In-Depth Analysis of Runes Protocol: Underlying Mechanisms and Innovative Features

1. Runes( The essence of Runes)

Runes is a new type of asset issuance protocol designed by Casey, the founder of the Ordinals protocol, and is scheduled to officially launch on the Bitcoin mainnet around April 20, 2024. As the official version of the rune protocol, Runes is expected to bring new vitality to the Bitcoin ecosystem.

Compared to other inscription protocols, Runes adopts a different technological approach, which brings new challenges to project parties, wallets, and trading platforms. Especially launching the mainnet directly without a testnet presents a severe test of participants' technical capabilities.

2. Bitcoin On-Chain Data Recording Methods

There are two mainstream off-chain data attachment schemes for Bitcoin: engraving and etching.

2.1 Etching Technology Principles

Runes adopts etching technology, which achieves on-chain records by writing data into the OP_RETURN field of Bitcoin UTXO. This method has been supported since Bitcoin Core version 0.9 and can directly view additional information in blockchain explorers.

The advantages of etching are that the logic is simple and intuitive, the transaction costs are low, and it does not occupy the full node memory pool. The disadvantage is that it is limited to 80 bytes in length and requires highly compressed data.

2.2 Engraving Technology Principles

The engraving technology writes metadata into the witness data of the transaction, achieved through segregated witnesses and Pay-to-Taproot. This method requires two transactions ( commit and reveal ) to complete the data on-chain.

The advantages of engraving are that it is almost unlimited in size, has a certain level of privacy protection, and supports various gameplay. The disadvantages are that the transaction costs are relatively high, and it puts a lot of pressure on the full node memory pool.

3. Runes protocol Design Analysis

3.1 Early version ( features

The initial Runes protocol consists of three main parts:

• edicts: asset transfer information
• etching: asset deployment information
• burn:destroy

This version has already equipped basic asset management functions, capable of issuing, transferring, and destroying assets.

![In-depth Analysis of the Underlying Design Mechanism and Limitations of Runes protocol])https://img-cdn.gateio.im/webp-social/moments-1a8ad9f747fe4a9f9b3ba8b4f0d8b33b.webp(

) 3.2 Latest version ### innovation

The latest version of the Runes protocol has undergone multiple optimizations:

1. The asset ID generation method has been improved, effectively reducing the amount of encoding.
2. Introduce the terms field to enhance fairness by specifying the starting block for minting.
3. Set the asset name length release rules to increase scarcity.
4. Adopt a two-step deployment process similar to engraving to enhance security.
5. Add a turbo field to reserve space for future expansion.

These improvements aim to enhance the flexibility, security, and scalability of the protocol.

4. Runes protocol evaluation

( Advantages:

• Deeply integrated with Ordinals, easy to acquire user base
• Using OP_RETURN method, with high security.
• A flexible asset management mechanism is beneficial for building an orderly market.

) Challenge:

• The tight development schedule may impact the initial ecological construction.
• Complex rules increase the difficulty for users.
• Compared to other protocols, it is slightly lacking in L2 and smart contracts.

The Runes protocol brings new possibilities to the Bitcoin ecosystem, but its success still requires time for testing and market validation.

![In-depth Interpretation of the Runes protocol's underlying design mechanism and limitations]###https://img-cdn.gateio.im/webp-social/moments-76e02af769fcbb0515c5486c267f20dd.webp###