The Protocol: Analyzing Runes Impact as Bitcoin Fee Bonanza Fades

RUNING THE PARTY? Bitcoin’s once-every-four-years “halving” was supposed to bring a steep cut in revenue for crypto miners, since their rewards for new data blocks would drop by 50%. Instead, the simultaneous launch of Casey Rodarmor’s new Runes protocol – for minting digital tokens on top of the oldest and largest blockchain – proved so popular that it caused massive network congestion, sending transaction fees to record levels and showering Bitcoin miners with a windfall like never before. On a halving watch party hosted by Tone Vays, longtime Bitcoin experts expressed astonishment at transaction fees surpassing $2 million in certain blocks, versus a more typical level of less than $100,000. The main questions now are whether the Runes fever will last, and if so how Bitcoin will adapt. BitDigest newsletter circulated a chart (above) showing a steep drop-off in the fees as the initial post-Runes launch subsided. But the community discussion immediately turned to whether the extra traffic might prompt developers to accelerate their quest to build out and improve Bitcoin layer-2 networks. On Monday, one of the more prominent projects, Stacks, rolled out its much-anticipated “Nakamoto” upgrade, tipped to dramatically increase the speed. “Anything that causes fee rates to spike will probably drive people to seek out other solutions,” Bitcoin Core developer Ava Chow said in an interview with CoinDesk’s Daniel Kuhn. Rodarmor, who created the Ordinals protocol for “Bitcoin NFTs” last year, shaking up the blockchain’s conservative culture, has famously said that the Runes protocol was nothing more than a way of launching “sh!tcoins” on Bitcoin – a dicey proposition given how anti-altcoin longtime bitcoiners tend to be. There’s now speculation that top Ordinals collections might move to airdrop runes, another practice imported from other blockchains. The Bitcoin NFT project Runestones, led by the pseudonymous developer Leonidas, is reportedly airdropping DOG coins to holders of its inscriptions. In the meantime some of the newly minted runes are drawing jaw-dislodging valuations as they get listed on various crypto exchanges. Bitcoin.com estimated that a rune called “Z•Z•Z•Z•Z•FEHU•Z•Z•Z•Z•Z,” or “Z•FEHU” for short, already has a fully diluted valuation over $2 billion. (By the way, to type that dot in the middle of the trading ticker, a Runes convention, type option-8 on a Mac keyboard. I had to ask our markets editor how to do it. At this rate, it might be something we all need to learn.)