TL;DR

Bitcoin halving is in 3 days and Runes protocol is launching at the same halving block!

I’m sure you’ve heard about Runes protocol already, but I want to share my thesis why I’m short-term bearish but long term bullish, how to prepare, and what protocols/tools to use to not miss out.

PUDGY• PENGUIN• RUNE

But first, check out the airdrop farms of the week!

Farms of the Week

• BOB: Bitcoin L2 bringing security of BTC with Ethereum EVM. Surprised by the long list of strong partners like OKx, Mechanism Capital etc. Bob will launch Runes trading on halving with Bob L2 mainnet going live

Farm BOB Spice (Points) by depositing Ethereum assets. Tip: Deposit wBTC or tBTC for 1.5x point multiplier. Campaign started on March 27, and still 7 days left until deposits close.

→You need invite code: Use mine “50sj3z“ or just click here.

• Liquidium: Lend and borrow Ordinals/BTC. Might become the blue-chip BTCFi protocol like Aave. Secured VC funding and currently running point system for airdrop.
  → Try it here.

• Karak: A competitor to EigenLayer that just raised Series A at $1B valuation. You can restake EigenLayer LRTs to farm Eigenlayer, LRT, Karak XP points at once. I don’t believe they win against Eigenlayer but you don’t lose much by farming it too.

→ Use my permanent code IGNAS to start here.

• Elixir - network for orderbook liquidity raised $8M at $800M valuation from Crypto Hayes, Sui, Amber etc. Elixir allows to supply liquidity to orderbook exchanges and earn rewards, including Vertex, Bluefin and others.

Point (potion) system is live to earn Mystic Chest by depositing ETH and minting elxETH. Your ETH will be locked until mainnet launch in August.

→ Join with my invitation here.

Why I’m Bearish on Runes Protocol (Short-term)

I’ll start by sharing my bearish stance on Runes.

I expect that the pre-Runes market will remain hot leading up to the protocol launch. Assets such as Runestone, RSIC, and PUPS have already pumped a lot, and holders of these assets will receive Rune token airdrops. The new Rune tokens may see a strong initial performance for some time.

But the market will cool down similarly like NFTs dump after the JPEG reveal. Here are few reasons why:

• Bitcoin transaction fees will become prohibitively expensive for traders with less capital to actively trade Runes (which in turn will boost Bitcoin L2 narrative).
• Runes might not significantly improve on BRC20 trading experience as UTXOs and BRC20 trade like NFTs.

• Early UniSat and Ordinal Wallet trading interfaces are same as for BRC20s with 1) number of tokens and 2) price per package are traded in one transaction
• Number of new Rune tokens issued will be outrageous: tens or hundreds of new tokens will be minted daily (at high gas costs) diluting the trader 1) attention 2) money inflows per token.

Utility-wise Runes are memecoins like BRC20s. At least at first, so the excitement of “new” will fade away. Especially if no rune token manages to sustain the pump and degens lose money.

Plus, the Rune 0 (UNCOMMON•GOODS) set by Casey Rodamor himself will be hard to pump as it’s 1) freely mintable for 4 years with 2) a limit of 1 mint per transaction.

Why I’m Bullish on Runes Protocol (Long-term)

If I’m right and Runes hype cools down shortly after Rune protocol launches, the best opportunity will come after the dump.

Here’s why:

Speculation on narratives comes in waves.

The first wave is led by excitement over the new shiny thing. It usually comes from innovative technology or simple meme potential. Meme tokens is a bit like gambling: the absolute majority of memecoins that pump rarely have a second wave.

Yet, narrative speculation based on technical innovation has a stronger chance to recover after the first wave hype subsides.

Ordinal Inscriptions launched in December 2022. But the first major wave came with the launch of BRC20 in May 2023. Freely mintable BRC20 pumps quickly decreased, but as developers continued to build, the second and third waves arrived in late 2023.

Now we are at the 4th wave of Ordinals with pre-runes speculation.

While many narratives don’t survive the first wave (check ERC404 txs), I believe Runes will have 5th, 6th, and more waves.

