The Franklin Templeton investment team recently published a research report on the Runes protocol via Twitter. Released in anticipation of Runes’ debut coinciding with Bitcoin’s halving event, the report titled “Runes: Bitcoin’s New Fungible Token Standard” explains the protocol’s origins and highlights its potential given Bitcoin’s market capitalization.
(This article is not investment advice)
Bitcoin’s Non-Fungible Token Standard: Ordinals
The report notes that NFTs initially gained popularity on Ethereum through the ERC-721 standard. However, Bitcoin lacked a widely adopted NFT standard until developer Casey Rodarmor introduced the Ordinals protocol.
Unlike NFTs on other blockchains—which often store metadata off-chain—Ordinals inscribe asset data directly onto Bitcoin’s blockchain, assigning a unique identifier (an “ordinal”) to each satoshi (the smallest Bitcoin unit).
Since its December 2022 launch, Ordinals-based assets have surged to a $2 billion market cap by April 2024. This growth has spurred developers to explore Bitcoin’s potential for fungible tokens: “If NFTs thrive, why not homogenous tokens?”
👉 Discover how Bitcoin’s ecosystem is evolving
The Spotlight on Bitcoin’s Fungible Token Standard: Runes
The most anticipated project is Casey’s Runes protocol, a Layer-1 token standard addressing flaws in alternatives like BRC-20—notably, its spammy UTXO bloat and security risks.
Key Improvements of Runes Over BRC-20:
- UTXO Efficiency: Eliminates junk UTXO data, reducing blockchain bloat and fees.
- Native Design: Tailored for Bitcoin (unlike BRC-20’s Ethereum-inspired account model).
- Lightning Compatibility: Supports off-chain scalability.
Runes’ launch is timed to Bitcoin’s halving as a symbolic nod to the ecosystem’s ethos. Analysts predict a “name rush” akin to early BRC-20 token launches.
Market Potential: Runes vs. Other Chains
The report contrasts Bitcoin’s fledgling token economy with Ethereum and Solana’s mature markets:
| Blockchain | Native Token Market Cap | Fungible Token Market Cap |
|---|---|---|
| Bitcoin | $1.2T | Minimal (pre-Runes) |
| Ethereum | $400B | $80B+ (ERC-20 tokens) |
| Solana | $60B | $15B+ (SPL tokens) |
Runes could bridge this gap by enabling efficient tokenization, a prerequisite for Bitcoin’s DeFi growth.
👉 Explore Bitcoin’s DeFi future with Runes
Investment Risks
Franklin Templeton emphasizes risks including:
– Key loss or theft
– Regulatory uncertainty
– Technical vulnerabilities
– Extreme volatility
Risk Disclosure: Crypto investments are high-risk; you may lose all capital. Assess risks carefully.