Since its launch coinciding with Bitcoin's latest halving on Apr. 20, the Runes Protocol has swiftly dominated Bitcoin transactions, accounting for 68% of all activity on the network. Despite its success, concerns have been raised about its impact on Bitcoin's block space and whether it will provide sustainable revenue for miners. The Bitcoin halving itself triggered a frenzy of high-fee transactions as users competed to inscribe their transactions on the historic block. Meanwhile, BlackRock iShares Bitcoin Trust saw its first day without inflows since the introduction of Bitcoin ETFs in the U.S.
Runes Takes Over Bitcoin Transactions
Since its launch after Bitcoin's halving event on Apr. 20, Runes, a new token standard on the Bitcoin blockchain, has very quickly become a dominant force. In fact, Runes has made up more than two thirds of transactions on Bitcoin since its launch. More than 2.38 million Runes transactions have been processed, accounting for 68% of all Bitcoin transactions since Apr. 20, according to Dune Analytics. Runes had its biggest day on Apr. 23, with over 750,000 transactions.
The new protocol, which was developed by Ordinals inventor Casey Rodarmor, offers a more efficient method for token creation on the Bitcoin network compared to the existing BRC-20 standard, which is also based on Ordinals.
Despite its popularity and high transaction volume, Runes has also faced some criticism. The block space occupied by these transactions has sparked concerns, specifically from people like Nikita Zhavoronkov, the lead developer at Blockchair. He argues that Bitcoin is moving away from its original purpose as a peer-to-peer electronic cash system envisioned by its creator, Satoshi Nakamoto.
There is also an ongoing debate among industry experts about whether Runes will actually generate sustainable revenue for Bitcoin miners. There appears to be a disparity between the high number of transactions and the miner fees generated, which has added to the skepticism when it comes to the long-term viability of this new token standard.
Record-Breaking Fees Paid in Bitcoin's Historic Halving Block
The Bitcoin halving led to unprecedented activity on the blockchain, specifically surrounding the 840,000th block, which marked the halving point. This block was mined by ViaBTC at 12:09 m UTC on Apr. 20, which led to the miner reward being cut by 50% from 6.25 BTC to 3.125 BTC per block. This reduction in rewards spurred a frenzy of transactions, as users competed for space on this historic block.
The competition was quite fierce, with users paying a total of 37.7 BTC in transaction fees, which amounted to just over $2.4 million, to try and make sure their transactions were included in the halving block. The block itself contained not only the miner subsidy of 3.125 BTC but also the transaction fees, bringing the total to 40.7 BTC or approximately $2.6 million, which was paid to ViaBTC for producing the halving block.
This block has become a focal point because of its importance and the launch of the Runes Protocol, which coincided with the halving. The Runes Protocol attracted a boat load of attention, contributing to the high transaction fees. Participants, who were dubbed 'Runes degens' by the community, were very eager to inscribe and etch rare satoshis on the block.
After the halving block, the subsequent five blocks also saw high fee levels, with a total of $3.82 million spent in fees alone, according to data from Bitcoin block explorer mempool.space. This surge in fees was very likely caused by the activities around the Runes Protocol and the competition among Bitcoin mining pools to mine what is termed an “epic” satoshi , or the very first satoshi mined on the halving block.
Additionally, the interest in these blocks was so high that Trevor Owens, managing partner at The Bitcoin Frontier Fund, even offered a bounty of between $500,000 and $1 million for the first Bitcoin block mined after the halving.
What Exactly is the Runes Protocol?
The Runes Protocol is a novel token standard created by Casey Rodarmor, known for his work on the Ordinal Protocol. It is designed to efficiently issue fungible tokens on the Bitcoin network, providing a streamlined alternative to the earlier BRC-20 token standard.
By using Bitcoin's Unspent Transaction Output (UTXO) model, Runes minimizes its blockchain footprint, making it a more efficient option for token creation. This allows for a variety of fungible tokens to be created and managed in the Bitcoin ecosystem, representing assets ranging from loyalty points to fractional ownership of real-world assets. By simplifying token creation and ensuring compatibility with Bitcoin’s robust security measures, Runes aims to expand Bitcoin’s utility and reach.
Comparing Runes with BRC-20, the two standards offer different approaches to token creation on Bitcoin. Runes focuses on blockchain efficiency by maintaining a smaller data footprint and integrating smoothly with existing Bitcoin tools. In contrast, BRC-20, based on the more complex Ordinal Theory, tends to bloat the blockchain with excessive data and requires deeper technical knowledge to use.
Additionally, Runes prioritizes security with mechanisms to prevent poorly formed tokens, promoting a much cleaner blockchain environment. BRC-20 can lead to accumulation of "junk data" due to its less rigorous issuance process.
BlackRock Bitcoin ETF Sees First No-Inflow Day
The excitement about the halving is not reflected in the performance of ETFs. BlackRock's iShares Bitcoin Trust (IBIT) experienced its first day without any inflows since the introduction of Bitcoin exchange-traded funds (ETFs) in the US in January. Despite amassing nearly $15.5 billion in just 71 days, IBIT’s daily inflows paused on Apr. 24. BlackRock was not alone as most Bitcoin ETFs saw reduced activity on that day.
Bitcoin ETF inflow and outflow data (Source: Farside)
Among the 11 U.S.-registered Bitcoin ETFs, only the Fidelity Wise Origin Bitcoin Fund (FBTC) and the ARK 21Shares Bitcoin ETF (ARKB) managed to attract new funds, recording inflows of $5.6 million and $4.2 million, respectively. In contrast, the Grayscale Bitcoin Trust ETF (GBTC) faced big withdrawals, with $130.4 million leaving the fund. About $120.6 million flowed out of spot Bitcoin ETF’s on Apr. 24.
This caught people’s attention because it is considered a rarity for BlackRock's IBIT, which had not experienced a day without inflows.
To date, the U.S. Bitcoin ETF market has accumulated a net of $12.3 billion in Bitcoin, despite the outflows from GBTC, which have surpassed $17 billion since Jan. 11. Additionally, several Bitcoin ETF participants are expanding their focus to include Ether ETFs, although their approval in the U.S. has faced some delays.
BlackRock and Hedera
BlackRock also caught people’s attention for more interesting reasons recently. The global asset management giant clarified that it has no commercial ties with Hedera after a surge in HBAR token prices that was triggered by misinterpretations of a tokenization announcement.
The confusion started when the HBAR Foundation announced on X that blockchain firms Archax and Ownera had tokenized shares of BlackRock’s $22 billion ICS U.S. Treasury Fund on Hedera Hashgraph. This led to a huge price rally of over 100% for HBAR. However, a spokesperson for BlackRock made sure to mention that the company did not actually play an active role in the tokenization and has not engaged Hedera for any such activities.
Despite the initial price surge, HBAR's value has since dropped. According to data from CoinMarketCap, HBAR’s price dropped by 11% over the past day of trading. As a result, the token was worth about $0.114 at press time.
Meanwhile, Archax CEO Graham Rodford clarified that while BlackRock was aware of the tokenization, it was purely Archax’s initiative. Rodford indicated that the decision to tokenize the shares stemmed from client interest, and BlackRock was informed about the press release but did not actively participate in the tokenization process.
The announcement on X initially led to a lot of reposts and views, but the excitement died down a bit after BlackRock's clarification.
