Franklin Templeton asset manager predicts that Bitcoin’s upcoming “Runes” token standard will allow the crypto network to compete with its rivals in the DeFi space. The technology, set to launch alongside the Bitcoin halving, introduces a new token standard on the Bitcoin layer 1, improving upon existing fungible token standards on Bitcoin. Previously, Bitcoin lacked the ability to mint tokens on its main blockchain, limiting its use for applications like NFTs, stablecoins, and DeFi. The introduction of Ordinals in 2023 changed this by allowing users to inscribe individual satoshis with unique identification numbers and embed them with arbitrary data, enabling NFTs.
Bitcoin NFTs, distinguished by embedding image data directly into Bitcoin’s blockchain, have outperformed Ethereum and Solana NFTs, with Bitcoin hosting a larger NFT market than both blockchains. Domo subsequently built on the Ordinals protocol to enable BRC-20 tokens, though the creator noted inefficiency issues with such tokens. The new Runes tokens, also created by Casey Rordamor, are designed to be more efficient than BRC-20 tokens and Ethereum’s ERC-20 tokens, requiring less blockchain-based data to move around. Runes also offer compatibility with the lightning network and increased transaction privacy, positioning Bitcoin to compete in the fungible token market.
Currently, Bitcoin’s total market cap is $1.2 trillion, while its fungible token market cap is just $600 million. In comparison, Ethereum’s market cap is $378 billion, while its fungible token market cap sits at $499 billion. Franklin Templeton believes that Runes has the potential to close the gap between Bitcoin’s total market cap and its fungible token market cap. The firm is excited to see if Runes can have a similar impact on Bitcoin’s fungible token and DeFi market as Ordinals had on its NFT market. The efficiency and benefits of Runes could draw more users and application developers to Bitcoin’s blockchain, driving growth in the decentralized finance space.
The introduction of Runes on Bitcoin’s main blockchain is expected to revolutionize the DeFi space by improving token minting efficiency and transaction privacy. With the ability to mint tokens and create fungible assets on the Bitcoin network, users and developers can explore new applications and financial products previously unavailable on Bitcoin. The unique features of Runes, such as compatibility with the lightning network and increased privacy, could attract more users to the Bitcoin ecosystem and contribute to the growth of the DeFi market on the network. By leveraging Runes, Bitcoin aims to close the gap with its competitors in the fungible token market and accelerate its adoption in the DeFi ecosystem.
Overall, Franklin Templeton’s prediction about the impact of Runes on Bitcoin’s DeFi market underscores the potential for the crypto network to compete with other blockchains in offering decentralized financial services. The efficiency and benefits of Runes could drive more adoption and innovation in the DeFi space on Bitcoin, expanding the range of applications and products available to users. As Runes goes live alongside the Bitcoin halving, the crypto community eagerly anticipates the potential growth and development that the new token standard could bring to the Bitcoin network, positioning it as a strong contender in the DeFi sector.
