Bitcoin Runes Prepare for Post-Halving Launch
Can sh*tcoins solve Bitcoin’s long-term security?
Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!
This week, we discuss the launch of Runes on Bitcoin. While most have their eyes centered around the halving taking place briefly, the Runes protocol launch could have an even bigger impact. We explore the reasons why, and the long-term implications from this type of development on Bitcoin.
Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether
- Bitcoin fees nearly tripled week over week with Ordinals NFTs and meme coins like PUPS gathering significant volume
- Fees on Ethereum declined by 5% as network activity slowed down
Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges
- $180M worth of Bitcoin left CEXs this week, making it six consecutive weeks of net outflows
- Half a billion of ETH was net withdrawn from CEXs, the most since February
Bitcoin Runes Prepare for Post-Halving Launch
The Bitcoin halving is less than 24 hours away. While most in the crypto space are aware of the coming issuance reduction as a result, there are also other product launches planned at the time, making this one of the most unique Bitcoin halvings.
Out of these launches, Runes is likely the most anticipated. Bitcoin Runes is a protocol for creating fungible tokens on top of the Bitcoin blockchain. Runes enable the creation of fungible tokens on top of Bitcoin, prompting many to believe it will drive degen speculation to the Bitcoin blockchain.
One of the main reasons behind the anticipation is the impact that Runes’ main developer, Casey Rodarmor, has already had on Bitcoin through his previous launch of Ordinals.
Bitcoin Renaissance or Just Speculation? Despite leading to record levels of transactions, Bitcoin Ordinals have been dismissed by many people
- Bitcoin Ordinals introduced inscriptions, non-fungible customizable meta-data inscribed on top of satoshis (the smallest unit of Bitcoin)
- Initially this led to NFT-like assets being traded on top of Bitcoin, but then extended to semi-fungible tokens through BRC-20s, a collection of inscriptions with a shared ticker
- Since the introduction of Ordinals, Bitcoin has hit multiple new all-time highs in terms of transactions, most of these sending less than $1 worth of BTC used to pay fees
- In aggregate, Ordinals have contributed to Bitcoin fees heading towards new all-time highs
Sustainable Revenue Post-Halving — Runes are likely to extend the rise of transaction fees on Bitcoin
- In December 2023, the percentage of miner revenues made up by transaction fees reached over 20% for the first time since 2017
- The remaining 80% was made up from Bitcoin issuance being used to reward miners for validating the network
- As the halving will decrease these inflationary rewards by 50%, miners are likely to become increasingly dependent on transaction fees
- Runes and Ordinals, although controversial, are likely to contribute to Bitcoin’s security budget and make the network more sustainable as inflationary rewards decline
Miners’ BTC Holdings Hit 12-Year Low Prior to Halving
- As miners prepare for the quadrennial Bitcoin halving, they appear to have been net sellers
- With inflationary rewards declining by 50%, miners’ revenues are likely to take a hit in the short-term, especially if prices continue in a downward trajectory
- Runes could end up being a salvation for miners in the near-term, if speculative spirits are successfully redirected to the Bitcoin blockchain
Many Bitcoin believers are likely to point to Runes tokens as sh*tcoins. However, if there’s one thing crypto has proven is that there is a nearly insatiable appetite for speculation. And if that speculation ends up paying for Bitcoin’s long-term security, it should be well-received especially as it encourages new use-cases to emerge on top of the Bitcoin blockchain.
