TL; DR
Full story
Buckle up and hold on tight, because we’re about to take the first train straight to Nerd Town.
You’ve probably heard of Ordinals (we’ve written about them before).
Ordinals uses the token standard, BRC-20, which sounds like a bunch of letters and numbers – and it is – but they’re important letters and numbers because they meant data could be hosted on the Bitcoin network (which many refer to as as ‘BTC NFTs’).
Now there’s a new player in town, and it’s called ‘Rune’.
To explain how Runes can be more efficient than the BRC-20 standard, we need to explain ‘Unspent Transaction Outputs’ (UTXOs).
Imagine if Seb wanted to send Chevy 5.10 BTC.
Chevy may first ask: “5.1 BTC?? Did you rob a bank Seb??
After clarifying that he didn’t rob a bank, it was him did would receive an inheritance, Seb would transfer 5.2BTC because Seb’s wallet contained 5BTC and 0.2BTC (see the header photo or Watch this video for better understanding).
The ‘change’ Seb receives (0.1 BTC minus any fees) would become the UTXO.
And after you make a few transactions, you start to get a lot of UTXOs, each of which increases the cost of a transaction and increases congestion on the Bitcoin network when used for transactions.
The team behind Runes has come up with a way to solve this by essentially letting people combine UTXOs and instead use a Rune with the exact value that wants to be traded.
It’s complicated stuff, and we’ll definitely write about this again to further explain the use cases for Runes (such as the ability to replaceable tokens such as security tokens, stablecoins and governance tokens on the Bitcoin blockchain.
For now, we hope you survived and are ready to get back to the day.
Everyone aboard! 🫡