Runes Protocol Heat Pushes Bitcoin Fees Higher Ahead of Halving

The Bitcoin community is optimistic about the development of Runes, which has led to an increase in Bitcoin transaction fees ahead of the halving event.

Runes Protocol Heat Pushes Bitcoin Fees Higher. Image: Protos

Runes Protocol, designed by Casey Rodarmor, the creator of the renowned Ordinals protocol, is set to launch on April 20, coinciding with the Bitcoin halving event.

Since the inception of the Bitcoin network, BTC has been the sole currency. Bitcoin's structure traditionally prohibits the creation of additional tokens. However, Ordinals paved the way for fungible token issuance, with several protocols emerging in 2023 such as BRC-20, ARC-20, ORC-20, ORC-CASH, and SRC-20.

Similar to BRC-20, Runes aims to issue new tokens tradable on the Bitcoin network. Unlike BRC-20, Runes operates without UTXO (Unspent Transaction Output). Thus, the project is expected to offer a more efficient token issuance method for Bitcoin, reducing network congestion compared to BRC-20.

UTXO represents the balance of tokens owned by users after each transaction. Unlike Ethereum, where users can transfer individual tokens, on the Bitcoin network, tokens are aggregated in each transaction, and any unused tokens return to the wallet, available for reuse in subsequent transactions.

Recently, investment firm Franklin Templeton predicted that Runes Protocol will enable Bitcoin to catch up with Ethereum and Solana. Runes is anticipated to bring numerous improvements, including no UTXO dependency on off-chain data, no additional token cost, enhanced privacy, and compatibility with the Lightning Network.

Following the success of BRC-20, community expectations are high for Runes to become the next major success in the industry. In January 2024, OKX announced its support for Runes on its wallet and exchange platforms.

According to CryptoSlam, many BRC-20 tokens have seen price increases due to community excitement surrounding Runes. Token PUPS achieved the highest trading volume to date, exceeding $62 million USD in April. This marks the second-largest BRC-20 NFT collection in the past week. Each PUPS token will convert to PUPS tokens on the Runes Protocol upon launch.

Statistics on PUPS trading activity. Source: CryptoSlam (April 18, 2024)

PUPS previously stated on its website that it was just a memecoin. However, its price increase over other memecoins has illustrated the current allure of Runes.

The Runes Protocol frenzy has also contributed to an increase in Bitcoin transaction fees in April. The seven-day moving average of Bitcoin transaction fees has risen from $4.11 USD at the beginning of April to $12.17 USD currently.

Seven-day moving average of Bitcoin (blue) and Ethereum (pink) transaction fees. Source: The Block (April 18, 2024)

While still lower than Bitcoin's December transaction levels, this increase is sufficient to push Bitcoin fees higher than Ethereum's. Meanwhile, Ethereum's price has continued to decline as investor attention shifts to new Layer 1 and Layer 2 projects.