Runes hype pushes transaction fees on Bitcoin higher

The bitcoin halving is almost upon us. While this is mostly exciting since it slows bitcoin's issuance, cutting the block reward down to 3.125 BTC, some people are excited about it because of Runes.

Runes is a new protocol from Casey Rodarmor, the Bitcoin developer behind Ordinals. While the primary ideas behind Ordinals focused on bringing non-fungibility to Bitcoin, by differentiating specific satoshis by the order in which they were minted, the BRC-20 token standard also emerged, helping to bring new issuance of fungible tokens to the network.

Runes is like BRC-20 in the sense that its goal is to allow new tokens to be traded on Bitcoin, but unlike BRC-20, Runes will use a UTXO (unspent transaction output) model. Essentially, Runes is supposed to be a more efficient implementation of token issuance, designed to impose network clog.

Rodarmor announced Runes in September 2023, giving people plenty of time to get excited about it. Given the success of BRC-20, it's not surprising that many are betting Runes has the potential to be the next big thing. In January, OKX said it would enable support for Runes across its wallet and marketplace.

There has already been a lot of success in the Runes anticipation market, with the token PUPS, currently a BRC-20, doing millions of dollars in trading volume a day this month, according to CryptoSlam. It was the second most voluminous NFT/BRC-20 collection of the past seven days. Each BRC-20 PUPS token will have a claim to the PUPS Runes token, which will convert over once Runes launches.

The PUPS project does emphasize the fact they are just a memecoin on their website, which could explain why they are attracting so much attention, given that memecoins are so popular right now.

All of this Runes hype activity has naturally pushed transaction fees on Bitcoin upwards. The 7-day moving average of the average transaction fee on the network has climbed from $4.11 earlier in the month to $12.17 now.

While this is still low compared to the highs we saw in December during a bout of Ordinals hype, the jump has been enough to push fees on Bitcoin above those on Ethereum. Ethereum fees have continued to slide as cheaper layer 1s and scaling networks attract a lot of activity away from what was once the de facto DeFi blockchain.

This is an excerpt from The Block's Data & Insights newsletter. Dig into the numbers making up the industry’s most thought-provoking trends.