Reasons being:

• Multiple protocols and are building infrastructure for Rune tokens. But it takes time to develop new DEXes/marketplaces. For example, Saturn is building a familiar looking DEX for Runes, but it will take time to make UX fluid. I’ll share more protocols to follow below.

• The Runes protocol aims to consolidate the BTCFi industry around a single standard for development. Just picture Ethereum without the unifying ERC20 standard - tokens wouldn’t be interchangeable between Aave and Uniswap. This is the current situation on Bitcoin. Prior to Runes, we’ve had BRC20, CBRC-20, ARC-20, BRC-420, and so on. A mess.

I’m also bullish on Runes in long term because it nails all three pillars of the booming crypto ecosystem. It’s my framework for this bull market.

Three Pillars of Booming Crypto Ecosystems

IGNAS | DEFI RESEARCH

2023年11月30日

Read full story

In my view, the success of any crypto ecosystem is driven by three key elements: technical innovation, token minting opportunities, and captivating storytelling. Here’s how Runes fits into it.

• Technical innovation: We were told NFTs and tokens weren’t possible on Bitcoin. Yet, Bitcoin NFTs are surpassing Ethereum NFTs in performance this cycle. And ORDI, the first BRC-20 on Bitcoin, is trading at $1B on Binance. \

The magic lies in transforming fungible satoshis into non-fungible ones. A single satoshi is no longer equal to another when there’s an inscription on top of it.

It’s one of the most exciting Zero to One innovation this cycle. And if you are curious how we arrive to this point, check my previous blog post on BTCFi

• Ordinals & BTC DeFi: Start Here.
• IGNAS | DEFI RESEARCH
• 2月13日
• Read full story
• Token printing: It’s one of the reasons we have crypto cycles. During every bull run, new tokens are created out of thin air and assigned crazy valuations. Just as central banks can overprint fiat money, we tend to issue too many tokens to align with the influx of money and attention into the crypto space. So, the market crashes.

This cycle is no different. I wrote more on how it happens even before this bull even started.

• Echoes of the Past: What the Deja Vu Market Tells Us About the Next Bull Market.
• IGNAS | DEFI RESEARCH
• 2023年8月24日
• Read full story
• Yet the token printing was reserved for smart contract blockchains like Ethereum/Solana. Until Ordinals theory that inadvertently gave rise to BRC20s.

I was concerned about BTCFi because of the unlimited token printing. BRC20s (and Runes) can be easily minted without any actual value accrual, as there are no smart contracts on BTC.

But Ordinals community managed to find Schelling points) to converge to by ascribing OG value to early Ordinal NFTs and airdropping tokens those NFT collections.

Moreover, without any direct value accrual, all BRC20 tokens are essentially memecoins. Only ORDI managed to garner attention as the first BRC20 token, but now PUPS might’ve crossed the Rubicon to become the real memecoin on Bitcoin. The higher PUPS price goes, the higher conviction it induces to degens.

Finally, there’s a growing BTCFi ecosystem with native tokens defies memecoins and rationalizes owning BRC20s/Runes as a value accrual token. More on this later.

• Captivating storytelling: Storytelling is what gives life to the technical aspects and tokenomic models, turning them into something people can relate to, believe in, and become a part of.

For example, Bitcoin Ordinals as immutable NFTs on the most secure and decentralized blockchain is a sexy story. Plus, memecoins on boomer Bitcoin? Come on, that’s much cooler than memecoins on Solana or Ethereum.

Crypto Twitter is catching up with the technical innovations of Ordinals/Runes and the narrative is hot.

This short-term bearish but long-term bullish scenario could be the best case if you are late to pre-runes tokens. It offers you just enough time to study and prepare once the hype diminishes, before the second Runes wave hits.

The best time to study was yesterday, and the second-best time is today. So, here’s a brief introduction to Runes.

What You Need to Know About Runes Protocol

Runes Protocol is developed by Casey Rodamor, the creator of Ordinals Theory as a rebuke to BRC20s. Casey wasn’t a fan of BRC20s so it’s expected that what Casey did to NFTs, he’ll do it again for fungible tokens.

