The Runes Protocol

The Runes Protocol allows Bitcoin UTXOs to hold balances of arbitrary fungible tokens, known as Runes, alongside their satoshis (sats).

Ord, the software responsible for enabling the tracking of sats for Ordinals, also provides an implementation of the Runes Protocol. Ord functions as both a wallet and a block explorer.

Running Ord alongside a Bitcoin core node allows users to identify which UTXOs contain Runes in addition to their satoshi balances.

Neither Ordinals nor Runes require any changes to Bitcoin's software or consensus rules. The creation of these tokens is made possible by viewing regular Bitcoin transactions through a specialized lens.

The Ord software serves as this lens, giving additional meaning to ordinary Bitcoin transactions. All the information required to reconstruct Ordinals, Inscriptions, and Runes exists within the Bitcoin blockchain itself.

One of the strengths of these tokens is the absence of third-party dependencies or off-chain components. Even if everyone were to stop running their Ord software for a month and then restart it, everything would be updated seamlessly. The entire Ordinals and Runes universe is Bitcoin backward-compatible, with no external dependencies.

In essence, the Runes Protocol leverages the existing Bitcoin infrastructure and extends its capabilities to facilitate the creation and management of fungible tokens, without modifying the core Bitcoin protocol or introducing external dependencies.

In fact, as the Runes protocol is a meta-protocol built on top of Bitcoin, Bitcoin itself is unaware of and does not need to acknowledge its existence. Users and validators interested in this additional universe can choose to run the Ord software alongside their nodes, while those uninterested can simply ignore it.