Forwarded the Original Title: The rune craze resurges: Can it reignite the Bitcoin ecosystem?

As Bitcoin’s adjustment in the past half year may be coming to an end, the Bitcoin ecosystem is also showing signs of activity.

As of October 17, Magic Eden market data shows that the Runes sector has increased overall, with DOG·GO·TO·THE·MOON rising 10.1% in 24 hours, and the current price is 8.7 satoshis; PUPS·WORLD·PEACE rising 10.75% , the current price is 234 satoshis; BILLION·DOLLAR·CAT saw the largest gain, rising 47.67% to a current price of 155 satoshis.

According to GeniiData data, the current total market value of Rune Protocol has rebounded to $1.34 billion.

Based on Bitcoin network data shared by Dune user @cryptokoryo_research, it can be observed that the Rune protocol is gradually becoming a significant force in the Bitcoin ecosystem. Currently, Runes account for about 10% of transaction volume in the Bitcoin network. This figure experienced a rapid rise when the Rune protocol was initially launched, reaching a peak of 81.3%. This phenomenon was driven by strong FOMO sentiment in the early stages, but market enthusiasm has gradually returned to a more rational level.

During this process, Rune Protocol has rapidly grown from an emerging asset in the ecosystem to one of the mainstream forces in the Bitcoin ecosystem, especially in terms of transaction activity, which has surpassed the BRC-20 token. From on-chain data, the current trading volume of Rune compared to BRC-20 is about 95:5, showing its increasing competitiveness in the Bitcoin network ecosystem and gradually becoming one of the most active L1 assets.

From the perspective of transaction fees, native transaction fees in the Bitcoin network still dominate, accounting for about 90%, but the fee contribution from the Rune protocol has been fluctuating around 10%. Meanwhile, the combined fee proportion of BRC-20 and Ordinals protocols is only 2-3%, highlighting the growing importance of the Rune protocol in transaction fee contributions.

The revival of the Rune Protocol has triggered further market thinking about the future development of the Bitcoin ecosystem: can the revival of this protocol drive an overall recovery of the Bitcoin ecosystem?

What is the Rune Protocol?

The Rune Protocol, introduced by Bitcoin developer Casey Rodarmor in 2023, is a new token protocol designed to provide a token issuance standard based on the Bitcoin blockchain. This protocol utilizes Bitcoin’s UTXO model and OP_RETURN field to create and manage fungible tokens (FTs), offering high compatibility and scalability. It seamlessly integrates with Bitcoin’s RGB protocol and Lightning Network, ensuring that the Bitcoin network can expand its applications while maintaining existing security and decentralization features.

The main feature of Rune Protocol is its efficient and low-inflation token management method. Unlike traditional Inscription protocol, the Rune protocol stores token data through the OP_RETURN field, allowing it to implement complex transaction logic while occupying the least amount of on-chain storage resources. This mechanism effectively reduces blockchain bloat and provides miners with the opportunity to earn more transaction fee revenue. In terms of miner incentive mechanism, Rune Protocol has brought new revenue streams to the Bitcoin blockchain, easing the economic pressure after the block reward was halved.

From a technical perspective, the Rune Protocol is a UTXO-based protocol, which allows it to fully utilize the underlying design of Bitcoin to achieve highly secure token transactions and issuance. In addition, due to the scalability of the Rune Protocol, it has good compatibility with Layer 2 solutions, especially in terms of RGB protocol and Lightning Network, providing the Rune Protocol with broad application prospects, including cross-chain transactions and building decentralized finance platforms.

Overall, Rune’s liquidity is relatively weak, with its trading volume mainly concentrated on Magic Eden, which accounts for about 75.94% of the market share, becoming the most active platform for Rune trading. OKX follows with 17.58% of the trading volume share, showing prominent liquidity performance as the second-largest trading platform. UniSat ranks third with 1.70%, while other platforms (such as OrdinalsWallet and RuneAlpha) have almost no significant trading activity.

On Magic Eden, the rune market shows a strong head effect, and DOG·GO·TO·THE·MOON ranks first in the market with its high market value and high liquidity. There are large differences in the liquidity and holder distribution of other rune projects, and the overall liquidity of the market is still concentrated on a few targets. Especially in terms of trading volume and market capitalization. DOG is the clear leader in the market, with a market cap of $577 million and a trading volume of 8.141 BTC in 24 hours. There are nearly 92,000 holders of this rune, reflecting its wide recognition and consensus in the community.

In contrast, other Rune projects have relatively weak market performance. Although RSIC·GENESIS·RUNE has a market value of $92 million, its daily trading volume is only 0.578 BTC, indicating insufficient liquidity. While Runes like BILLION·DOLLAR·CAT and PUPS·WORLD·PEACE show some activity in the market, with daily trading volumes of 3.931 BTC and 6.18 BTC respectively, the gap compared to DOG remains significant.

