Runes: Tokens on Bitcoin | Casey Rodamor

Welcome to Banklist, where we explore the frontier of internet money and internet finance. And today on Bankless, we are exploring the frontier of tokens on Bitcoin. Since the introduction of ordinals to Bitcoin, over 65 million inscriptions have been made, paying almost 7,000 Bitcoins, about half a billion dollars of fees to the Bitcoin network. As a result of the explosion of ordinals on Bitcoin, the entire Bitcoin ecosystem has experienced a changing of the season. Bitcoin builders, Bitcoin pragmatists, Bitcoin Renaissancers have all rallied behind this shift in Bitcoin culture, spawning a new era for the protocol, while laser-eyed Bitcoin monetary maximalists continue to claim that Bitcoin is only for BTC transfers. Fast forward to today, Casey Rodemore appears to drop yet another bomb into Bitcoin land, this time with a new protocol standard for Bitcoin called runes, which wants to be a Bitcoin native version of fungible tokens on the Bitcoin layer one, which is going to be the topic of the show today.

Our assistance to you through this episode is to ask a whole bunch of the dumb questions to actually make this thing make sense. So that's what we did. We have Casey on the episode today. Before we get into the conversation, we want to thank the sponsors that made this episode possible.

Bankless Nation, Casey Rodemore is the creator of the Ordinals Protocol, a harmless protocol that simply allows for arbitrary data to be inscribed into individual Bitcoin UTXOs, creating what we call Bitcoin NFTs. He is now also the creator of runes, a second protocol working to bring fungible tokens to Bitcoin. Casey, welcome back to Bankless.

What's up? Uh good to be with you guys. Uh yeah, it's been like a year since the launch, year, year and change since the launch of uh Ordinals that we did this.

David called it harmless. What dude, why why did you say harmless?

Arthur?

Protocols that are like more harmful?

Uh well, all that really is an allusion to is just like it is within the consensus rules of Bitcoin to do this. So of course by definition, it works in Bitcoin, so therefore it's harmless. Right, Casey?

Um yeah, I mean, I I think they're I think they're both pretty harmless protocols. Um I I wouldn't have done them if I thought that they were bad for Bitcoin. I think that they're probably good for Bitcoin. And actually, I do not do things that I do think are harmful. Uh, in particular, whenever I think of some idea that I think might lead to some sort of like MEV extraction being available on Bitcoin, I will uh not do it. Uh the haters probably think that I don't I don't give a shit and I'll do anything, but yeah, I'm I'm generally pretty careful actually.

MEV on Bitcoin is, I think, where like this conversation uh logically concludes at, but maybe that it might have to be a podcast for a different day. The way I want to start this one, Casey, uh, is kind of just going back to Bitcoin as this concept, right? So Bitcoin is known as this protocol that no one can change. Uh, that's why Bitcoin is what it is. You can't change the hard cap, you can't change people's account balances, no one can change Bitcoin. Uh, however, I would also say at the same time, you have unequivocally, undoubtedly, changed Bitcoin through the addition of ordinals into the Bitcoin block space. So it's on a new path that I would also say is holistically inclusive of its old path. But now the future of what Bitcoin is, what people are imagining for Bitcoin, is now entirely different post introduction of oracles. And like we said, you have done this all from inside the consensus rules of Bitcoin. How does it feel to be the guy that changed Bitcoin?

Uh feels good, I guess. I don't know. Um it's nice. I mean, uh, if you look at the

Bitcoin's sort of graph chart of Bitcoin fees over the last um, I don't know, if you go to like mempool.space and and you look at it, I think the maximum is like six years or seven years or something. You can see that there's like a long period with very low fees, and then a short period of high fees, and then another long period of l no fees, and then a short period of high fees, and then another period of low fees, and then we get to

Like January, February of last year, and the fees just spike. The fees just spike and take off. And they've been, except for one brief moment where the mempool actually did clear for like a few days. Um, there's been a backlog of of quite a few blocks of transactions since then. Um, and I think that's really good. Um, Bitcoin, as the subsidy declines, uh, every four years there's a halving, and the subsidy of of the subsidy, i.e., the new Bitcoin created in each block, which are rewarded to the miners, uh, gets cut in half. So Bitcoin's destiny is relying on transaction fees, and those transaction fees must be high and they must be persistent to secure the network. So

Although, of course, I do think that the most important use case of Bitcoin is Bitcoin the monetary asset. Like I think Bitcoin is enough, Bitcoin the asset, and transferring that asset and be able to save bit save in Bitcoin and pay people in Bitcoin is like enough of a justification for the network to exist. Um, I think that having sources of fees from as many different sources as possible is good. Um, so I think it's I'm very happy to have contributed to that. And um I I don't,

you know, Bitcoin's having is really precipitous, right? Cutting in half every four years is a really substantial drop. Like we're going down to 0.16 Bitcoin.