You see, BRC-20 tokens use JSON data (text-based data format) inscribed on satoshis. They are tradable more like NFTs than fungible tokens. For example, you need to “inscribe” (by doing an on-chain transaction on BTC) BEFORE you can sell or transfer those tokens.

Plus BRC-20s create “junk” or “leftover” transactions that clogged the network.

Runes, on the hand uses, UTXO model, which confuses the hell out of everyone. Here’s my breakdown:

Ethereum follows account-based model, while Bitcoin uses UTXOs (Unspent Transaction Outputs) to track user state and balances.

For example, if you have a UTXO worth 1 BTC and want to send someone 0.3 BTC, the transaction will use the entire 1 BTC UTXO as input. The transaction will then create two outputs: one sending 0.3 BTC to the recipient, and another returning 0.7 BTC (minus any transaction fees) back to your address as two new UTXOs.

So technically when you say: “I own 1 bitcoins”, you should be saying: “I own some UTXOs that allow me to spend 1 bitcoin.” (Credit to Alchemy for this quote.)

In the example above, when you use 1 BTC UTXO as input, that UTXO gets ‘destroyed’ and two new UTXOs will get minted: 0.3 UTXO for the recipient and 0.7 UTXO (minus fee) to you.

As you can see, these UTXOs are like NFTs!

But while every inscription (like BRC20) is unique, every unit of a rune is the same. They are interchangeable tokens. You can transfer Runes like regular bitcoin instead of inscribing BRC20 every time you send them.

In case of Runes, UTXO can now store 1 Bitcoin, 100 Rune tokens A, and 50 Rune tokens B as Runestones.

Tip: Create multiple UTXOs by sending the amount of BTC you are willing to invest per Rune to new wallets. This way, you can ape in multiple tokens without having to wait for the previous transaction to complete. Or use Luminex.

Runestones (not to be confused by Runestone Ordinals) are Rune protocol messages are stored in Bitcoin transaction outputs when you send the UTXO.

I’m sharing this because you’ll soon start seeing terms like “Runestone,” “Etching,” and “Edicts” being discussed on Twitter once Runes launches. People will try to trade Runes but face issues, leading them to seek answers on Twitter.

Runestone - rune protocol message - can include etching (deploying) a new rune, minting an existing rune, on top of transferring runes from one address to another.

Etching is how runes are minted for the first time by an “etcher”. When etched the properties cannot be changed.

You can learn all the cool words to impress your degen friends in the official docs by Casey here.

My favorite is Cenotaphs to burn runes.

Finally, a few other simple terms and facts about Runes you should know:

• Rune Name: Initially, only names with 13+ characters are available; this limit decreases every 4 months by one character until all names are accessible after four years.
• Rune Number: Indicates the creation order of a Rune, starting from “Rune 0” then “Rune 1” etc.
• First Rune UNCOMMONGOODS - a free mint with no supply cap and only 1 UG per mint. 1 UG is basically the price of Bitcoin tx fee.
• Rune ID: Generated based on the transaction block and location, e.g., “500:20”
• You could mint Runes by entering Rune ID. For example, RuniGun bot on telegram will allow minting Runes by Rune ID. So, you won’t depend on 3rd party UI for minting if you know the ID. Can check the bot here (disclaimer, I’m not affiliated but just found it on X myself).

• Rune Symbol: A non-unique currency symbol of a Rune $, ⧉, or 🧿 or a generic currency symbol ¤.

More technical terms by Leonidas here.

A simple BRC20 vs Runes comparison by Delphi Digital.

Projects, Protocols and Tools to Keep an Eye On

I initially planned to write on “how to position yourself for Runes protocol launch.” But there are multiple similar looking threads on X already with same protocols.

The key thing to know is that Runes games are underway with multiple pre-run protocols launched promising to airdrop Rune tokens after the protocol launch at the Bitcoin halving block.

The hype started with RSIC protocol that mysteriously airdrop RSIC NFT miners to Ordinal OG wallets.

