Franklin Templeton Report: Rune issuance to become the standard for homogenized tokens in the Bitcoin ecosystem

The Franklin Templeton research team released a report on the Rune protocol on Twitter, titled "Runes: A New Homogeneous Token Standard for Bitcoin," as the Rune protocol prepares to launch alongside the Bitcoin halving. The report introduces their clients to what Runes are and their origins, illustrating their potential significance with Bitcoin's market value.

This article is not investment advice.

This article is compiled and translated. For any doubts, please refer to the original article.

Advertisement - Scroll down for more content

Bitcoin's Non-Fungible Token Standard: Ordinals

The report highlights that NFTs initially gained popularity on Ethereum using the ERC-721 standard. However, a widely adopted NFT standard within the Bitcoin ecosystem had been missing for years until Bitcoin developer Casey Rodamor introduced the Ordinals protocol.

Assets data utilizing the Ordinals protocol are recorded on the blockchain's raw data, assigning a unique identifier ordinal to each smallest unit of Bitcoin Sats. This differs from other NFT standards on blockchains, which often store off-chain data on centralized servers.

Since the release of the Ordinals protocol by Casey in December 2022, the market value of Ordinals assets has grown significantly to around $2 billion as of April this year.

Notable Bitcoin Fungible Token Standard: Runes

The most prominent fungible token project currently is the Runes protocol introduced by Casey. The Runes protocol introduces a new token standard on the Bitcoin network Layer1, addressing issues present in current standards such as the generation of junk data and security concerns in BRC-20.

What are the security risks generated by the incomplete infrastructure of BRC-20 on Bitcoin?

The design of BRC-20 is based on an account model, similar to Ethereum's ERC-20. Therefore, the destruction and minting processes of these tokens result in a large amount of junk UTXO, leading to blockchain bloat and increased costs. Runes protocol has several key improvements addressing this issue. The most crucial is the avoidance of creating useless UTXO data, not relying on off-chain data simultaneously compatible with the Lightning Network, making it a more native "ERC-20" standard in the Bitcoin ecosystem.

Runes enhances efficiency through a UTXO-based design. The main difference between BRC-20 and Runes is that the former uses existing protocols to meet the needs of fungible tokens on Bitcoin, while Runes is specifically tailored for a fungible token standard in the Bitcoin ecosystem.

Casey set the release date of the Runes protocol on the same day as the Bitcoin halving event to commemorate the community's ideals about the Bitcoin ecosystem. A "name grabbing" battle is expected on that day.

Runes Market Value Still Relatively Small Compared to Tokens in Other Ecosystems

The report indicates that the market for replaceable tokens in the Bitcoin ecosystem is relatively small compared to Ethereum and Solana, especially in relation to BTC's market value.

With the introduction of more efficient token standards like Runes, the Bitcoin ecosystem is poised to gain an advantage, narrowing the gap between its fungible token market value and other blockchains. On the other hand, for DeFi to experience exponential growth in the Bitcoin ecosystem, widely adopted fungible token standards are essential.

Recommended Reading: Aside from Runes, how does the Rune protocol drive market speculation again?
Reason for recommendation: This article provides a deeper insight into the origin of Runes due to Casey's aversion to BRC-20, while listing several well-known improvement projects that Runes competes with, complementing this article for readers' consolidation.

Investment Risks of Runes: Investing in Runes Comes with Pros and Cons

As a reputable investment fund like Franklin, it never forgets to remind clients of the risks of investment. Risks associated with Runes include private key loss, regulatory issues, technical vulnerabilities, high volatility, intellectual property conflicts, among others. Investing in Runes comes with both gains and losses.

This article is not investment advice