The Protocol: Analyzing Runes Impact as Bitcoin Fee Bonanza Fades

Last
week’s
once-every-four-years
Bitcoin
halving
came
and
went
–
just
as
Satoshi
Nakamoto
programmed
it
15
years
ago.
But
the
big
surprise
was
the
fast
uptake
of
Casey
Rodarmor’s
new
Runes
protocol,
his
second
big
hit
on
the
original
blockchain
in
two
years.
Now,
it
looks
like
the
initial
fee
bonanza
might
be
fading,
and
the
question
is
whether
Runes
transactions
will
provide
a
sustainable
source
of
ongoing
revenue
for
miners,
especially
now
that
the
block
rewards
have
been
cut
in
half.
We’ve
got
the
recap.

This
article
is
featured
in
the
latest
issue
of


The
Protocol,
our
weekly
newsletter
exploring
the
tech
behind
crypto,
one
block
at
a
time.


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up
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The
Protocol

podcast.

Chart
shows
Bitcoin
fees
spiking
dramatically
post-Runes-launch,
then
subsiding
somewhat.
(BitDigest)

RUNING
THE
PARTY?
Bitcoin’s
once-every-four-years
“halving”
was
supposed
to
bring
a

steep
cut
in
revenue
for
crypto
miners,
since
their
rewards
for
new
data
blocks
would
drop
by
50%.
Instead,
the
simultaneous
launch
of
Casey
Rodarmor’s
new

Runes
protocol
–
for
minting
digital
tokens
on
top
of
the
oldest
and
largest
blockchain
–
proved
so
popular
that
it
caused
massive
network
congestion,
sending
transaction
fees
to
record
levels
and
showering
Bitcoin
miners
with
a
windfall
like
never
before.
On
a
halving

watch
party
hosted
by
Tone
Vays,
longtime
Bitcoin
experts
expressed
astonishment
at
transaction
fees
surpassing
$2
million
in
certain
blocks,
versus
a
more
typical
level
of
less
than
$100,000.
The
main
questions
now
are
whether
the
Runes
fever
will
last,
and
if
so
how
Bitcoin
will
adapt.
BitDigest
newsletter
circulated
a
chart
(above)
showing
a
steep
drop-off
in
the
fees
as
the
initial
post-Runes
launch
subsided.
But
the
community
discussion
immediately
turned
to
whether
the
extra
traffic
might
prompt
developers
to
accelerate
their
quest
to
build
out
and
improve

Bitcoin
layer-2
networks.
On
Monday,
one
of
the
more
prominent
projects,
Stacks,
rolled
out
its
much-anticipated
“Nakamoto”
upgrade,
tipped
to
dramatically
increase
the
speed.
“Anything
that
causes
fee
rates
to
spike
will
probably
drive
people
to
seek
out
other
solutions,”
Bitcoin
Core
developer
Ava
Chow

said
in
an
interview
with
CoinDesk’s
Daniel
Kuhn.
Rodarmor,
who
created
the

Ordinals
protocol
for
“Bitcoin
NFTs”
last
year,
shaking
up
the
blockchain’s
conservative
culture,
has
famously
said
that
the
Runes
protocol
was
nothing
more
than
a
way
of
launching
“sh!tcoins”
on
Bitcoin
–
a
dicey
proposition
given
how
anti-altcoin
longtime
bitcoiners
tend
to
be.
There’s
now
speculation
that
top
Ordinals
collections
might
move
to
airdrop
runes,
another
practice
imported
from
other
blockchains.
The
Bitcoin
NFT
project
Runestones,
led
by
the
pseudonymous
developer

Leonidas,
is
reportedly
airdropping

DOG
coins
to
holders
of
its

inscriptions.
In
the
meantime
some
of
the
newly
minted
runes
are
drawing
jaw-dislodging
valuations
as
they
get

listed
on
various
crypto
exchanges.

Bitcoin.com

estimated
that
a
rune
called
“Z•Z•Z•Z•Z•FEHU•Z•Z•Z•Z•Z,”
or
“Z•FEHU”
for
short,
already
has
a
fully
diluted
valuation
over
$2
billion.
(By
the
way,
to
type
that
dot
in
the
middle
of
the
trading
ticker,
a

Runes
convention,
type
option-8
on
a
Mac
keyboard.
I
had
to
ask
our
markets
editor
how
to
do
it.
At
this
rate,
it
might
be
something
we
all
need
to
learn.)

