What are Bitcoin Runes and How do you Buy Them?

Introduction

The digital asset landscape is rapidly evolving, with various types of tokens emerging to capture the attention of investors and enthusiasts alike. Bitcoin Runes represent a new protocol for fungible tokens on the Bitcoin network, similar to ERC-20 on Ethereum, enabling the creation of meme coins, utility tokens, and more. In this blog post, we'll explore what Bitcoin Runes are, their significance, and provide a guide on how to interact with them.

What are Runes?

Unique Digital Assets on Bitcoin

Bitcoin Runes is a protocol developed specifically for the Bitcoin blockchain that enables the creation of fungible tokens. Utilizing Bitcoin's existing UTXO model and the OP_RETURN opcode, Runes allows for the creation and management of digital assets directly on the Bitcoin network, offering a simpler and more efficient alternative to protocols like BRC-20.

Key Features

• Efficiency: Runes use the OP_RETURN opcode, which only takes up 80 bytes of data, reducing network load compared to other token standards.

• Simplicity: The protocol enables straightforward creation and management of multiple fungible tokens directly on-chain.

• Integration with Bitcoin Ecosystem: Runes are compatible with the Bitcoin Lightning network and support both lightning clients and SPV wallets.

History of Runes

The journey to Runes began with Bitcoin's Taproot upgrade in November 2021, which enhanced Bitcoin's privacy, efficiency, and smart contract capabilities. In early 2022, Casey Rodarmor and Raph developed Ordinals, enabling the inscription of data onto individual satoshis, creating unique digital assets (NFTs) on Bitcoin.

Building on Ordinals, Domo introduced the BRC-20 standard, allowing fungible tokens to exist on the Bitcoin blockchain. Inspired by BRC-20s, Casey Rodarmor aimed to create a more efficient and robust token standard, leading to the development of Runes. Runes offer an improved framework for managing fungible tokens directly on Bitcoin, leveraging its security and decentralization and eliminating the need for transfer inscriptions.

Why Runes Matter

Shifting Attention to Bitcoin

Recently, meme coins have been rallying on platforms like Solana and other blockchain networks, drawing significant attention and traffic. While these platforms offer unique opportunities, it is beneficial for some of this attention and traffic to flow towards Bitcoin. Bitcoin’s established security and widespread recognition provide a solid foundation for digital assets like Bitcoin Runes, ensuring their longevity and trustworthiness in the digital economy.

Broader Adoption

Bitcoin has the largest market cap and user base among cryptocurrencies. By integrating NFTs like Ordinals and Fungibles like Runes into the Bitcoin ecosystem, both Ordinals and Runes have the potential for broader adoption and recognition.

Utility Tokens

Ethereum and Solana have numerous utility tokens that help serious projects to decentralize and establish fair governance, thereby building better protocols for the benefit of everyone. Bitcoin Runes can foster similar developments on the Bitcoin network, encouraging the creation of utility tokens that enhance decentralization and governance within Bitcoin-based projects.

New Builders in the Ecosystem

Bitcoin is essentially an open playground with new possibilities introduced by Ordinals and Runes. This has attracted a wave of developers and startups to the Bitcoin ecosystem, who are now exploring its limitations, building useful applications, and enhancing Bitcoin’s utility. This influx of innovation is making Bitcoin more versatile and attracting new participants to the network.

How can I buy, trade, and borrow against Runes?

1. Centralized Exchanges (CEXes)

Centralized Exchanges like OKX, Gate.io and Cube.exchange are online platforms that facilitate the buying, selling, and trading of cryptocurrencies. These exchanges operate as intermediaries between buyers and sellers, providing a platform where users can place orders to buy or sell various digital assets. After highly recommend sending your runes and some Bitcoin to a self-custody wallet like Xverse, Phantom, OKX wallet, Unisat, Leather, Magic Eden wallet, etc.

2. Decentralized Exchanges (DEX)

A DEX is a peer-to-peer marketplace where users can trade cryptocurrencies in a non-custodial manner without the need for an intermediary to facilitate the transfer and custody of funds. Unisat and Magic Eden are some of  the most popular DEX marketplaces. Simply connect your self-custody wallet and you can start trading runes

3. Borrowing Against Runes

Some individuals are interested in using their runes as collateral to secure loans. Liquidium is the leading platform enabling peer-to-peer Bitcoin borrowing and lending. Users can borrow or lend Bitcoin, using unique Bitcoin-based assets like Runes and Ordinals (Inscriptions) as collateral.

Once purchased from CEXes, DEXes runes can be used as collateral from Liquidium your Runes will be either stored in your wallet or a non-custodial escrow wallet. Ensure you keep your wallet secure by using hardware wallets or secure software wallets and backing up your seed phrases.

How is Liquidium Secure?

Liquidium uses DLCs (Discreet Log Contracts) and Partially Signed Bitcoin Transactions (PSBTs) on native Bitcoin. Everything is built with primitive Bitcoin technologies and executes on Bitcoin Layer 1, ensuring a high level of security and integration with the Bitcoin network.

Conclusion

Bitcoin Runes represent an exciting development in the Bitcoin ecosystem, offering a new way to create and manage fungible tokens. As the protocol matures, we can expect to see more applications, trading platforms, and wallet support emerge. Platforms like Liquidium are at the forefront of integrating these new assets into the broader Bitcoin financial ecosystem, enabling novel use cases such as using Runes as collateral for loans.

Always conduct thorough research and exercise caution when interacting with new protocols and assets in the cryptocurrency space. The Runes protocol is relatively new, and while it offers exciting possibilities, it's important to understand the risks and potential of this emerging technology.