The Bitcoin ecosystem has exploded with innovation, introducing concepts like "inscriptions" and "runes" that have captivated investors and developers. For newcomers, it can be overwhelming to navigate terms like BRC-20, ARC-20, and Runes. This guide breaks down the key protocols, their differences, and what you need to know.
Understanding Key Bitcoin Protocols
Ordinals Protocol
Launched in December 2022 by developer Casey Rodarmor, the Ordinals protocol is a numbering system for satoshis (the smallest unit of Bitcoin). It assigns a unique serial number to each satoshi, allowing users to attach additional data—such as images, videos, or text—directly to the Bitcoin blockchain. This creates non-fungible token (NFT)-like assets on Bitcoin.
BRC-20 Standard
Introduced in March 2023 by an anonymous developer known as "domodata," BRC-20 is a token standard built on the Ordinals protocol. It uses JSON inscriptions to deploy, mint, and transfer tokens. The first BRC-20 token, ORDI, gained significant traction, leading to a wave of similar tokens. BRC-20 functions similarly to Ethereum’s ERC-20 standard but operates on Bitcoin.
STAMPS Protocol (SRC-20)
The STAMPS protocol, also known as Bitcoin "stamps," was developed by Mike In Space. It leverages the Counterparty protocol to embed base64-encoded image data directly into Bitcoin transactions. Unlike Ordinals, STAMPS data is permanently stored on-chain and must be synced by all nodes. However, higher transaction costs have limited its adoption.
Atomicals Protocol (ARC-20)
Launched in September 2023, the Atomicals protocol addresses perceived limitations in Ordinals. It enables decentralized and fair token distribution on Bitcoin using a proof-of-work (POW) mechanism. The first ARC-20 token, ATOM, was fully mined within five hours of its release.
Runes Protocol
Developed by Casey Rodarmor as an alternative to BRC-20, Runes is a UTXO-based fungible token protocol. It aims to reduce blockchain "junk" and improve user experience. Runes is designed to integrate seamlessly with layer-2 solutions like the Lightning Network.
Pipe Protocol
Created by developer Beny, Pipe is an extension of the Runes protocol that adds minting functionality. It is part of a broader effort to enhance token issuance on Bitcoin.
Inscriptions vs. Runes: Key Differences
Inscriptions and runes represent two distinct approaches to token creation on Bitcoin:
- Inscriptions: Data is inscribed within witness data, allowing for larger storage capacity. This method is used by protocols like BRC-20 and ARC-20.
- Runes: Data is inscribed using OP_RETURN, which has limited storage but is sufficient for token issuance. This approach reduces on-chain bloat and improves efficiency.
The technical difference lies in where data is stored, with runes offering a more lightweight solution.
Representative Tokens
Bitcoin-Based Tokens
- BRC-20: ORDI, SATS, RATS
- ARC-20: ATOM, REALM
- SRC-20: STAMP, KEVIN, UTXO
- Runes: PIPE
- Rune Alpha: COOK, PSBTS
Ethereum-Based Tokens
- Ethscriptions: ETHS, FACET
- IERC-20: ETHI
Multi-Chain Tokens
The inscription trend has expanded to other blockchains, including:
- DRC-20 (Dogecoin): DOGI
- BSC-20 (Binance Smart Chain): BNBS
- SPL-20 (Solana): SOLS
- LRC-20 (Litecoin): LITE
- PRC-20 (Polygon): POLS
- ASC-20 (Avalanche): AVAV, ASCT, AVAS
- TRC-20 (Tron): TRXI
Essential Tools for Inscriptions and Runes
To interact with inscription and rune protocols, you’ll need specialized tools. Wallets are the most common starting point, as many now integrate marketplace functionalities.
Recommended Wallets
- OKX Wallet: Supports BRC-20, SRC-20, and multiple blockchains like Ethereum and Solana. It includes built-in token trading and issuance features.
- UniSat Wallet: A popular Bitcoin wallet supporting BRC-20 and SRC-20 tokens, with an integrated marketplace.
- Atomical Wallet: Designed for ARC-20 tokens.
- Unielon Wallet: Supports DRC-20 tokens on Dogecoin.
Marketplace Platforms
For advanced users, dedicated marketplaces offer additional functionality:
- Stampscan/Openstamp: For SRC-20 tokens.
- Atomical Market: For ARC-20 tokens.
- Avascription: For ASC-20 tokens.
- Magic Eden/Tensor Trade: For SPL-20 tokens on Solana.
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Bitcoin Ecosystem Projects
The rise of inscriptions has spurred interest in Bitcoin layer-2 solutions. While the Lightning Network is a longstanding layer-2, it lacks smart contract support. Newer protocols aim to fill this gap:
- Taproot Assets: Enables instant, low-cost transactions via the Lightning Network.
- Nostr Assets: Gained popularity with tokens like TRICK and TREAT.
- Stacks: Facilitates Ethereum application migration to Bitcoin.
- RGB: Focuses on privacy-centric smart contracts.
- BitVM: Uses off-chain computation and fraud proofs.
Notable Projects to Watch
- CHAX: A liquidity infrastructure project for BRC-20 tokens, featuring a layer-2 rollup solution.
- OrdiZK: A zk-SNARKs-based bridge between Ethereum and Bitcoin.
- Ordinal Tools: A Telegram bot providing cross-chain transfers between BRC-20 and ERC-20 tokens.
- Dova Protocol: A BRC-20 lending protocol with integrated MultiBit bridge support.
- NXHUB: An aggregated marketplace pulling data from UniSat, OKX, and Magic Eden.
- OrdBridge: The first bridge enabling seamless transfers between BTC and Ethereum for BRC-20 tokens.
Disclaimer: New projects carry high risks. The above list is for educational purposes only.
Frequently Asked Questions
What is the difference between BRC-20 and Runes?
BRC-20 uses witness data for inscriptions, while Runes uses OP_RETURN. Runes is more efficient and reduces on-chain bloat.
Can I store inscriptions in any Bitcoin wallet?
No, you need a compatible wallet like OKX Wallet or UniSat Wallet that supports specific inscription standards.
Are inscriptions and runes only on Bitcoin?
No, the concept has expanded to other blockchains like Ethereum, Solana, and Dogecoin, each with their own standards.
What are the risks of investing in inscription tokens?
These tokens are highly speculative and often lack utility. Market volatility and regulatory uncertainty pose significant risks.
How do I participate in inscription minting?
You need a supported wallet, Bitcoin for transaction fees, and familiarity with the minting process for your chosen protocol.
Will Bitcoin layer-2 solutions improve inscription scalability?
Yes, layer-2 solutions like Taproot Assets and Stacks aim to enhance scalability and functionality for Bitcoin-based assets.