CELO’S
CHOICE.
The
main
developer
behind
layer-1
blockchain
Celo,
after
a
months-long
search
for
a
technology
provider
for
its
migration
to
become
a
layer-2
network
atop
Ethereum,

chose
to
recommend
Optimism’s
OP
Stack.
Teams
representing
rival
layer-2
networks
Arbitrum,
Polygon
and
zkSync
had
vied
for
Celo’s
business,
with
the
selection
process
starting
to
look
like
TV’s
“The
Bachelorette.”

COSMOS
🐞–
Asymmetric
Research,
a
security
firm
that
contributes
to
the
Wormhole
interoperability
protocol,
disclosed
details
of
a
vulnerability
impacting
the
Cosmos
blockchain
ecosystem
that
it
says

could
have
put
more
than
$150
million
at
risk.

BIPSTERS:
Bitcoin
Core
developer

Ava
Chow
led
the
nomination
process
to
name
five
new
editors
for
BIPs,
or

Bitcoin
Improvement
Proposals
–
the
standard
for
proposing
nonbinding
software
updates
that
will
somehow
change
the
Bitcoin
protocol,
our
Daniel
Kuhn

reported.
The
months-long
search
effort
was
finalized
on
Monday,
after
Jonatack
made

modifications
to
the
BIP
GitHub.
A
lingering
question
is
whether
the
addition
of
editors
will
make
it
easier
to
push
through
proposals
like
the
pending

OP_CAT,
which
has
not
been
given
a
BIP
number
through
the
formal
process,
despite

reports
that
originally
suggested
otherwise.

Top
picks
of
the
past
week
from


our
Protocol
Village

column,
highlighting
key
blockchain
tech
upgrades
and
news.

1.

Metis
unveiled
phase
2
of
its
decentralized
sequencer,
adding
new
technical
features
and
introducing
“Sequencer
Mining”
for
users,
according
to
the
team.

Screenshot
from
Metis
video
showing
how
its
decentralized
sequencer
architecture
works
(Metis)

2.


Neura,
the
EVM-compatible
layer-1
blockchain
for
AI
from
the
team
at
Ankr,

built
on
Cosmos
SDK,
just
released
its
public
testnet,
now
available
for
developers
looking
to
build
dApps
that
fuse
AI
and
Web3,
according
to
the
team.

High-level
architecture
of
Neura.
(Neura)

3.
(PROTOCOL
VILLAGE
EXCLUSIVE)

Omni
Foundation,
supporting
Omni
Network,
which
is
a
layer-1
chain
and
Ethereum-focused
interoperability
protocol
powered
by
EigenLayer
restaking,

announced
the
launch
of
Omni
Network’s
mainnet
on
the
Ethereum
layer-2
networks
Arbitrum
and
Optimism.

4.
(PROTOCOL
VILLAGE
EXCLUSIVE)

The
DODO
team,
which
previously
developed
the
“Proactive
Market
Maker”
algorithm
and
features
including
a
cross-chain
swap
aggregator,
announced
the
launch

DODOchain,
an
Omni
Trading
Layer3,
powered
by
Arbitrum
Orbit,
EigenLayer
and
AltLayer,
according
to
the
team.

5.
(PROTOCOL
VILLAGE
EXCLUSIVE):

Alchemy,
a
blockchain
development
firm,
launched
“Pipelines,”
a
new
tool
that
allows
engineers
to
build
and
maintain
a
data
pipeline
with
just
a
few
clicks,
according
to
the
team.

Fundraisings

Turnkey
co-founders
Jack
Kearney
and
Bryce
Ferguson
(Turnkey)

Turnkey,
a
company
that
builds
wallet
infrastructure
for
blockchain
developers,
has

raised
$15
million
in
a
Series
A
funding
round
led
by
Lightspeed
Faction
and
Galaxy
Ventures.

Runes
DEX,
an
automated
market
maker
(AMM)
platform
for
runes
on
Bitcoin,
announced
the
successful
closure
of
its
$2
million
seed
investment
round,
according
to
a

press
release.

Deals
and
grants

Gavin
Wood
made
a
presentation
on
JAM
at
Token
2049
in
Dubai
last
week.
(@mattunchi
via
Polkadot)

Web3
Foundation
(W3F),
the
foundation
behind
the
Polkadot
ecosystem,
has
announced
a
10
million

DOT
($74.5
million)
prize
pool,
“to
foster
diversity
within
the
development
of

JAM,
a
protocol
combining
elements
of
both
Polkadot
and
Ethereum,”
according
to
the
team.

Safe,
a
provider
of

blockchain
smart
accounts,
has
“welcomed
the
senior
leadership
team
of
Multis
to
the
Safe
Ecosystem
Foundation
and
completed
the

strategic
acquisition
of
the
Multis
source
code,”
according
to
the
team.