After this next halving in like four days. And then after that, it's it's even less, right? So in a in a couple halvings, we'll really be down to not very much at all. And so I think that the fee market needs to get jump started sooner or later. Um, there will be other sources of demand for block space, but it's it's very good to get those sources of block space, even if they're from unsavory things as uh, you know, monkey JPEGs and uh and and shit coins.

Unsavory, but harmless, right, Casey? It's just harmless right here.

I mean, I think a lot of it is uh unsavory and harmful, right? I mean, um

the vast majority of NFTs, I think, are like stupid, ugly, like waste of time and space. Um same with fungible tokens. I think actually fungible tokens are probably even worse than uh NFTs. Um, but ultimately I think that they are essentially a form of gambling, a form of speculation, right? Like I think that

if you zoom out, cryptocurrency is actually just this big MMO that people play together with all these different shiny currencies that you can exchange for.

Uh money. And they provide a sort of like this online digital casino that people like like to play. And there's there's different levels of harm, right? Like so I think that the worst

things are like outright scams, where there's like some, you know, token and then there's some rug pull. I think the next worst thing are things which I would say are like I kind of call them like structural scams, where you have founders who are very well intentioned, but the things that they're building are never gonna come to fruition. And I think that that's like 90.

maybe 99% of everything out there, right? So even if they're not scams, even if there's no dishonesty in the heart of the creators, they're making all these promises that are never going to come true. They mint a token. It never goes anywhere. It has a classic like pump and dump, you know, fall-off. Um maybe least harmful is like meme coins.

Where everybody kind of knows, like, okay, this is not going to be the future of finance or whatever. Uh, but they still, you know, go up and down. So yeah, people lose money, people make money. I don't think it overall it's a great

activity. I don't think a lot of it is provides really much benefit, no, much like net benefit. Um, but I'm I'm sort

of glad to

move people onto Bitcoin, hopefully, and move people towards the meme coin kind of direction of that activity and not thinking that you know there's going to be a uh like a

Uh whatchamacallit? A uh a metaverse, like that that some token is gonna get you access to, you know?

So uh I guess your your your comment is that m most of the use cases of the the stuff that you're building or enabling on top of um Bitcoin are kind of like like scams or like not great. So this is kind of a question that so so Casey, why are you doing it then?

Um

well, so I'm I'm not a huge fan of uh most of cryptocurrency outside of Bitcoin. Um I think that it's like

pretty useless. Um a lot of it is is is is pretty broken. Um and if people want to do those things, I would prefer them to be paying those fees to Bitcoin and securing uh Bitcoin the network. Um I think it's also kind of unfortunate if people sort of get into cryptocurrency, into like NFTs or

Fungible tokens or whatever, and they land in some random part of the ecosystem and then they stay there and they never get to like Bitcoin the asset, right? They, you know, land on some other chain,

uh, like you know, Tron or Ethereum or something, and they get huge bags on that chain. And I don't think like

I don't think those chains are super uh decentralized. Like I'm not super confident that Ethereum, for example, could uh withstand like a nation-state attacker just due to its complexity and its fragility. Um I think it's unfortunate if they do those things and they uh land in these other parts of the ecosystems and they never like make it to Bitcoin. So I'd sort of like to redirect a lot of the DGens just directly towards Bitcoin.

Uh so yeah, even though a lot of these activities I think are sort of like uh net negative, I think that.

the moving those uh activities onto Bitcoin is is a net positive.

Okay, so there's nothing about like ordinals or what we're gonna get to runes that's like fixing the humans that build on top of shit coins and NFTs. Like that all that's all saying the same. You're just saying this is a means to an end to produce that same kind of activity, not fix that activity, but at least move that activity towards a place where at least we'll actually help sustain Bitcoin, which you see as like it's a noble pursuit. Bitcoin is a noble pursuit. Uh and so at least like the exhaust from NFT speculation and meme coin speculation can at least be funneled into the Bitcoin system and also bring a bunch of users much more proximate to BTC the asset. That's that's your perspective.