Current Driving Forces of the Rune Trend

The mechanics of the Rune protocol are similar to Meme tokens, with traffic, symbolic representation, liquidity, and market consensus all capable of rapidly increasing its popularity. Firstly, traffic comes from the support of well-known KOLs, artists, or large projects, and this rapid spread on social media brings high investor attention to Runes. Especially in top-tier ecosystems like Bitcoin, KOL support can significantly accelerate the popularity of Runes. Previously, GIZMO·IMAGINARY·KITTEN, posted on X by Bitcoin Puppets artist @lepuppeteerfou, saw a continuous rise. Although lepuppeteerfou later denied any connection to this Rune, its narrative spread through traffic and social media, causing its market value to quickly soar to tens of millions of dollars.

From a symbolic perspective, the cultural and symbolic significance carried by Runes often far exceeds their technical aspects. Taking Runes like “Satoshi Nakamoto” as an example, they represent not just a currency or asset, but symbolize the history and spirit of the Bitcoin community. This symbolic narrative can evoke emotional resonance in investors, enhancing market trust and enthusiasm for these projects.

Liquidity is the foundation for the healthy operation of the Rune market. Sufficient liquidity not only increases the trading volume of projects but also ensures that market participants have enough liquidity to enter and exit projects. For example, the DOG Rune, with its high liquidity and market depth, has attracted more investors, becoming one of the most liquid projects in the Rune market. In contrast, low-liquidity Runes struggle to maintain market heat, and investors are more likely to lose confidence.

Market consensus is the core force behind the runes craze. Meme culture and community consensus form a self-reinforcing cycle, especially in projects like Rune, where market participants are often not motivated by technological innovation or project substance, but based on group sentiment and market resonance. This collective consensus has fueled the continuous rise of Runes.

In the rune market, these four factors work together to make the rune market exhibit extremely high volatility and emotion-driven nature. The introduction of traffic triggers a symbolic effect through the promotion of KOL or well-known projects. The symbolic effect stimulates market consensus, and the market consensus further strengthens the liquidity of rune projects. This cycle not only accelerates the market expansion of runes, but also amplifies their potential risks.

The future development potential of the Rune trend depends both on the continuity of these driving factors and on whether the market can shift from emotional drive to exploring actual application scenarios. Currently, the Rune market is more like an evolution of Meme tokens, capturing investor attention through symbolic and cultural narratives. However, in long-term development, without substantial applications and technical support, the high volatility of this market will become a major risk, potentially leading to a rapid collapse of market confidence.

It’s worth noting that the Bitcoin Ordinals browser Ord.io has posted that there are rumors suggesting Coinbase insiders have revealed that the exchange is conducting internal security audits and regulatory compliance assessments on the Runes protocol. If Runes can pass these compliance reviews and successfully list on mainstream exchanges, it will greatly enhance the market recognition of Runes and potentially bring a wider user base and capital inflow. However, this information has not yet been officially confirmed.

Challenges and Opportunities in the Bitcoin Ecosystem’s Recovery

Runes utilize the UTXO model of the Bitcoin blockchain, overcoming Bitcoin’s limitations in scalability and functionality. With minimal on-chain data storage costs, they enable the issuance and circulation of tokenized assets. This innovation greatly enriches Bitcoin’s application scenarios, enhancing its potential in areas such as DeFi, NFTs, and on-chain asset management. Simultaneously, the widespread use of Runes has increased on-chain activity, especially building upon protocols like Ordinals to bring more types of transactions and interactions. This has boosted the vitality of the Bitcoin network and attracted more developers and users. Its market performance has already demonstrated its potential and user base.

The rise of Runes may have fired the first shot for the recovery of the Bitcoin ecosystem, but it also faces many challenges. On one hand, technical bottlenecks still exist. Although Runes have brought more application scenarios to the Bitcoin network through tokenization mechanisms, the scalability issues of the Bitcoin network itself still constrain the full development of its ecosystem. On the other hand, market confidence and investor sentiment will directly affect the sustainable development of Runes. Despite the current excellent market performance of Rune projects, their long-term development still depends on continuous capital inflow and user growth. Liquidity is key to whether Runes can maintain their popularity. Without sustained market demand and liquidity, Runes may still fall into short-term speculative bubbles.

Moreover, current Layer 2 solutions have not achieved widespread market acceptance and application, with insufficient coverage and user activity in practical applications, which to some extent limits the scalable development of the Rune protocol and other decentralized applications. The breakthrough of the ecosystem still requires the coordinated development of technology, developers, and users across the entire ecosystem. Only with the maturity of technology and broader user participation can the necessary infrastructure support be provided for various protocols within the ecosystem, pushing the Bitcoin ecosystem towards the next stage of comprehensive prosperity.

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