Chia
Network
Makes
Progress
Toward
an
IPO,
CEO
Says

Data
and
Tokens

Renzo
Restaked
ETH
Suffers
a
Brief
Crash
on
Uniswap

Avail
Confirms
Token
Airdrop
Plans,
a
Week
After
Leaked
Screenshots

Shiba
Inu
Fetches
$12M
Investment
in
Token
Sale
to
Build
Privacy-Focused
Blockchain

Tether
Reorganizes
Into
4
Divisions
as
It
Expands
Beyond
Stablecoins

Akash
Network,
Decentralized
Cloud
Computing
Platform
on
Cosmos,
Sees
Token
Surge

Bitcoin’s
200-Day
Price
Average
Approaches
Record,
Historically
Kicking
Off
Most
Powerful
Phase
of
Bull
Market

Regulatory,
Policy
and
Legal

Mango
Markets
Exploiter
Avi
Eisenberg
Found
Guilty
of
Fraud
and
Manipulation

Ripple
Says
$10M
Penalty
Enough,
Rejects
SEC’s
Ask
of
$1.95B
Fine
in
Final
Judgment

Tether
Will
Freeze
Wallets
Evading
Venezuelan
Sanctions

Nigeria
Directs
Entities
to
Identify
Those
Dealing
Crypto
With
Bybit,
KuCoin,
OKX
and
Binance

Talk
to
a
few
venture
capitalists
about
the
Bitcoin
ecosystem,
and
you’ll
hear
a
variety
of
explanations
as
to
why
there
isn’t
more
top-down
investment
into
startups
focused
on
the
blockchain.
One
is
that
the
biggest
Bitcoin
investors
tend
to
be
HODLers,
and
they
see
no
reason
to
part
with
their
BTC
in
order
to
put
money
into
a
startup.
Another
is
that
many
crypto
VC
firms,
in
return
for
their
dollars,
expect
an
allocation
of
digital
tokens
that
would
eventually
zoom
in
price,
and
that’s
not
really
an
option
in
for
Bitcoin
startups,
since
the
community
in
general
is
(or
was,
until
recently)
averse
to
anything
non-BTC.
A
final
reason
is
that
the
Bitcoin
developer
culture
(again,
until
recently)
was
so
conservative
that
it
didn’t
really
attract
the
sort
of
experimentation
and
entrepreneurship
witnessed
on
other
chains.

But
there’s
now
a
growing
cottage
industry
of
venture
capitalists
and
investment
firms
willing
to
put
money
into
Bitcoin-focused
startups,
such
as

Trammell
Venture
Partners
(TVP)
and

Ten31.
In
February,
Dan
Held,
a
former
Kraken
marketing
executive
who
recently
served
as
fractional
CMO
for
Taproot
Wizards
and
Trust
Machines,

announced
he
was
joining
Joe
McCann’s
crypto
fund,

Asymmetric
Financial,
as
a
general
partner,
with
plans
to
spearhead
a
new
Bitcoin
DeFi
Venture
Fund
I,
targeting
a
raise
of
$21
million.

TVP
earlier
this
month
released
a
research
brief
titled,
“The
Emerging
Bitcoin-Native
Venture
Capital
Landscape,”
to
illustrate
the
opportunity.
The
chart
below
shows
that
BTC
represents
more
than
half
of
the
market
capitalization
of
all
cryptocurrencies,
but
comprises
just
a
small
fraction
of
the
venture
dollars
and
deal
count:

(Trammell
Venture
Partners)

May
9-10:

Bitcoin
Asia,
Hong
Kong.

May
29-31:

Consensus,
Austin
Texas.

May
29-31:

Bitcoin
Seoul.

June
11-13:

Apex,
the
XRP
Ledger
Developer
Summit,
Amsterdam.

July
8-11:

EthCC,
Brussels.

July
25-27:

Bitcoin
2024,
Nashville.

Aug.
19-21:

Web3
Summit,
Berlin.

Sept.
19-21:

Solana
Breakpoint,
Singapore.

Sept.
1-7:

Korea
Blockchain
Week,
Seoul.

Sept.
30-Oct.
2:

Messari
Mainnet,
New
York.

Oct.
9-11:

Permissionless,
Salt
Lake
City.

Oct.
21-22:

Cosmoverse,
Dubai.

Oct.
23-24:

Cardano
Summit,
Dubai.

Oct.
30-31:

Chainlink
SmartCon,
Hong
Kong

Nov
12-14:

Devcon
7,
Bangkok.

Nov.
20-21:

North
American
Blockchain
Summit,
Dallas.

Feb.
19-20,
2025:

ConsensusHK,
Hong
Kong