Yeah, I mean there's a couple other things. Like as far as the NFTs go, I do think that there are some things about inscriptions that are um better than NFTs on other chains. Um so for example

Inscriptions are not arbitrary smart contracts, right? They are there is a single implementation of inscriptions, and that is that which is in the Ord client and the rules for how inscriptions are created and transferred. And there's only way to one way to store inscription data, which is on-chain. Um, and so I do think that those things are better. I think it's bad if somebody winds up buying a NFT on another chain, and eventually what they wind up owning is they own a

you know link to a JPEG on an Amazon server,

or if they own a hash that points in IPFS, and they don't understand that when the last computer

uh seeding that uh

data to IPFS goes away, their asset, you know, becomes worthless. Um, or they don't understand that, you know, each NFT, each ERC 721 is a different smart contract that can have its own bugs, its own backdoors, its own, you know, upgrade keys or whatever. I don't think any

NFT purchaser does, you know, quote unquote due diligence. So I think it's good to, I think those aspects of inscriptions are good, that they're all on chain, that there's only one smart contract, that there's sort of this uniformity that people sort of just from a sort of consumer protection angle. Um, and then with runes, I think it's good. I'm very like shit coin forward. I'm or like I'm unapologetic about this. I'm not telling people that this is the future of finance. I'm not telling people that this is going to, you know, we're gonna have like pharmaceutical research on the blockchain or whatever. I'm saying, like, no, this is for like memes and shit coins. And the biggest tokens.

I mean, people have been pre-djetting on runes, which is pretty insane. Like it hasn't launched yet. And there's all these people saying, like, oh, like by our inscription, we're gonna airdrop you like runes or like whatever. Um, but they're like all meme coins. Um, and so I think it's I would rather

there to be more meme coins, because I actually think that even though meme coins are like, yeah, obviously they're just, you know, pure speculation, I think it's worse than projects that say,

oh, we're going to do something that's like really revolutionary. And whether they believe it or not, whether they're being honest or not,

That pitch, I think, is a lot more likely to confuse people and cause people to think that they're investing in some sort of like a tech stock, right? That has this chance of going to the moon, um, when in reality, like almost none of those have paid off. So I think that uh

there there is that advantage to inscriptions and to runes, that they sort of in some ways are better, either structurally or due to the technology or due to just the sort of

The zeitgeist around them. And the same thing about

their only one being one implementation of inscriptions also applies to runes. Runes are not an arbitrary smart contract. They're not each one is an arbitrary smart contract. Each one has a small number of parameters that are set when the rune is created and are unchangeable after that. And so it's it's literally just a like.

Five numbers that determine the parameters of the rune, including a literal like pre-mine. Like if you want to pre-mine your rune, runes have an open mint mechanic similar to BRC20. And you don't have to, but you can, when you create your rune, uh

have uh this open mint, and you can also have a pre allocation to yourself. That is called the pre mine. And if you go to the page of the rune on ordinals.com or any other block explorer, it will say pre mine and will tell you the amount of the pre mine.

You're putting

So

minds into the Bitcoin protocol.

yeah, into the Bitcoin protocol, right in there, just right in there.

So so Casey, I, you know, well, I I almost was tempted to ask you a little bit about like whether you think stable coins are a shit coin, whether whether that's pot possible in the infrastructure you're building, but we'll save that you know like for for later. I I want to you like ask the the broader context of this. So the way David introduced you, and uh you seem to partially accept this is as somebody who has changed Bitcoin. And what what's interesting is um you could totally see the stuff that you're building with ordinals and now later runes is it's definitely changed the fees, the fee market of Bitcoin, right? Like we've seen that. And and by the way, from like a you know, I I consider myself a Bitcoiner. I don't know if they'd accept me. I accept big like b Bitcoiners and Bitcoin culture and all of this. One of my big concerns, long-standing concerns of Bitcoin was didn't have a sustainable uh security defense fund, right? Once block subsidies run out. And now this has really ameliorated that concern for me. Like I'm I'm seeing block block space being sold for other use cases. And and so like that's great from from my perspective. Um, but when when David says you've you've changed things, I think he's talking about the fee market and you'd acknowledge that, and that's part of the value proposition of what you're you're bringing. But also you've sort of changed the social layer, I would say. Like it's now it's within the Overton window of acceptance to like build on Bitcoin again. Not with everybody, but I would say with like with generally like crypto participants and maybe like generally inside like Bitcoin culture, like building is a thing, once again. And and so I I guess I'm I'm curious for from from your perspective, um how what what has been the effect of like ordinals on Bitcoin in general, maybe from a from a cultural you know, like perspective? Has it has it brought this this renaissance that that we've been talking about? And like you know, is that significant? Because some Bitcoiners we talk to is just like they don't even acknowledge that Bitcoin culture is kind of like a thing, you know, like tell tell us about that.

Yeah, yeah, yeah. So uh I mean before inscriptions, I would say that Bitcoin culture was in pretty rough shape. Um it was sort of this very