Back then I said “Something huge is brewing in the BTCFi space” without actually knowing how it would play out. We now know that RSIC started a competition to capture the mindshare of Rune degens.

If you don’t hold a RSIC, I don’t think it’s the right time to enter: by holding RSIC who mined RSIC points which will reward you with RSIC Rune tokens. In theory, RSIC should trade at $0 at halving block.

As a response to the RSIC team (that left 10% of RSIC to themselves and airdrop criteria wasn’t transparent), Leonidas launched Runestone airdrop to 112.4k OG wallets. By holding Runestone you will get not one, but 3 Rune memecoins

“ONE LATER THIS MONTH ONE LATER THIS YEAR ONE WHEN WE BECOME THE TOP MEMECOIN IN THE WORLD” - Leonidas

Rune stone is currently trading at $549M market cap, making it the 2nd largest (after Rune Pups + PUPS) pre-runes collection.

But because RSCI keep decreasing in value the closer to halving it gets, real RSIC valuation stands at $588M USD (according to $0.028 USD price per 1 RSIC Rune on whalesmarket).

Rune Pups ($80M + PUPS memecoin ($421M) together trade at $501M valuation. Remember, both Rune Pups and PUPS token holders will migrate to Runes with 23% if the allocation going to Rune pups and 77% to PUPS.

There’s often a nice arbitrage in Runes Pups NFTs, PUPS on Unisat and bridged Pups on Solana.

NOT FINANCIAL ADVICE but are you willing to ape at these valuations? If my short-term expectations are right, their valuations should drop shortly after the launch.

In any case, this is a speculative decision you should take on your own. There are multiple other runes protocol at sub $100M valuations. Check the full list on Magic Eden.

I’m not selling, though. I entered the ecosystem early and willing to hold. Plus, these three major assets are becoming the Schelling points of the Rune ecosystem and hopefully they can hold the value and accrue more airdrops.

In longer-term, new protocols will appear to capitalize on Runes protocol hype. Below are the protocols and tools to start with.

Follow doggfather for up to date info on Rune protocols

Notable protocols

• Luminex: Mint Runes and can split UTXOs to mint multiple Runes with the same wallet. Promoted by Xverse wallet, so might be good.

• Sovryn: Exchange/Lending for Runes with their own sidechain. Launching on halving. Sovryn will launch their DEX on Bob L2, the same one I shilled my referral link.
• RunePro: Building a dex and Etching protocol. No live yet. https://twitter.com/Rune_Pro
• Rune Bitcoin: Etching, transfer services for Runes but also building a marketplace and a DEX.
• Runessance: Lending protocol for Runes and BTC.
• Liquidium: Borrow against Ordinals and Runes. Or earn yield on BTC. Point system live. There are points for Liquidium airdrop.
• Saturn: AMM/Orderbook exchange for Bitcoin assets. Liquidity might not exist during Runes launch.
• RuniGun: Telegram bot for minting, creating and managing Runes. Can’t export my private keys so be cautious.

But you’ll probably use Magic Eden and Unisat to trade Runes and OKx Web3 wallet (if you are a mobile user). Personally, I use Unisat, Xverse and OKx wallet interchangeably.

I will write a dedicated blog post on BTCFi ecosystem dApps in the future. A lot of unpack here so make sure to subscribe.

Useful tools for Runes

• SatScreener: Real-time token aggregator for Runes and the Bitcoin ecosystem. Because Coingecko/CMC for Bitcoin ecosystem sucks, Satscreener is the place to follow token info.
• Runesmarketcap: Find Rune protocols by provenance, market cap, type etc.
• Runealpha: Rune explorer, real-time data, etching (minting) protocol in one. Quite useful.
• Runes terminal: Building a scanner, minter, and a launchpad. Has its own Ordinals that will reward RUNI airdrop after the halving.

More tools in the thread below.

It’ still early, so let me know the best tools and protocols for Runes in the comments!

One last thing before I finish: BTCFi is in early days. It’s like turning time back and going to Ethereum DeFi of 2019-20 even before Uniswap was born. Opportunities are going to be ample, so make sure to keep studying and clicking buttons!

Disclaimer：

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