Bitcoin Runes Have Come to Leather: Unpacking the Runes Protocol

Bitcoin Runes Have Come to Leather: Unpacking the Runes Protocol

Bitcoin Runes Have Come to Leather: Unpacking the Runes Protocol

Apr 20, 2024

General Wallet Use

5 min

Leather released Bitcoin Runes support following the Runes protocol’s launch. Now, Leather users can view their Rune token balances in their extension and connect to platforms like OrdinalsBot and Luminex to etch, mint, and transfer Runes.

One of the developments that sprung from Casey Rodarmor’s Ordinals protocol was the BRC-20 token standard, which experimented with fungible tokens on Bitcoin. While BRC-20 tokens allowed Bitcoin DeFi to flourish and grow, the token standard was far from perfect. 

Casey Rodarmor proposed Runes in a bid to create a more efficient fungible token protocol on Bitcoin. In this article, you will learn what Bitcoin Runes are, how they work, and the new use cases they bring to the Bitcoin network.

What Are Runes?

Runes is a fungible token protocol on the Bitcoin blockchain that follows the Bitcoin-native Unspent Transaction Output (UTXO) model. UTXO is the number of unspent tokens that remain after a successful transaction and can be used in subsequent transactions. 

In September 2023, Casey Rodarmor, the founder of Bitcoin Ordinals, pitched Runes in a blog post to further the development of Bitcoin-based fungible tokens.

Runes is not the first fungible protocol for the Bitcoin blockchain. Several other token standards and protocols, like BRC-20 and Taproot Assets, also offer fungible token support for Bitcoin. However, Runes offers a better system for fungible tokens compared to existing Bitcoin protocols by reducing network congestion and dependence on off-chain data.

The protocol launched in conjunction with the fourth Bitcoin halving when Bitcoin reached a block height of 840,000.

So how, exactly, do Runes work? First, it’s necessary to understand the shortcomings of other fungible token protocols.

The Problems Of Existing Bitcoin-Based Fungible Token Protocols

Generally, existing Bitcoin-based fungible protocols often have issues related to UTXO management, which creates “junk” UTXOs that clog the network and lead to a spike in transaction fees. For example, the prominent BRC-20 token standard (which utilizes the Ordinals protocol) has been known to flood the network with redundant UTXOs. In May 2023, Bitcoin transaction fees surged by 800% due to an overwhelming number of BRC-20 transactions.

Moreover, some Bitcoin fungible protocols store data off-chain and require an off-chain indexer to determine a wallet’s fungible token balance. For example, RGB (Really Good For Bitcoin) and Taproot Assets rely on off-chain data and have complicated technical infrastructures.

Off-chain data is problematic because it lies beyond a blockchain’s security mechanism and fails to guarantee data integrity. Taproot Assets store data in local data stores or information repositories called ‘Universes’. To check asset validity, one has to verify transaction data from the genesis output through Taproot’s gossip layer, making it a complex process.

On the other hand, the Runes protocol leverages the UTXO system. 

So, how does Runes use the UTXO model to its advantage? Let’s look at how Runes work.

How Does the Runes Protocol Work?

Within the Runes protocol, UTXOs hold the Rune balances, and each UTXO can hold any number of Runes. The subsequent transactions use the balance from the UTXO database which removes “junk” UTXOs from the network. Since UTXOs track the Runes' tokens balance, the protocol doesn’t require any off-chain indexer.

A new Runes transaction begins with token issuance (“etching”) that determines properties like the total supply and token symbol, and allocates it to a UTXO. The transfer function uses the UTXO and updates transaction details after successful token transfers to recipient addresses.

Each issuance transaction can create up to 2^128-1 of the issued Rune. The Runes symbol has a base 26-encoded human-readable symbol, with characters from A to Z. Moreover, the Runes protocol would avoid ‘symbol squatting’ to encourage ‘competition for desirable symbols’ such as shorter tickers, memorable names etc.

There are three main actions that users can take with Runes:


During the etching process, a Runes token’s creator determines its basic properties, such as:

  • Token name

  • Token divisibility

  • Unicode-based symbol

  • Amount of the token that can be minted at once

  • Total supply

Based on the block and order in which the etching occurs, the Runes protocol assigns that etching with a unique ID. 


After a token has been etched, users will be able to mint the token. However, they will only be able to mint a certain number of Runes during the transaction, depending on the properties that were set during a token’s etching.


To transfer Runes to a recipient, a user needs to create one or multiple edicts. Edicts contain the Rune token ID, the amount you wish to transfer, and the Runes’ output number. 

Because multiple edicts can be included in one transfer, this means that a user can send Runes to multiple recipients in one transaction.

Projects Inspired By The Runes Protocol

When Rodarmor announced Runes, it led to many Runes-inspired Ordinals projects that planned to airdrop Rune tokens. These collections played a significant role in drumming up excitement for the protocol prior to its mainnet launch.

Some of the top pre-Runes Ordinals projects are:

  • Runestone

  • Rune Guardians

  • Rune Pups

  • Bitcoin Burials

  • Runecoin

  • Ape Odyssey

  • Runevo

  • Game of Blocks

  • Tiny Vikings

  • Runepunks

  • XO Unchained

The Impact Of Runes On The Bitcoin Ecosystem

Creating a well-built Bitcoin-based fungible token protocol is necessary to bring new users, good developers, and more revenue to Bitcoin. And that’s what the Runes protocol wants to do for the Bitcoin community.

Runes runs on the Bitcoin-native UTXO model and doesn’t rely on off-chain data or require a native token. Thus, the Runes protocol might encourage users from other networks to shift to Bitcoin.

Keep in mind, since all of these developments are pretty experimental, you’ll need a Bitcoin wallet that shields you from any potential security concerns. Leather allows you to interact with the Rune tokens while keeping you safe at every stage of your journey. 

Connect to web3 applications built on Bitcoin with the Leather browser extension. Install Leather – the only wallet you need to tap into the multilayered Bitcoin economy – today.