus

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. The protocol was officially launched on April 20 of this year during the Bitcoin halving, sparking a wave of excitement.

1. The operation mechanism of rune

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 UTXO, and a single UTXO can hold an arbitrary number of runes, avoiding the creation of "junk" UTXOs, improving efficiency and reducing on-chain space occupancy.

Specifically, the data of Runes is stored in the OP_RETURN field, allowing for 80 bytes of data to be stored in the transaction output. Transactions use protocol messages marked by OP_RETURN, followed by a data push of the uppercase letter R. Issuance or transfer transactions are specified and assigned to UTXO in the subsequent data pushes.

2. Comparison of rune and BRC-20

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

1. Designed for interchangeable tokens, based on the native BTC architecture, does not rely on off-chain data, and requires only a single minting.
2. Data is stored in an 80 bytes OP_RETURN field, taking up less space.
3. Based on the UTXO model, it integrates with the native BTC architecture and inherits its security, offering stronger scalability.

3. The meaning of runes

1. has created a new asset issuance method for BTC, attracting more attention and capital.
2. is simpler, more efficient, and more compatible than before, reducing network congestion.
3. contributes more transaction fees to the Bitcoin network, helping to address the security budget issue.

2. Industry Data Overview

Currently, rune transactions account for about 20% of the total BTC network, making it the most active L1 asset outside of BTC transactions. In terms of fee contribution, runes account for 10-20%, exceeding the combined proportion of Ordinals and BRC-20.

Compared to meme coins on other chains, the market capitalization of meme coins on the Bitcoin chain accounts for the lowest share, less than 0.1% of that chain. This indicates that there is still room for the market capitalization of meme coins on the BTC chain to expand further.

3. DOG Project Analysis

DOG, as the leading project in the current rune track, has the following characteristics:

1. Innovative distribution method, the project party assumes all on-chain costs.
2. A large early user base enables a rapid cold start.
3. The founders have a strong background and the project has a rich narrative.
4. Continuously attract market attention.
5. Rune stones and Rune DOG are gaining traction, with strong price performance.
6. The trading volume far exceeds other rune projects, and liquidity is the best.
7. The market capitalization firmly ranks first among rune projects.
8. The number of holders is large, but the chips are dispersed.
9. Price stability is rising, and buyer strength is strong.

4. Summary

1. The rune protocol is technically superior to BRC-20 and has become an important new asset form.
2. Runes as a meme coin enhance the attractiveness of the Bitcoin network, but there is still room for further development.
3. The DOG project is currently in a leading position in the track, but the chip structure is relatively dispersed, and it may take time to accumulate before landing on top-tier exchanges.