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What are bitcoin rune etchings?

Professional engineers carrying the laptop working in crypto mine. Crypto mine management software. Cryptocurrency Mining business.
Bitcoin runes have been likened to 'memecoins' on the bitcoin blockchain. (PixeloneStocker via Getty Images)

Bitcoin's (BTC-USD) runes protocol launched in April. This new standard enables people to issue their own cryptocurrency tokens on the bitcoin network.

Here we explore what bitcoin runes are, how to create them and how to navigate the complexities of trading them.

Bitcoin runes, conceived by developer Casey Rodarmor, the mind behind ordinals — a system that allows you to number and track individual satoshis, the smallest units of bitcoin, opening up new possibilities for creating and transferring NFTs on the bitcoin network — are a new breed of tokens within the bitcoin ecosystem.

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While bitcoin ordinals resemble NFTs on the Ethereum network (ETH-USD), bitcoin runes are best compared with memecoins deployed on the same network.

Bitcoin runes have swiftly garnered attention since their inception around the time of the last bitcoin halving in April.

Read more: Crypto live prices

The runes protocol uses a UTXO-based system and manages transactions so that each unit of digital currency is like a unique coin that hasn't been spent yet, ensuring transparency and security in the blockchain network.

The new protocol leverages the bitcoin network's native features for on-chain data storage. This ensures the uniqueness and authenticity of each token and avoids the pitfalls of duplication that plague other token protocols. Additionally, runes are compatible with bitcoin's lightning network, enabling faster and more cost-effective transactions on the network.

"Etching" is the process of creating and naming a rune token. "Minting" is the process of claiming a rune token. Luminex has emerged as a prominent platform for minting and etching runes, offering a user-friendly interface, despite slightly higher fees.

For those keen on delving deeper into runes, platforms such as GeniiData provide comprehensive data and analytics. Monitoring volume, holder count and minting activity can offer valuable insights for informed decision-making when traversing the runes ecosystem.

Setting up a bitcoin wallet compatible with runes is the first step in trading these tokens. One example of a bitcoin wallet that is compatible with runes is the Magic Eden wallet.

Trading runes on secondary marketplaces opens up more possibilities for investors. Platforms like Magic Eden and Unisat offer avenues for buying and selling runes, with their own unique features and fee structures. When trading, prioritising tokens with widespread distribution ensures liquidity of the particular token and the likelihood you will be able to resell it.

Read more: How crypto's faster payment systems are influencing banks

Acquiring bitcoin is also essential for covering transaction fees for etching, minting, buying and selling runes.

Bitcoin runes are a way to bring fungible tokens to the bitcoin network. Etching, minting and trading runes expands the potential of the bitcoin ecosystem, according to runes' supporters.

Remember that bitcoin runes are a new phenomenon, however. They could be vulnerable to malicious code and the new token prices are driven by speculation with risks that they could fall to zero.

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